<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-Q/A

(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 33-95042
                                                --------

                      PEGASUS MEDIA & COMMUNICATIONS, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


          Delaware                                         23-2778525
          --------                                         ----------
 (State or other jurisdiction of                          (IRS Employer
  incorporation or organization)                      Identification Number)


    c/o Pegasus Communications 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
   ---    ---

         Number of shares of each class of the Registrant's common stock
outstanding as of August 4, 2000:


         Class A, Common Stock, $0.01 par value                161,500
         Class B, Common Stock, $0.01 par value                  8,500

         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>

                      PEGASUS MEDIA & COMMUNICATIONS, INC.

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

                                                                            Page
                                                                            ----
Introductory Statement on Amended Filing                                       3

PART I. FINANCIAL INFORMATION


         Item 1.           Combined Financial Statements

                           Combined Balance Sheets
                             December 31, 1999 and June 30, 2000               4

                           Combined Statements of Operations
                             Three months ended June 30, 1999 and 2000         5

                           Combined Statements of Operations
                             Six months ended June 30, 1999 and 2000           6

                           Combined Statements of Cash Flows
                             Six months ended June 30, 1999 and 2000           7

                           Notes to Combined Financial Statements              8


         Item 2.           Management's Narrative Analysis of
                             the Results of Operations                        19


PART II.  OTHER INFORMATION


         Item 1.           Legal Proceedings                                  26

         Item 6.           Exhibits and Reports on Form 8-K                   26

         Signature                                                            28


                                       2


<PAGE>


                      PEGASUS MEDIA & COMMUNICATIONS, INC.
                  For the Quarterly Period Ended June 30, 2000



                    Introductory Statement on Amended Filing


     This Form 10-Q/A is filed to amend the Form 10-Q for the quarter ended June
30, 2000 as filed on August 14, 2000. The purpose of this amended filing is to
restate certain amounts within the financial statements and to conform
applicable portions of Management's Discussion and Analysis of Financial
Condition and Results of Operations to the restated amounts. The effects of the
restatements on the financial statements are discussed in Note 3 of the Notes to
Combined Financial Statements. All disclosures herein are as of the date of the
original filing of the Form 10-Q except as amended for the effects of the
restatements.

                                       3

<PAGE>
                 Pegasus Media & Communications, Inc.
                        Combined Balance Sheets
                        (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                 December 31,     June 30,
                                                                                    1999           2000
                                                                                 -----------    ----------
                                       ASSETS                                            (unaudited)
                                                                                               (as restated,
                                                                                                see Note 3)
<S>                                                                             <C>            <C>
Current  assets:
   Cash and cash equivalents                                                      $ 21,351      $   10,758
   Accounts receivable, less allowance for doubtful accounts of
       $1,067 and $1,888, respectively                                              24,642          33,069
   Inventory                                                                         9,506          20,292
   Program rights                                                                    4,373           3,868
   Deferred taxes                                                                      406             654
   Net advances to affiliates                                                        1,790           3,521
   Prepaid expenses and other                                                        3,463           6,098
                                                                                  --------      ----------
     Total current assets                                                           65,531          78,260

Property and equipment, net                                                         37,841          51,591
Intangible assets, net                                                             437,774         793,654
Deferred financing costs, net                                                        6,500           9,998
Program rights                                                                       5,731           3,843
Investment in affiliates                                                             4,598         116,444
Deposits and other                                                                   5,042          10,510
                                                                                  --------      ----------

   Total assets                                                                   $563,017      $1,064,300
                                                                                  ========      ==========

                               LIABILITIES AND EQUITY

Current liabilities:
   Current portion of long-term debt                                              $ 11,091      $   10,560
   Accounts payable                                                                  8,045           7,166
   Accrued interest                                                                  6,253          10,946
   Accrued satellite programming, fees and commissions                              24,314          36,807
   Accrued expenses                                                                 11,817          22,366
   Amounts due seller                                                                6,729               -
   Current portion of program rights payable                                         4,447           4,360
                                                                                  --------      ----------
     Total current liabilities                                                      72,696          92,205

Long-term debt                                                                     235,633         362,170
Program rights payable                                                               4,211           2,248
Deferred taxes, net                                                                  4,951          21,749
                                                                                  --------      ----------
    Total liabilities                                                              317,491         478,372
                                                                                  --------      ----------

Commitments and contingent liabilities

Minority interest                                                                    3,000               -

Common stockholder's equity:
   Class A Common Stock; $0.01 par value; 230,000 shares
     authorized; 161,500 issued and outstanding                                          2               2
   Class B Common Stock; $0.01 par value; 20,000 shares
     authorized; 8,500 issued and outstanding                                            -               -
   Additional paid-in capital                                                      378,889         770,003
   Accumulated deficit                                                            (136,365)       (184,077)
                                                                                  --------      ----------
     Total stockholder's equity                                                    242,526         585,928
                                                                                  --------      ----------

   Total liabilities and stockholder's equity                                     $563,017      $1,064,300
                                                                                  ========      ==========
</TABLE>
             See accompanying notes to combined financial statements

                                       4
<PAGE>

                      Pegasus Media & Communications, Inc.
                        Combined Statements of Operations
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                  Three Months Ended June 30,
                                                                                  ---------------------------
                                                                                      1999         2000
                                                                                    ---------- ------------
                                                                                          (unaudited)
                                                                                               (as restated,
                                                                                                see Note 3)
<S>                                                                                 <C>         <C>
Net revenues:
     DBS                                                                            $ 38,135     $105,286
     Broadcast                                                                         9,578        9,233
                                                                                    --------     --------
       Total net revenues                                                             47,713      114,519

Operating expenses:
     DBS
        Programming, technical, general and administrative                            26,103       73,896
        Marketing and selling                                                         17,343       26,537
        Incentive compensation                                                           270          385
        Depreciation and amortization                                                 10,064       20,874
     Broadcast
        Programming, technical, general and administrative                             5,209        6,076
        Marketing and selling                                                          1,612        2,042
        Incentive compensation                                                            46           31
        Depreciation and amortization                                                  1,288        1,215

     Corporate expenses                                                                1,049        2,707
     Corporate depreciation and amortization                                             176           70
     Development costs                                                                     2          742
     Other expense, net                                                                   31          249
                                                                                    --------     --------

       Loss from operations                                                          (15,480)     (20,305)

Interest expense                                                                      (3,837)     (11,885)
Interest income                                                                            1          274
                                                                                    --------     --------

     Loss from continuing operations before income
       taxes and equity loss                                                         (19,316)     (31,916)
Provision (benefit) for income taxes                                                     100      (13,094)
Equity in net loss of unconsolidated affiliates                                            -          (99)
                                                                                    --------     --------

     Loss from continuing operations                                                 (19,416)     (18,921)
Discontinued operations:
     Income from discontinued operations of cable segment,
       net of income taxes of $0 in 1999 and $62 in 2000                                 616          101
                                                                                    --------     --------

     Net loss                                                                       ($18,800)    ($18,820)
                                                                                    ========     ========
</TABLE>
             See accompanying notes to combined financial statements

                                        5
<PAGE>
                      Pegasus Media & Communications, Inc.
                        Combined Statements of Operations
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                   Six Months Ended June 30,
                                                                                   -------------------------
                                                                                      1999         2000
                                                                                    ---------- ------------
                                                                                          (unaudited)
                                                                                               (as restated,
                                                                                                see Note 3)
<S>                                                                                 <C>         <C>
Net revenues:
     DBS                                                                            $ 72,471     $201,143
     Broadcast                                                                        17,481       17,332
                                                                                    --------     --------
       Total net revenues                                                             89,952      218,475

Operating expenses:
     DBS
        Programming, technical, general and administrative                            49,899      141,754
        Marketing and selling                                                         29,140       51,946
        Incentive compensation                                                           595          785
        Depreciation and amortization                                                 19,986       41,148
     Broadcast
        Programming, technical, general and administrative                            10,145       12,021
        Marketing and selling                                                          3,079        3,911
        Incentive compensation                                                           202           46
        Depreciation and amortization                                                  2,472        2,531

     Corporate expenses                                                                1,931        4,622
     Corporate depreciation and amortization                                             350           95
     Development costs                                                                     2        1,169
     Other expense, net                                                                  153          815
                                                                                    --------     --------

       Loss from operations                                                          (28,002)     (42,368)

Interest expense                                                                      (7,795)     (22,646)
Interest income                                                                          143          432
                                                                                    --------     --------

     Loss from continuing operations before income
       taxes, equity loss and extraordinary items                                    (35,654)     (64,582)
Provision (benefit) for income taxes                                                     185      (22,434)
Equity in net loss of unconsolidated affiliates                                            -         (215)
                                                                                    --------     --------

     Loss from continuing operations before
       extraordinary items                                                           (35,839)     (42,363)
Discontinued operations:
     Income from discontinued operations of cable segment,
       net of income taxes of $0 in 1999 and $249 in 2000                                749          405
                                                                                    --------     --------

     Loss before extraordinary items                                                 (35,090)     (41,958)
Extraordinary loss from extinguishment of debt, net of
     income taxes of ($3,526)                                                              -       (5,754)
                                                                                    --------     --------

     Net loss                                                                       ($35,090)    ($47,712)
                                                                                    ========     ========
</TABLE>
             See accompanying notes to combined financial statements

                                        6
<PAGE>

                      Pegasus Media & Communications, Inc.
                        Combined Statements of Cash Flows
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                              Six Months Ended June 30,
                                                                                         --------------------------------
                                                                                           1999                  2000
                                                                                         --------             -----------
                                                                                                  (unaudited)
                                                                                                              (as restated
                                                                                                               see Note 3)
<S>                                                                                      <C>                  <C>
Cash flows from operating activities:
   Net loss                                                                              ($35,090)               ($47,712)
   Adjustments to reconcile net loss
     to net cash used for operating activities:
     Extraordinary loss on extinquishment of debt, net                                          -                   9,280
     Depreciation and amortization                                                         25,831                  47,969
     Program rights amortization                                                            1,539                   2,410
     Amortization of debt discount and deferred financing fees                                199                   2,013
     Stock incentive compensation                                                             858                   1,211
     Equity in net loss of unconsolidated affiliates                                            -                     215
     Bad debt expense                                                                       1,594                   6,409
     Deferred income taxes                                                                    185                 (25,512)
     Change in current assets and liabilities:
        Accounts receivable                                                                  (974)                 (3,195)
        Inventory                                                                          (1,003)                (10,786)
        Prepaid expenses and other                                                         (1,577)                 (1,808)
        Accounts payable and accrued expenses                                               2,823                  (5,232)
        Accrued interest                                                                      (44)                  4,693
        Deposits and other                                                                   (195)                 (5,192)
                                                                                         --------                --------

   Net cash used for operating activities                                                  (5,854)                (25,237)
                                                                                         --------                --------

Cash flows from investing activities:
      Acquisitions                                                                        (91,930)                (35,967)
      Cash acquired from acquisitions                                                           5                       -
      Cash acquired from merger with affiliate                                                  -                   3,236
      Capital expenditures                                                                 (3,726)                (14,245)
      Purchase of intangible assets                                                        (1,216)                 (2,034)
      Payments for programming rights                                                      (1,256)                 (2,065)
      Investment in affiliate                                                                   -                 (14,506)
                                                                                         --------                --------

   Net cash used for investing activities                                                 (98,123)                (65,581)
                                                                                         --------                --------

Cash flows from financing activities:
      Repayments of long-term debt                                                         (9,283)                (13,503)
      Net borrowings on bank credit facilities                                             20,500                  70,800
      Net advances to affiliates                                                          (10,068)                 (3,043)
      Restricted cash                                                                       1,000                       -
      Deferred financing costs                                                                (15)                 (8,558)
      Capital lease repayments                                                                (61)                    (74)
      Net contributions by parent                                                          91,209                  34,603
                                                                                         --------                --------

   Net cash provided by financing activities                                               93,282                  80,225
                                                                                         --------                --------

Net decrease in cash and cash equivalents                                                 (10,695)                (10,593)
Cash and cash equivalents, beginning of year                                               22,707                  21,351
                                                                                         --------                --------

Cash and cash equivalents, end of period                                                 $ 12,012                $ 10,758
                                                                                         ========                ========
</TABLE>
             See accompanying notes to combined financial statements

                                        7
<PAGE>
                      PEGASUS MEDIA & COMMUNICATIONS, INC.
                     NOTES TO COMBINED FINANCIAL STATEMENTS

1.       The Company

         Pegasus Media & Communications, Inc. ("Pegasus" or together with its
subsidiaries, the "Company") operates in growing segments of the media industry
and is a direct subsidiary of Pegasus Communications Corporation ("PCC" or the
"Parent"). Pegasus' significant operating subsidiaries are Pegasus Broadcast
Television, Inc. ("PBT"), Pegasus Cable Television, Inc. ("PCT") and Pegasus
Satellite Television, Inc. ("PST").

         Pegasus' subsidiaries provide direct broadcast satellite television
("DBS") services to customers in certain rural areas of the United States; own
and/or program broadcast television ("Broadcast" or "TV") stations affiliated
with the Fox Broadcasting Company ("Fox"), United Paramount Network ("UPN") and
The WB Television Network ("WB"); and own and operate a cable television
("Cable") system that provides service to individual and commercial subscribers
in Puerto Rico.

2.       Basis of Presentation

         The accompanying unaudited combined 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 Pegasus
and all of its subsidiaries and the accounts of Pegasus Development Corporation
("PDC"). All intercompany transactions and balances have been eliminated.
Certain amounts for 1999 have been reclassified for comparative purposes, and
certain amounts for 2000 have been restated (see Note 3).

         The unaudited combined 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 combined 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.

         PDC, a subsidiary of PCC, provided capital for various satellite
initiatives such as subscriber acquisition costs from October 1, 1997 through
March 31, 1998. The accounts of PDC have been included in the accompanying
combined financial statements since subscriber acquisition costs are an integral
part of the DBS operations and their inclusion is necessary for a fair
presentation of the financial position of the Company and the results of its
operations and its cash flows.

         In May, 2000, PCC completed a two-for-one 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, option shares, warrant shares and
exercise prices included in the accompanying notes to combined financial
statements reflect the stock split and its retroactive effect.

3.       Restatement of Financial Statements

         At year end 2000, the Company corrected the purchase accounting and
allocation of the purchase consideration in the acquisition of Digital
Television Services, Inc. ("DTS"). DTS was acquired by PCC in 1998 and then
contributed by PCC to the Company in January 2000. DTS was then merged with and
into a subsidiary of the Company. The purchase consideration was revised to
$336.5 million from that previously reported of $363.9 million. The correction
of the purchase accounting and allocation of the purchase consideration affected
amounts recorded by the Company at the date that DTS was contributed to the
Company and thereafter. The effects of the corrected accounting and
consideration allocation as of and for the three and six months ended June 30,
2000 are shown below.


                                       8
<PAGE>

                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

3.       Restatement of Financial Statements - (Continued)

As of June 30, 2000:

o   Reduction of $105.4 million in the valuation allowance against deferred tax
    assets;
o   Reduction of $49.2 million in DBS rights assets;
o   Reduction of $15.9 million in accumulated amortization of DBS rights assets;
o   Increase in deferred income tax liabilities of $45.0 million; and
o   An increase in additional paid-in capital of $2.1 million.

For the three months ended June 30, 2000:
o   Reduction of amortization expense for DBS rights assets of $3.9 million; and
o   Net increase in income tax benefits of $10.0 million.

For the six months ended June 30, 2000:
o   Reduction of amortization expense for DBS rights assets of $6.0 million; and
o   Net increase in income tax benefits of $18.9 million.

The adjustment to additional paid-in capital relates to the cumulative effects
of the purchase accounting revisions on periods that DTS was a direct subsidiary
of PCC and that would have affected the amount of PCC's investment in DTS that
it contributed to the Company.

         Because of the magnitude of the corrections discussed above, the
Company restated financial information herein from that previously reported as
of and for the three and six months ended June 30, 2000. The following presents
the financial statement items that were restated along with their amounts
previously reported, excluding subtotals on the financial statements.
<TABLE>
<CAPTION>
                                                                                         As               As Previously
(in thousands)                                                                        Restated              Reported
                                                                                     ----------            ----------
<S>                                                                                  <C>                   <C>
Balance sheet items as of June 30, 2000:
Intangible assets, net of accumulated amortization                                    $ 793,654             $ 826,934
Noncurrent deferred tax assets, after reclassification of restated deferred
   tax assets of $138.4 million to deferred tax liabilities                               -                    33,062
Noncurrent deferred tax liabilities, net of restated deferred tax assets of
  $138.4 million                                                                         21,749               115,135
Additional paid-in capital                                                              770,003               767,878
Accumulated deficit                                                                    (184,077)             (208,996)
Total assets and total liabilities and stockholder's equity                           1,064,300             1,130,642

Statement of operations items for the three months ended June 30, 2000:
DBS depreciation and amortization                                                        20,874                24,731
Income tax benefit for continuing operations                                            (13,094)               (3,019)
Income from discontinued operations, net of income taxes                                    101                   163
Net loss                                                                                (18,820)              (32,690)

Statement of operations items for the six months ended June 30, 2000:
DBS depreciation and amortization                                                        41,148                47,181
Income tax benefit for continuing operations                                            (22,434)               (6,825)
Income from discontinued operations, net of income taxes                                    405                   654
Loss before extraordinary items                                                         (41,958)              (63,351)
Extraordinary loss, net of income taxes                                                  (5,754)               (9,280)
Net loss                                                                                (47,712)              (72,631)
</TABLE>

                                       9
<PAGE>

                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

Cash flows of the Company were not impacted by the corrected purchase accounting
and consideration allocation. As DTS was contributed to the Company in January
2000, there was no impact on the 1999 reported information.

4.       Investment in Affiliates

         PDC has a 90% investment in Pegasus PCS Partners, LP ("PCS") which is
accounted for by the equity method. PCS, a jointly owned limited partnership,
acquires, owns, controls and manages wireless licenses. Pegasus PCS, Inc. is the
sole general partner of PCS and is controlled by Marshall W. Pagon, the
Company's President and Chief Executive Officer. PDC's share of undistributed
losses of PCS included in continuing operations was $211,000 for the first half
of 2000. PDC's total investment in PCS at June 30, 2000 was $4.4 million.

         In January 2000, PDC made an investment in Personalized Media
Communications, LLC ("PMC"), an advanced communications technology company, of
approximately $112.0 million which is accounted for by the equity method. The
investment consisted of $14.4 million in cash, 400,000 shares of PCC's Class A
Common Stock (amounting to $18.8 million) and warrants to purchase 2.0 million
shares of PCC's Class A Common Stock at an exercise price of $45.00 per share
and with a term of ten years. The fair value of the warrants to be issued was
estimated using the Black-Scholes pricing model and is approximately $78.8
million. A subsidiary of PMC granted to PDC an exclusive license for use of
PMC's patent portfolio in the distribution of satellite services from specified
orbital locations. Mary C. Metzger, Chairman of PMC and a member of Pegasus'
Board of Directors, and John C. Harvey, Managing Member of PMC and Ms. Metzger's
husband, own a majority of and control PMC. PDC's share of undistributed losses
of PMC included in continuing operations was $4,000 for the first half of 2000.
PDC's total investment in PMC at June 30, 2000 was $112.0 million.

5.       Common Stock

         In October 1996, the Company became a direct subsidiary of PCC as a
result of PCC's initial public offering of its Class A Common Stock. In December
1996, as a result of a registered exchange offer made to holders of Pegasus'
Class B Common Stock, Pegasus became a wholly owned subsidiary of PCC.

     The Company's ability to pay dividends on its Common Stock is subject to
certain restrictions.

6.       Long-Term Debt, as restated
<TABLE>
<CAPTION>
             Long-term debt consists of the following (in thousands):                December 31,         June 30,
                                                                                        1999                2000
                                                                                        ----                ----
<S>                                                                                   <C>                <C>
Series B Notes payable by Pegasus, due 2005, interest at 12.5%, payable
    semi-annually in arrears on January 1 and July 1, net of unamortized
    discount of $2.2 million and $2.0 million as of December 31, 1999
    and June 30, 2000, respectively.....................................              $ 82,776            $ 82,976
Senior  six-year  $180.0 million  revolving  credit  facility,  payable by
    Pegasus,  interest at the  Company's  option at either the bank's base
    rate plus an applicable margin or LIBOR plus an applicable margin...               142,500                -
Senior five-year $225.0 million  revolving  facility,  payable by Pegasus,
    interest at the  Company's  option at either the bank's base rate plus
    an applicable margin or LIBOR plus an applicable margin.............                  -                   -
Senior  five-year  $275.0 million term loan facility,  payable by Pegasus,
    interest at the  Company's  option at either the bank's base rate plus
    an applicable margin or LIBOR plus an applicable margin.............                  -                275,000
Mortgage payable, due 2000, interest at 8.75%...........................                   431                -
Sellers' notes, due 2000 to 2005, interest at 3% to 8%..................                20,707              14,481
Capital leases and other................................................                   310                 273
                                                                                      --------            --------
                                                                                       246,724             372,730
Less current maturities.................................................                11,091              10,560
                                                                                      --------            --------
Long-term debt..........................................................              $235,633            $362,170
                                                                                      ========            ========
</TABLE>
                                       10
<PAGE>

                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

6.       Long-Term Debt, as restated - (Continued)

Certain of the Company's sellers' notes are collateralized by stand-by letters
of credit issued pursuant to the New PM&C Credit Facility.

         The Company maintained a $180.0 million senior revolving credit
facility (the "PM&C Credit Facility") which was collateralized by substantially
all of the assets of Pegasus and its subsidiaries. The PM&C Credit Facility was
subject to certain financial covenants as defined in the loan agreement,
including a debt to adjusted cash flow covenant. The PM&C Credit Facility was
amended and restated in January 2000.

         In January 2000, the Company entered into a first amended and restated
credit facility, which consists of a $225.0 million senior revolving credit
facility which expires in 2004 and a $275.0 million senior term credit facility
which expires in 2005 (collectively, the "New PM&C Credit Facility"). The New
PM&C Credit Facility is collateralized by substantially all of the assets of
Pegasus and its subsidiaries and 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, $38.2 million of stand-by letters of credit were issued
pursuant to the New PM&C Credit Facility, including $10.4 million
collateralizing certain of the Company's outstanding sellers' notes.

         Commensurate with the closing of the New PM&C Credit Facility, the
Company borrowed $275.0 million under the term loan and outstanding balances
under the PM&C Credit Facility were repaid. Unamortized deferred financing fees
associated with outstanding debt repaid were written off and the Company
recognized an extraordinary loss on the extinguishment of debt of $5.8 million,
net of income tax benefit of $3.5 million, as restated. The net amount of the
extinguishment of debt was restated to include an allocable portion of income
taxes that resulted from the DTS purchase accounting correction (see Note 3).
Additionally, in connection with the closing of the New PM&C Credit Facility,
Digital Television Services, Inc. ("DTS"), a wholly owned subsidiary of PCC, was
merged with and into a subsidiary of Pegasus.

         The Company's 12.5% Series B Notes due 2005 (the "12.5% Series B
Notes") may be redeemed, at the option of the Company, in whole or in part, at
various points in time after July 1, 2000 at the redemption prices specified in
the indenture governing the 12.5% Series B Notes, plus accrued and unpaid
interest thereon.

         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.

7.       Acquisitions

         In the first half of 2000, the Company acquired, from seven independent
DIRECTV ("DIRECTV") providers the rights to provide DIRECTV programming in
certain rural areas of the United States and the related assets in exchange for
total consideration of approximately $133.9 million, which consisted of $36.0
million in cash, 22,500 shares of PCC's Series D Preferred Stock (amounting to
$22.5 million), 10,000 shares of PCC's Series E Preferred Stock (amounting to
$10.0 million), 873,184 shares of PCC's Class A Common Stock (amounting to $39.7
million), warrants to purchase a total of 3,000 shares of PCC's Class A Common
Stock (amounting to $166,000), $24.4 million of a deferred tax liability,
$200,000 in promissory notes and $961,000 in assumed net liabilities.

8.       Discontinued Operations, as restated

         In January 2000, the Company entered into a letter of intent to sell
its remaining Cable operations for $170.0 million in cash, subject to certain
adjustments. The Company anticipates closing this sale during the second half of
2000. Accordingly, the results of operations from the entire Cable segment have
been classified as discontinued with prior periods restated.

                                       11
<PAGE>

                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

8.       Discontinued Operations, as restated - (Continued)

         Net revenues and income from discontinued operations were as follows
(in thousands):
<TABLE>
<CAPTION>
                                                                                   Three Months Ended June 30,
                                                                                     1999              2000
                                                                                     ----              ----
<S>                                                                                 <C>               <C>
Net revenues..............................................................          $5,577            $6,511
Income from operations....................................................             638               414
Provision for income taxes, as restated...................................               -                62
Income from discontinued operations, as restated..........................             616               101

                                                                                    Six Months Ended June 30,
                                                                                     1999              2000
                                                                                     ----              ----

Net revenues..............................................................          $8,648           $12,710
Income from operations....................................................             765               811
Provision for income taxes, as restated...................................               -               249
Income from discontinued operations, as restated..........................             749               405
</TABLE>

The provision for income taxes and income from discontinued operations was
restated to include an allocable portion of income taxes that resulted from the
DTS purchase accounting correction (see Note 3).

9.       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>
Barter revenue and related expense............................................        $3,648          $ 3,558
Acquisition of program rights and assumption of related program payables......         6,655               16
Capital contribution and related acquisition of intangibles...................             -           78,115
Capital contribution and related investment in affiliates.....................             -           97,555
Notes payable and related acquisition of intangibles..........................         4,490              515
Deferred taxes, net and related acquisition of intangibles....................            29           27,985
</TABLE>

         For the six months ended June 30, 1999 and 2000, the Company paid cash
for interest in the amount of $7.7 million and $16.0 million, respectively. The
Company paid no federal income taxes for the six months ended June 30, 1999 and
2000.

10.      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.

                                       12
<PAGE>

                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

10.      Commitments and Contingent Liabilities - (Continued)

         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 101W orbital location,
without regard to the orbital lives of the other DIRECTV satellites at the 101 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.

         On January 10, 2000, the Company and Golden Sky Systems, Inc. ("Golden
Sky", a subsidiary of Golden Sky Holdings, Inc., which PCC acquired on May 5,
2000) 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 Golden
Sky. The claims are also based on DIRECTV's position with respect to launch fees
and other benefits, term and rights 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 Golden Sky 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 Golden Sky 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 combined
operations, liquidity, cash flows or financial position of the Company.

Commitments:

         The Company has entered into a multi-year agreement with a provider of
integrated marketing, information and transaction services to provide customer
relationship management services which will significantly increase the Company's
existing call center capacity. The initial term of the agreement ends on
December 31, 2004. The Company must pay minimum fees to the provider as follows
(in thousands):

                                       13
<PAGE>

                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

10.      Commitments and Contingent Liabilities - (Continued)

                                                              Annual
           Year                                            Minimum Fees
           ----                                            ------------

           2000............................................  $12,600
           2001............................................   18,216
           2002............................................   20,250
           2003............................................   20,250
           2004............................................   20,250
                                                             -------
           Total minimum payments                            $91,566
                                                             =======

11.      Industry Segments, as restated

         The Company operates in growing segments of the media industry: DBS and
Broadcast. DBS consists of providing direct broadcast satellite television
services to customers in certain rural areas of 38 states. Broadcast consists of
ten television stations affiliated with Fox, UPN and the WB, all located in the
eastern United States.

         All of the Company's revenues are derived from external customers.
Capital expenditures for the Company's DBS segment were $834,000 and $6.9
million for the six months ended June 30, 1999 and 2000, respectively. Capital
expenditures for the Company's Broadcast segment were $494,000 and $4.1 million
for the six months ended June 30, 1999 and 2000, respectively. Capital
expenditures for the Company's discontinued Cable segment were $2.4 million and
$3.1 million for the six months ended June 30, 1999 and 2000, respectively. All
other capital expenditures for the six months ended June 30, 1999 and 2000 were
at the corporate level. Identifiable total assets for the Company's DBS segment
were $394.6 million as of December 31, 1999 and $782.1 million, as restated from
that previously reported of $815.4 million (see Note 3), as of June 30, 2000.
Identifiable total assets for the Company's Broadcast segment were $66.1 million
and $66.4 million as of December 31, 1999 and June 30, 2000, respectively.
Identifiable total assets for the Company's discontinued Cable segment were
$86.2 million and $84.3 million as of December 31, 1999 and June 30, 2000,
respectively. All other identifiable assets as of December 31, 1999 and June 30,
2000 were at the corporate level.

12.      Subsidiary Guarantees, as restated

         The 12.5% Series B Notes are guaranteed on a full, unconditional,
senior subordinated basis, jointly and severally by each of the wholly owned
direct and indirect subsidiaries of Pegasus with the exception of certain
subsidiaries as described below (the "Guarantor Subsidiaries"). WTLH License
Corp., WTLH, Inc., Pegasus Anasco Holdings, Inc., Pegasus Satellite Development
Corporation ("PSDC") and Pegasus Cable Television of Connecticut, Inc.
("PCT-CT"), all of which are direct or indirect subsidiaries of Pegasus, are not
guarantors of the 12.5% Series B Notes ("Non-guarantor Subsidiaries"). As the
result of these subsidiaries not being guarantors of the 12.5% Series B Notes,
the following condensed combining financial statements have been provided, as
restated for the items discussed in Note 3. The Company believes separate
financial statements and other disclosures concerning the Guarantor Subsidiaries
are not deemed material to investors.

                                       14
<PAGE>


                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

12.  Subsidiary Guarantees, as restated: - (Continued)
<TABLE>
<CAPTION>
Condensed Combined Balance Sheets
(in thousands)
                                    Guarantor        Non-guarantor                                          Pegasus
As of June 30, 2000                Subsidiaries      Subsidiaries       Pegasus        Eliminations         Subtotal
                                   ------------      ------------       -------        ------------         --------
<S>                               <C>                <C>               <C>             <C>                <C>
Assets:
Cash and cash equivalents          $   10,195          $    179                                             $ 10,374
Accounts receivable, net               34,558                                                                 34,558
Other current assets                   32,602                           $      4                              32,606
                                   ---------------------------------------------------------------------------------
  Total current assets                 77,355               179                4                 -            77,538

Property and equipment, net            51,014                                                                 51,014
Intangible assets, net                790,436             2,338              163                             792,937
Other assets                          (19,630)                            43,556                              23,926
Investment in subsidiaries and
  affiliates                                             71,042          847,698         ($918,740)                -
                                   ---------------------------------------------------------------------------------
  Total assets                     $  899,175          $ 73,559         $891,421         ($918,740)         $945,415
                                   =================================================================================

Liabilities and total equity:
Current portion of long-term debt     $10,560                                                               $ 10,560
Accounts payable                        7,015                                                                  7,015
Other current liabilities              74,329                           $ 10,675         ($ 10,675)           74,329
                                   ---------------------------------------------------------------------------------
  Total current liabilities            91,904                 -           10,675           (10,675)           91,904
Long-term debt                      1,186,945          $    314           82,976          (908,065)          362,170
Other liabilities                       1,090            (8,875)          31,782                              23,997
                                   ---------------------------------------------------------------------------------
 Total liabilities                  1,279,939            (8,561)         125,433          (918,740)          478,071

Total equity (deficit)               (380,764)           82,120          765,988                             467,344
                                   ---------------------------------------------------------------------------------
  Total liabilities and equity     $  899,175          $ 73,559         $891,421         ($918,740)         $945,415
                                   =================================================================================

As of December 31, 1999
Assets:
Cash and cash equivalents          $   15,085          $    494         $  5,756                            $ 21,335
Accounts receivable, net               21,993                                                                 21,993
Other current assets                   19,469                                                                 19,469
                                   ---------------------------------------------------------------------------------
  Total current assets                 56,547               494            5,756                 -            62,797

Property and equipment, net            37,833                                                                 37,833
Intangible assets, net                438,212             2,440            3,083                             443,735
Other assets                            3,896                              6,452                              10,348
Investment in subsidiaries and
  affiliates                                                             353,828         ($353,828)                -
                                   ---------------------------------------------------------------------------------
  Total assets                     $  536,488          $  2,934         $369,119         ($353,828)         $554,713
                                   =================================================================================

Liabilities and total equity:
Current portion of long-term debt  $   11,091                                                               $ 11,091
Accounts payable                        7,963                                                                  7,963
Other current liabilities              53,550                           $  5,690         ($  5,690)           53,550
                                   ---------------------------------------------------------------------------------
  Total current liabilities            72,604                 -            5,690            (5,690)           72,604
Long-term debt                        500,681          $    314           82,776          (348,138)          235,633
Other liabilities                       6,180            (8,478)          11,460                               9,162
                                   ---------------------------------------------------------------------------------
 Total liabilities                    579,465            (8,164)          99,926          (353,828)          317,399
Minority interest                       3,000                                                                  3,000
Total equity (deficit)                (45,977)           11,098          269,193                             234,314
                                   ---------------------------------------------------------------------------------
  Total liabilities and equity     $  536,488          $  2,934         $369,119         ($353,828)         $554,713
                                   =================================================================================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Condensed Combined Balance Sheets
(in thousands)
                                     Pegasus
                                   Development
As of June 30, 2000                Corporation       Eliminations        Totals
                                   -----------       ------------        ------
<S>                               <C>               <C>                <C>
Assets:
Cash and cash equivalents          $      384                          $   10,758
Accounts receivable, net               (1,489)                             33,069
Other current assets                    1,827                              34,433
                                   ----------------------------------------------
  Total current assets                    722                 -            78,260

Property and equipment, net               577                              51,591
Intangible assets, net                    717                             793,654
Other assets                              425                              24,351
Investment in subsidiaries and
  affiliates                          116,444                             116,444
                                   ----------------------------------------------
  Total assets                     $  118,885                 -        $1,064,300
                                   ==============================================

Liabilities and total equity:
Current portion of long-term debt                                      $   10,560
Accounts payable                   $      151                               7,166
Other current liabilities                 150                              74,479
                                   ----------------------------------------------
  Total current liabilities               301                 -            92,205
Long-term debt                                                            362,170
Other liabilities                                                          23,997
                                   ----------------------------------------------
 Total liabilities                        301                 -           478,372

Total equity (deficit)                118,584                             585,928
                                   ----------------------------------------------
  Total liabilities and equity     $  118,885                 -        $1,064,300
                                   ==============================================

As of December 31, 1999
Assets:
Cash and cash equivalents          $       16                          $   21,351
Accounts receivable, net                2,649                              24,642
Other current assets                       69                              19,538
                                   ----------------------------------------------
  Total current assets                  2,734                 -            65,531

Property and equipment, net                 8                              37,841
Intangible assets, net                    539                             444,274
Other assets                              425                              10,773
Investment in subsidiaries and
  affiliates                            4,598                               4,598
                                   ----------------------------------------------
  Total assets                     $    8,304                 -        $  563,017
                                   ==============================================

Liabilities and total equity:
Current portion of long-term debt                                      $   11,091
Accounts payable                          $82                               8,045
Other current liabilities                  10                              53,560
                                   ----------------------------------------------
  Total current liabilities                92                 -            72,696
Long-term debt                                                            235,633
Other liabilities                                                           9,162
                                   ----------------------------------------------
 Total liabilities                         92                 -           317,491
Minority interest                                                           3,000
Total equity (deficit)                  8,212                             242,526
                                   ----------------------------------------------
  Total liabilities and equity         $8,304                 -        $  563,017
                                   ==============================================
</TABLE>
                                       15
<PAGE>
                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

12.  Subsidiary Guarantees, as restated: - (Continued)

Condensed Combined Statements of Operations
For the Six Months ended June 30, 2000
(in thousands)
<TABLE>
<CAPTION>
                                     Guarantor      Non-guarantor                                           Pegasus
                                   Subsidiaries      Subsidiaries       Pegasus        Eliminations         Subtotal
                                   ------------      ------------       -------        ------------         --------
<S>                                <C>                 <C>              <C>            <C>                <C>
Total revenue                        $218,475            $2,030                            ($2,030)         $218,475
Total operating expenses              209,544            52,048              $63            (2,030)          259,625
                                   ---------------------------------------------------------------------------------

Income (loss) from operations           8,931           (50,018)             (63)                -           (41,150)

Interest expense                        6,583                             21,243            (5,180)           22,646
Other                                    (431)                                (1)                               (432)
                                   ---------------------------------------------------------------------------------
Income (loss) from continuing
  operations before income taxes
  and equity loss                       2,779           (50,018)         (21,305)            5,180           (63,364)
Provision for income taxes            (15,609)                            (6,825)                            (22,434)
Equity loss                                                                                                        -
Discontinued operations                   407                (2)                                                 405
                                   ---------------------------------------------------------------------------------
Income (loss) before
  extraordinary item                   18,795           (50,020)         (14,480)            5,180           (40,525)
Extraordinary loss on
  extinguishment of debt               (3,315)                            (2,439)                             (5,754)
                                   ---------------------------------------------------------------------------------
Net income (loss)                    $ 15,480          ($50,020)        ($16,919)           $5,180          ($46,279)
                                   =================================================================================

                                     Pegasus
                                   Development
                                   Corporation      Eliminations         Totals
                                   -----------      ------------         ------

Total revenue                                                           $218,475
Total operating expenses               $1,218                            260,843
                                   ---------------------------------------------

Income (loss) from operations          (1,218)                -          (42,368)

Interest expense                                                          22,646
Other                                                                       (432)
                                   ---------------------------------------------
Income (loss) from continuing
  operations before income taxes
  and equity loss                      (1,218)                -          (64,582)
Provision for income taxes                                               (22,434)
Equity loss                              (215)                              (215)
Discontinued operations                                                      405
                                   ---------------------------------------------
Income (loss) before
  extraordinary item                   (1,433)                -          (41,958)
Extraordinary loss on
  extinguishment of debt                                                  (5,754)
                                   ---------------------------------------------
Net income (loss)                     ($1,433)                -         ($47,712)
                                   =============================================
</TABLE>

<PAGE>

Condensed Combined Statements of Operations
For the Six Months ended June 30, 1999
(in thousands)
<TABLE>
<CAPTION>
                                     Guarantor      Non-guarantor                                           Pegasus
                                   Subsidiaries      Subsidiaries       Pegasus        Eliminations         Subtotal
                                   ------------      ------------       -------        ------------         --------
<S>                                <C>                 <C>              <C>            <C>                <C>
Total revenue                         $89,985           $   956                            ($  989)         $ 89,952
Total operating expenses               89,349            29,238          $   356              (989)          117,954
                                   ---------------------------------------------------------------------------------

Income (loss) from operations             636           (28,282)            (356)                -           (28,002)

Interest expense                        5,621                              7,329            (5,155)            7,795
Other                                    (194)                                47                                (147)
                                   ---------------------------------------------------------------------------------
Income (loss) from continuing
  operations before income taxes       (4,791)          (28,282)          (7,732)            5,155           (35,650)
Provision for income taxes                185                                                                    185
Discontinued operations                   736                13                                                  749
                                   ---------------------------------------------------------------------------------
Net income (loss)                     ($4,240)         ($28,269)         ($7,732)           $5,155          ($35,086)
                                   =================================================================================

                                     Pegasus
                                   Development
                                   Corporation      Eliminations         Totals
                                   -----------      ------------         ------
Total revenue                                                            $89,952
Total operating expenses                                                 117,954
                                   ---------------------------------------------

Income (loss) from operations               -                 -          (28,002)

Interest expense                                                           7,795
Other                                      $4                               (143)
                                   ---------------------------------------------
Income (loss) from continuing
  operations before income taxes           (4)                -          (35,654)
Provision for income taxes                                                   185
Discontinued operations                                                      749
                                   ---------------------------------------------
Net income (loss)                         ($4)                -         ($35,090)
                                   =============================================
</TABLE>

                                       16
<PAGE>
                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

12.  Subsidiary Guarantees, as restated: - (Continued)

Condensed Combined Statements of Cash Flows
For the Six Months ended June 30, 2000
(in thousands)
<TABLE>
<CAPTION>

                                                              Guarantor     Non-guarantor                                   Pegasus
                                                             Subsidiaries   Subsidiaries      Pegasus      Eliminations     Subtotal
                                                             ------------   ------------      -------      ------------     --------
<S>                                                          <C>            <C>             <C>            <C>            <C>
Cash flows from operating activities:
Net income (loss)                                              $ 15,480       ($50,020)      ($16,919)         $5,180      ($46,279)
Adjustments to reconcile net income (loss) to
  net cash provided (used) by operating activities:
  Depreciation and amortization                                  47,772            102             46                        47,920
  Program rights amortization                                     2,410                                                       2,410
  Change in assets and liabilities:
     Accounts receivable                                         (7,333)                                                     (7,333)
     Accounts payable and accrued expenses                        4,432                                        (5,180)         (748)
     Prepaids and other                                          (1,808)                                                     (1,808)
 Other                                                          (46,111)                       25,507                       (20,604)
                                                               --------------------------------------------------------------------
Net cash provided (used) by operating activities                 14,842        (49,918)         8,634               -       (26,442)

Cash flows from investing activities:
   Acquisitions                                                 (35,967)                                                    (35,967)
   Capital expenditures                                         (13,676)                                                    (13,676)
   Purchase of intangible assets                                 (4,681)                        2,874                        (1,807)
   Other                                                        629,489                      (530,978)                       98,511
                                                               --------------------------------------------------------------------
Net cash provided (used) for investing activities               575,165              -       (528,104)              -        47,061

Cash flows from financing activities:
   Net proceeds from debt                                        57,297                                                      57,297
   Other                                                       (652,194)        49,603        513,714                       (88,877)
                                                               --------------------------------------------------------------------
Net cash provided (used) by financing activities               (594,897)        49,603        513,714               -       (31,580)

Net increase (decrease) in cash and cash equivalents             (4,890)          (315)        (5,756)                      (10,961)
Cash and cash equivalents, beginning of year                     15,085            494          5,756                        21,335
                                                               --------------------------------------------------------------------
Cash and cash equivalents, end of period                       $ 10,195        $   179              -               -       $10,374
                                                               ====================================================================

                                                              Pegasus
                                                            Development
                                                            Corporation    Eliminations      Totals
                                                            -----------    ------------      ------
Cash flows from operating activities:
Net income (loss)                                            ($ 1,433)                     ($47,712)
Adjustments to reconcile net income (loss) to
  net cash provided (used) by operating activities:
  Depreciation and amortization                                    49                        47,969
  Program rights amortization                                                                 2,410
  Change in assets and liabilities:
     Accounts receivable                                        4,138                        (3,195)
     Accounts payable and accrued expenses                        209                          (539)
     Prepaids and other                                                                      (1,808)
 Other                                                         (1,758)                      (22,362)
                                                              -------------------------------------
Net cash provided (used) by operating activities                1,205              -        (25,237)

Cash flows from investing activities:
   Acquisitions                                                                             (35,967)
   Capital expenditures                                          (569)                      (14,245)
   Purchase of intangible assets                                 (227)                       (2,034)
   Other                                                     (111,846)                      (13,335)
                                                              -------------------------------------
Net cash provided (used) for investing activities            (112,642)             -        (65,581)

Cash flows from financing activities:
   Net proceeds from debt                                                                    57,297
   Other                                                      111,805                        22,928
                                                              -------------------------------------
Net cash provided (used) by financing activities              111,805              -         80,225

Net increase (decrease) in cash and cash equivalents              368                       (10,593)
Cash and cash equivalents, beginning of year                       16                        21,351
                                                              -------------------------------------
Cash and cash equivalents, end of period                      $   384              -        $10,758
                                                              =====================================
</TABLE>
                                       17
<PAGE>
                      PEGASUS MEDIA & COMMUNICATIONS, INC.
              NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)

12.  Subsidiary Guarantees, as restated: - (Continued)

Condensed Combined Statements of Cash Flows
For the Six Months ended June 30, 1999
(in thousands)
<TABLE>
<CAPTION>
                                                              Guarantor     Non-guarantor                                   Pegasus
                                                             Subsidiaries   Subsidiaries      Pegasus      Eliminations     Subtotal
                                                             ------------   ------------      -------      ------------     --------
<S>                                                          <C>            <C>             <C>            <C>            <C>
Cash flows from operating activities:
Net income (loss)                                             ($4,240)        ($28,269)       ($7,732)         $5,155      ($35,086)
Adjustments to reconcile net income (loss) to
  net cash provided (used) by operating activities:
  Depreciation and amortization                                25,382              101            348                        25,831
  Program rights amortization                                   1,539                                                         1,539
  Change in assets and liabilities:
     Accounts receivable                                         (974)                                                         (974)
     Accounts payable and accrued expenses                      8,110               (3)                        (5,155)        2,952
     Prepaids and other                                        (1,577)                                                       (1,577)
     Other                                                     (6,450)                          7,904                         1,454
                                                              ---------------------------------------------------------------------
Net cash provided (used) by operating activities               21,790          (28,171)           520               -        (5,861)

Cash flows from investing activities:
   Acquisitions                                               (91,930)                                                      (91,930)
   Capital expenditures                                        (3,728)                                                       (3,728)
   Purchase of intangible assets                               (1,097)                            (26)                       (1,123)
   Other                                                       69,835                         (71,086)                       (1,251)
                                                              ---------------------------------------------------------------------
Net cash provided (used) by investing activities              (26,920)               -        (71,112)              -       (98,032)

Cash flows from financing activities:
   Proceeds from debt                                          70,500                                                        70,500
   Repayment of debt                                          (59,344)                                                      (59,344)
   Other                                                       (9,146)          25,558         65,713                        82,125
                                                              ---------------------------------------------------------------------
Net cash provided (used) by financing activities                2,010           25,558         65,713               -        93,281

Net increase (decrease) in cash and cash equivalents           (3,120)          (2,613)        (4,879)                      (10,612)
Cash and cash equivalents, beginning of year                   14,143            3,092          5,318                        22,553

                                                              ---------------------------------------------------------------------
Cash and cash equivalents, end of period                      $11,023             $479           $439               -       $11,941
                                                              =====================================================================


                                                              Pegasus
                                                            Development
                                                            Corporation    Eliminations      Totals
                                                            -----------    ------------      ------
Cash flows from operating activities:
Net income (loss)                                                ($4)                       ($35,090)
Adjustments to reconcile net income (loss) to
  net cash provided (used) by operating activities:
  Depreciation and amortization                                                               25,831
  Program rights amortization                                                                  1,539
  Change in assets and liabilities:
     Accounts receivable                                                                        (974)
     Accounts payable and accrued expenses                        11                           2,963
     Prepaids and other                                                                       (1,577)
     Other                                                                                     1,454
                                                               -------------------------------------
Net cash provided (used) by operating activities                   7              -           (5,854)

Cash flows from investing activities:
   Acquisitions                                                                              (91,930)
   Capital expenditures                                            2                          (3,726)
   Purchase of intangible assets                                 (93)                         (1,216)
   Other                                                                                      (1,251)
                                                               -------------------------------------
Net cash provided (used) by investing activities                 (91)             -          (98,123)

Cash flows from financing activities:
   Proceeds from debt                                                                         70,500
   Repayment of debt                                                                         (59,344)
   Other                                                           1                          82,126
                                                               -------------------------------------
Net cash provided (used) by financing activities                   1              -           93,282

Net increase (decrease) in cash and cash equivalents             (83)                        (10,695)
Cash and cash equivalents, beginning of year                     154                          22,707
                                                               -------------------------------------
Cash and cash equivalents, end of period                         $71              -          $12,012
                                                               =====================================
</TABLE>

                                       18
<PAGE>

ITEM 2.   MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS (AS
          RESTATED)

          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 available to our management at the
date that this report was initially filed on August 14, 2000. 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 views that existed at August 14, 2000
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 or viewers;
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 businesses; and other factors referenced in this Report and in
reports and registration statements filed by Pegasus and its parent company,
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 of August 14, 2000. 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, Pegasus 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 Pegasus should be read in conjunction
with the combined financial statements and related notes which are included
herein.

         The following discussion has been revised to conform to the
restatements discussed in Note 3 of the Notes to Combined Financial Statements.

General

         Pegasus Media & Communications, Inc. is:

         o   A wholly owned subsidiary of Pegasus Communications Corporation.

         o   An independent provider of DIRECTV with 848,000 subscribers at June
             30, 2000, on an actual basis. We have the exclusive right to
             distribute DIRECTV digital broadcast satellite services to
             approximately 5.3 million rural households in 38 states. We
             distribute DIRECTV through the Pegasus Communications retail
             network, a network in excess of 3,000 independent retailers.

         o   The owner or programmer of ten TV stations affiliated with either
             Fox, UPN or the WB and the owner of a large cable system in Puerto
             Rico serving approximately 56,000 subscribers.

         DBS revenues are principally derived from monthly customer
subscriptions and pay-per-view services. Broadcast revenues are derived from the
sale of broadcast airtime to local and national advertisers.

         In January 2000, we entered into a letter of intent to sell the assets
of our entire cable system business in Puerto Rico to a subsidiary of Centennial
Cellular Corporation for $170.0 million in cash, subject to certain adjustments.
The closing of this sale is anticipated to occur during the second half of 2000
and is subject to the negotiation of a definitive agreement, third-party
approvals, including regulatory approvals, and other customary conditions.
Accordingly, the results of our cable segment have been presented as
discontinued operations in our combined statements of operations.

                                       19
<PAGE>

         In this section we use the terms pre-marketing cash flow from
continuing operations and location cash flow from continuing operations.
Pre-marketing cash flow from continuing operations 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 Pegasus
             Communication's restricted stock, stock option and 401(k) plans;

         o   corporate overhead;

         o   extraordinary and non-recurring items;

         o   results of discontinued operations; and

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

         Location cash flow from continuing operations is pre-marketing cash
flow from continuing operations less DBS subscriber acquisition costs.

         Pre-marketing cash flow from continuing operations and location cash
flow from continuing operations are not, and should not be considered,
alternatives 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 from continuing operations and location cash
flow from continuing operations also do not necessarily indicate whether our
cash flow will be sufficient to fund working capital, capital expenditures, or
to react to changes in Pegasus' industry or the economy generally. We believe
that pre-marketing cash flow from continuing operations and location cash flow
from continuing operations are important, however, for the following reasons:

         o   people who follow our industry frequently use them as measures of
             financial 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.

         Pegasus 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.

         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.

                                       20
<PAGE>

Restatement of Financial Statements

         At year end 2000, we corrected the purchase accounting and allocation
of the purchase consideration in Pegasus Communications Corporation's
acquisition in 1998 of Digital Television Services, Inc. Pegasus Communications
Corporation contributed Digital Television Services to us in January 2000. The
purchase consideration was revised to $336.5 million from that previously
reported of $363.9 million. The correction of the purchase accounting and
allocation of the purchase consideration affected amounts that we recorded at
the date that Digital Television Services was contributed to us and thereafter.
The effects of the corrected accounting and consideration allocation as of and
for the six months ended June 30, 2000 are shown below.

As of June 30, 2000:
o   Reduction of $105.4 million in the valuation allowance against deferred tax
    assets;
o   Reduction of $49.2 million in DBS rights assets;
o   Reduction of $15.9 million in accumulated amortization of DBS rights assets;
o   Increase in deferred income tax liabilities of $45.0 million; and
o   An increase in additional paid-in capital of $2.1 million.

For the six months ended June 30, 2000:
o   Reduction of amortization expense for DBS rights assets of $6.0 million; and
o   Net increase in income tax benefits of $18.9 million.

The adjustment to additional paid-in capital relates to the cumulative effects
of the purchase accounting revisions on periods that DTS was a direct subsidiary
of PCC and that would have affected the amount of PCC's investment in DTS that
it contributed to the Company.

         Because of the magnitude of the corrections discussed, the Company
restated financial information herein from that previously reported as of and
for the six months ended June 30, 2000. The following presents the financial
statement items that were restated along with their amounts previously reported,
excluding subtotals on the financial statements.
<TABLE>
<CAPTION>
                                                                                         As               As Previously
(in thousands)                                                                        Restated              Reported
                                                                                     ----------            ----------
<S>                                                                                 <C>                   <C>
Balance sheet items as of June 30, 2000:
Intangible assets, net of accumulated amortization                                    $ 793,654             $ 826,934
Noncurrent deferred tax assets, after reclassification of restated deferred
   tax assets of $138.4 million to deferred tax liabilities                               -                    33,062
Noncurrent deferred tax liabilities, net of restated deferred tax assets of
  $138.4 million                                                                         21,749               115,135
Additional paid-in capital                                                              770,003               767,878
Accumulated deficit                                                                    (184,077)             (208,996)
Total assets and total liabilities and stockholder's equity                           1,064,300             1,130,642

Statement of operations items for the six months ended June 30, 2000:
DBS depreciation and amortization                                                        41,148                47,181
Income tax benefit for continuing operations                                            (22,434)               (6,825)
Income from discontinued operations, net of income taxes                                    405                   654
Loss before extraordinary items                                                         (41,958)              (63,351)
Extraordinary loss, net of income taxes                                                  (5,754)               (9,280)
Net loss                                                                                (47,712)              (72,631)
</TABLE>

As Digital Television Services was contributed to us in January 2000, there was
no impact on the 1999 reported information.

                                       21
<PAGE>

Results of Operations

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

         Total net revenues from continuing operations for the six months ended
June 30, 2000 were $218.5 million, an increase of $128.5 million, or 143%,
compared to total net revenues of $90.0 million for the same period in 1999. The
increase in total net revenues for the six months ended June 30, 2000 was
primarily due to an increase in DBS revenues of $128.7 million attributable to
acquisitions, internal growth in Pegasus' DBS subscriber base and the merger of
Digital Television Services with and into a subsidiary of Pegasus in January
2000. Total operating expenses from continuing operations for the six months
ended June 30, 2000 were $260.8 million, as restated, an increase of $142.9
million, or 121%, compared to total operating expenses of $118.0 million for the
same period in 1999. The increase was primarily due to an increase of $136.0
million, as restated, in operating expenses attributable to the growth in
Pegasus' DBS business.

         Total corporate expenses from continuing operations, including
corporate depreciation and amortization, were $4.7 million for the six months
ended June 30, 2000, an increase of $2.4 million, or 107%, compared to $2.3
million for the same period in 1999. The increase in corporate expenses is
primarily attributable to the growth in Pegasus' business.

         New business development costs were $1.2 million for the six months
ended June 30, 2000 compared to $2,000 for the same period in 1999.

         Other expenses from continuing operations were $815,000 for the six
months ended June 30, 2000, an increase of $662,000, or 433%, compared to other
expenses of $153,000 for the same period in 1999. The increase is primarily due
to legal fees associated with the DIRECTV litigation.

         Interest expense from continuing operations was $22.6 million for the
six months ended June 30, 2000, an increase of $14.9 million, or 191%, compared
to interest expense of $7.8 million for the same period in 1999. The increase in
interest expense is primarily due to interest and fees in connection with the
new credit facility and the growth in Pegasus' DBS business. Interest income
from continuing operations was $432,000 for the six months ended June 30, 2000,
an increase of $289,000, or 202%, compared to interest income of $143,000 for
the same period in 1999. The increase in interest income is due to higher
average cash balances for the six months ended June 30, 2000 compared to the
same period in 1999.

         We had an income tax benefit of $22.4 million, as restated, for the six
months ended June 30, 2000 compared to income tax expense of $185,000 for the
same period in 1999. As a result of the correction to the purchase accounting
for the Digital Television Services acquisition, we reduced the valuation
allowance against deferred income tax assets in the current year period, which
permitted us to recognize the tax benefits of the deferred tax assets in the
current year period.

         Equity in the net losses of unconsolidated affiliates, resulting from
investments in Pegasus PCS Partners, LP in August 1999 and Personalized Media
Communications, LLC in January 2000, amounted to $215,000 for the six months
ended June 30, 2000.

         Income from discontinued operations of the cable segment, net of income
taxes, was $405,000, as restated, for the six months ended June 30, 2000, a
decrease of $344,000, or 46%, compared to $749,000 for the same period in 1999.
The decrease is primarily attributable to an increase in incentive compensation
and income tax expense. Pegasus had approximately 56,000 cable subscribers at
June 30, 2000 compared to 52,700 at June 30, 1999.

                                       22
<PAGE>

         Extraordinary loss from the extinguishment of debt, net of income
taxes, was $5.8 million, as restated, for the six months ended June 30, 2000. In
January 2000, Pegasus entered into an amended and restated $500.0 million credit
facility. Commensurate with the closing of the new credit facility, certain
funds from the initial borrowing were used to repay the outstanding balances
under the existing Pegasus' $180.0 million credit facility, the Digital
Television Services $90.0 million credit facilities and the Pegasus
Communications Corporation $35.5 million interim letter of credit facility and
commitments under these credit facilities were terminated. Accordingly, the
deferred financing costs related to the terminated credit facilities were
written off.

DBS

         During the last twelve months, Pegasus acquired, through acquisitions,
approximately 63,000 subscribers and the exclusive DIRECTV distribution rights
to approximately 520,000 households in rural areas of the United States. In
January 2000, as a result of the merger of Digital Television Services with and
into a subsidiary of Pegasus, Pegasus added approximately 263,000 subscribers
and 1.8 million households. At June 30, 2000, Pegasus had exclusive DIRECTV
distribution rights to 5.3 million households and 848,000 subscribers as
compared to 4.8 million households and 540,000 subscribers at June 30, 1999.
Pegasus had 5.7 million households and 910,000 subscribers at June 30, 2000,
including pending acquisitions. At June 30, 1999, subscribers would have been
647,000, including pending and completed acquisitions and the merger of Digital
Television Services with and into a subsidiary of Pegasus. Subscriber
penetration increased from 11.4% at June 30, 1999 to 16.0% at June 30, 2000,
including pending and completed acquisitions and the merger of Digital
Television Services with and into a subsidiary of Pegasus.

         Total DBS net revenues were $201.1 million for the six months ended
June 30, 2000, an increase of $128.7 million, or 178%, compared to DBS net
revenues of $72.5 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 $43.51 for the six months ended June 30, 2000 compared to $42.48
for the same period in 1999. Pro forma for the merger of Digital Television
Services with and into a subsidiary of Pegasus, DBS revenues for the six months
ended June 30, 1999 were $122.5 million.

         Programming, technical, and general and administrative expenses were
$141.8 million for the six months ended June 30, 2000, an increase of $91.9
million, or 184%, compared to $49.9 million for the same period in 1999. The
increase is attributable to significant growth in subscribers and territory
during the last twelve months. As a percentage of revenue, programming,
technical, and general and administrative expenses were 70.5% for the six months
ended June 30, 2000 compared to 68.9% for the same period in 1999.

         Subscriber acquisition costs were $51.9 million for the six months
ended June 30, 2000, an increase of $22.8 million, or 78%, compared to $29.1
million for the same period in 1999. Gross subscriber additions were 154,500 for
the six months ended June 30, 2000 compared to 74,300 for the same period in
1999. The total subscriber acquisition costs per gross subscriber addition were
$336 for the six months ended June 30, 2000 compared to $392 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 $4.1 million of DBS subscriber equipment was capitalized in the
first half of 2000 related to rental units which are being depreciated over a
three year period.

         Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $785,000 for the six months ended June 30, 2000,
an increase of $190,000, or 32%, compared to $595,000 for the same period in
1999. The increase resulted from a larger gain in pro forma location cash flow
during the first half of 2000 as compared to the first half of 1999.

         Depreciation and amortization was $41.1 million, as restated, for the
six months ended June 30, 2000, an increase of $21.2 million, or 106%, compared
to $20.0 million for the same period in 1999. The increase in depreciation and
amortization is primarily due to an increase in the fixed and intangible asset
base as the result of DBS acquisitions that occurred during the last two years
and the merger of Digital Television Services with an into a subsidiary of
Pegasus.

Broadcast

         During the six months ended June 30, 2000, Pegasus owned or programmed
ten broadcast television stations in six markets. One new station was launched
during the fourth quarter of 1999. Total net broadcast revenues for the six
months ended June 30, 2000 were $17.3 million, a decrease of $149,000, or 1%,
compared to net broadcast revenues of $17.5 million for the same period in 1999.
The decrease is primarily attributable to a decrease in barter revenue.

                                       23
<PAGE>

         Programming, technical, and general and administrative expenses were
$12.0 million for the six months ended June 30, 2000, an increase of $1.9
million, or 18%, compared to $10.1 million for the same period in 1999. The
increase is primarily due to higher programming costs for the six months ended
June 30, 2000 compared to the same period in 1999 and an increase in fees to the
Fox Television Network.

         Marketing and selling expenses were $3.9 million for the six months
ended June 30, 2000, an increase of $832,000, or 27%, compared to $3.1 million
for the same period in 1999. The increase in marketing and selling expenses was
due to an increase in promotional costs associated with the launch of new
stations and news programs.

         Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $46,000 for the six months ended June 30, 2000, a
decrease of $156,000, or 77%, compared to $202,000 for the same period in 1999.
The decrease resulted from a lower gain in pro forma location cash flow during
the first half of 2000 as compared to the first half of 1999.

         Depreciation and amortization was $2.5 million for the six months ended
June 30, 2000, an increase of $59,000, or 2%, compared to $2.5 million for the
same period in 1999.

         As defined in the Indenture governing Pegasus' Series B Notes, Pegasus
is required to provide adjusted operating cash flow data for Pegasus and its
restricted subsidiaries, on a combined basis, where adjusted operating cash flow
is defined as "for the four most recent fiscal quarters for which internal
financial statements are available, operating cash flow of such person and its
restricted subsidiaries, less DBS cash flow for the most recent four-quarter
period, plus DBS cash flow for the most recent quarterly period multiplied by
four." Operating cash flow is income from operations before income taxes,
depreciation and amortization, interest expense, extraordinary items and
non-cash charges. Although adjusted operating cash flow is not a measure of
performance under generally accepted accounting principles, we believe that
location cash flow, operating cash flow and adjusted operating cash flow are
accepted within our business segments as generally recognized measures of
performance and are used by analysts who report publicly on the performance of
companies operating in such segments. Restricted subsidiaries carries the same
meaning as in the Indenture. Pro forma for the merger of Digital Television
Services with and into a subsidiary of Pegasus, as if such merger occurred on
July 1, 1999, adjusted operating cash flow would have been approximately $129.5
million as follows (in thousands):
<TABLE>
<CAPTION>
                                                                                                Four Quarters Ended
                                                                                                   June 30, 2000
                                                                                                -------------------
<S>                                                                                            <C>
Revenues...............................................................................             $442,657
Direct operating expenses, excluding depreciation, amortization and other
  non-cash charges.....................................................................              305,034
                                                                                                    --------
Income from operations before incentive compensation, corporate
  expenses, depreciation and amortization and other non-cash charges...................              137,623
Corporate expenses.....................................................................                8,162
                                                                                                    --------
Adjusted operating cash flow...........................................................             $129,461
                                                                                                    ========
</TABLE>
Seasonality

         Pegasus' revenues vary throughout the year. As is typical in the
broadcast television industry, Pegasus' first quarter generally produces the
lowest revenues for the year and the fourth quarter generally produces the
highest revenues for the year. Pegasus' 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.

                                       24
<PAGE>
Inflation

         Pegasus believes that inflation has not been a material factor
affecting its business. In general, Pegasus' revenues and expenses are impacted
to the same extent by inflation.

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.




                                       25
<PAGE>


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 8 and 9 of Pegasus' Annual Report on Form 10-K filed with
the SEC on March 27, 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 Golden Sky 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 Golden Sky 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 combined operations, cash flows
or financial position.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Exhibit 27.1  Financial Data Schedule.


(b)  Reports on Form 8-K

         There were no Current Reports on Form 8-K filed during the quarter
ended June 30, 2000.



                                       26
<PAGE>
                                    SIGNATURE


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


                       Pegasus Media & Communications, Inc.



August 3, 2001         By: /s/ Kasin Smith
-------------------        --------------------
Date                       Kasin Smith
                           Chief Financial Officer, Treasurer and Executive Vice
                           President of Finance and Information Technology
                           (Principal Financial and Accounting Officer)



                                       27
<PAGE>





Exhibit 27.1  Financial Data Schedule, as restated

Pegasus Media & Communications, Inc.
Second Quarter 2000 Form 10-Q


         This schedule contains summary financial information extracted from the
combined balance sheet of Pegasus Media & Communications Inc., as of June 30,
2000 (unaudited) and the related combined statements of operations for the six
months ended June 30, 2000 (unaudited). This information is qualified in its
entirety by reference to such financial statements.


                      (Dollars in thousands, except per share data)

           Multiplier                                                     1
           Currency                                            U.S. Dollars
           Period - Type                                           6 Months
           Fiscal Year End                                December 31, 2000
           Period- End                                        June 30, 2000
           Cash                                                      10,758
           Securities                                                     0
           Receivables                                               34,957
           Allowances                                                 1,888
           Inventory                                                 20,292
           Current Assets                                            78,260
           PP&E                                                      86,757
           Depreciation                                              35,166
           Total Assets                                           1,064,300
           Current Liabilities                                       92,205
           Bonds                                                     82,976
           Preferred - Mandatory                                          0
           Preferred                                                      0
           Common                                                         2
           Other - SE                                               585,928
           Total Liabilities and Equity                           1,064,300
           Sales                                                    218,475
           Total Revenues                                           218,475
           CGS                                                            0
           Total Costs                                              260,843
           Other Expenses                                              (217)
           Loss - Provision                                               0
           Interest Expense                                          22,646
           Income Pretax                                            (64,582)
           Income Tax                                               (22,434)
           Income Continuing                                        (42,363)
           Discontinued                                                 405
           Extraordinary                                             (5,754)
           Changes                                                        0
           Net Income                                               (47,712)
           EPS - Primary                                            (280.66)
           EPS - Diluted                                            (280.66)