<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 September 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 November 14, 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 reduced
disclosure format.
<PAGE>

                      PEGASUS MEDIA & COMMUNICATIONS, INC.

                                   Form 10-Q/A
                                Table of Contents
                For the Quarterly Period Ended September 30, 2000


<TABLE>
<CAPTION>
                                                                                       Page
<S>                                                                                     <C>
Introductory Statement on Amended Filing                                                3

PART I.  FINANCIAL INFORMATION


     Item 1.      Financial Statements

                  Condensed Combined Balance Sheets
                    December 31, 1999 and September 30, 2000                            5

                  Combined Statements of Operations and Comprehensive Loss/Income
                    Three months ended September 30, 1999 and 2000                      6

                  Combined Statements of Operations and Comprehensive Loss
                    Nine months ended September 30, 1999 and 2000                       7

                  Condensed Combined Statements of Cash Flows
                    Nine months ended September 30, 1999 and 2000                       8

                  Notes to Combined Financial Statements                                9

     Item 2.      Management's Narrative Analysis of
                    the Results of Operations                                          20


PART II.  OTHER INFORMATION


     Item 1.      Legal Proceedings                                                    27

     Item 6.      Exhibits and Reports on Form 8-K                                     27

     Signature                                                                         28
</TABLE>










                                       2
<PAGE>

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





                    Introductory Statement on Amended Filing


         This Form 10-Q/A is filed to amend the Form 10-Q for the quarter ended
September 30, 2000 as filed on November 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 Narrative Analysis of 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>

PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS


                                        4

<PAGE>

                      Pegasus Media & Communications, Inc.
                        Condensed Combined Balance Sheets
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                      December 31,           September 30,
                                                                         1999                    2000
                                                                      ------------           -------------
                                                                                  (unaudited)
                                                                                              (as restated,
                                                                                               see Note 3)
<S>                                                                    <C>                      <C>
                                        ASSETS

Current assets:
     Cash and cash equivalents                                         $   21,351               $  161,627
     Restricted cash                                                         --                      3,000
     Accounts receivable, net                                              24,642                   32,065
     Inventory                                                              9,506                   20,415
     Program rights                                                         4,373                    4,505
     Deferred taxes                                                           406                      715
     Net advances to affiliates                                             1,790                    4,056
     Prepaid expenses and other                                             3,463                   10,139
                                                                       ----------               ----------
       Total current assets                                                65,531                  236,522

Property and equipment, net                                                37,841                   38,228
Intangible assets, net                                                    437,774                  794,799
Deferred financing costs, net                                               6,500                    9,567
Program rights                                                              5,731                    5,416
Investment in affiliates                                                    4,598                  116,399
Marketable securities                                                        --                     24,757
Deposits and other                                                          5,042                   12,821
                                                                       ----------               ----------

     Total assets                                                      $  563,017               $1,238,509
                                                                       ==========               ==========

                                LIABILITIES AND EQUITY

Current liabilities:
     Current portion of long-term debt                                 $   11,091               $   11,257
     Current portion of program rights payable                              4,447                    4,727
     Taxes payable                                                           --                     28,000
     Accounts payable                                                       8,045                    3,181
     Accrued interest                                                       6,253                    3,936
     Accrued satellite programming, fees and commissions                   24,314                   45,557
     Accrued expenses                                                      11,817                   37,369
     Amounts due seller                                                     6,729                    6,741
                                                                       ----------               ----------
       Total current liabilities                                           72,696                  140,768

Long-term debt                                                            235,633                  361,264
Finance obligation                                                           --                     36,120
Program rights payable                                                      4,211                    4,022
Deferred taxes, net                                                         4,951                      715
                                                                       ----------               ----------
      Total liabilities                                                   317,491                  542,889
                                                                       ----------               ----------

Commitments and contingent liabilities

Minority interest                                                           3,000                     --

Common stockholder's equity:
     Common stock                                                               2                        2
     Other stockholder's equity                                           242,524                  695,618
                                                                       ----------               ----------
       Total stockholder's equity                                         242,526                  695,620
                                                                       ----------               ----------

     Total liabilities and stockholder's equity                        $  563,017               $1,238,509
                                                                       ==========               ==========
</TABLE>

             See accompanying notes to combined financial statements

                                        5
<PAGE>

                      Pegasus Media & Communications, Inc.
         Combined Statements of Operations and Comprehensive Loss/Income
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                       Three Months Ended September 30,
                                                                       --------------------------------
                                                                         1999                   2000
                                                                       ---------              ---------
                                                                                 (unaudited)
                                                                                            (as restated,
                                                                                             see Note 3)
<S>                                                                      <C>                      <C>
Net revenues:
     DBS                                                               $  46,392              $ 113,632
     Broadcast                                                             8,920                  8,706
                                                                       ---------              ---------
       Total net revenues                                                 55,312                122,338

Operating expenses:
     DBS
        Programming, technical, general and administrative                32,549                 79,391
        Marketing and selling                                             25,506                 42,644
        Incentive compensation                                               200                    648
        Depreciation and amortization                                     10,632                 21,754
     Broadcast
        Programming, technical, general and administrative                 5,765                  6,205
        Marketing and selling                                              1,369                  1,612
        Incentive compensation                                              --                      158
        Depreciation and amortization                                      1,299                  1,317

     Corporate expenses                                                    1,137                  3,368
     Corporate depreciation and amortization                                 176                     52
     Development costs                                                        74                  1,141
     Other expense, net                                                       97                     13
                                                                       ---------              ---------
       Loss from operations                                              (23,492)               (35,965)

Interest expense                                                          (4,358)               (10,924)
Interest income                                                               28                    435
Other non-operating expenses, net                                           --                      (99)
                                                                       ---------              ---------
     Loss from continuing operations before income taxes                 (27,822)               (46,553)

Provision (benefit) for income taxes                                         221                (19,215)
                                                                       ---------              ---------
     Loss from continuing operations                                     (28,043)               (27,338)
Discontinued operations:
     Income from discontinued operations of cable segment,
       net of income taxes of $0 in 1999 and $220 in 2000                    626                    360
     Gain on sale of discontinued operations, net of taxes                  --                   59,366
                                                                       ---------              ---------
     Net (loss) income                                                   (27,417)                32,388

     Other comprehensive loss                                               --                  (11,670)
                                                                       ---------              ---------

     Comprehensive (loss) income                                       ($ 27,417)             $  20,718
                                                                       =========              =========
</TABLE>

             See accompanying notes to combined financial statements

                                        6
<PAGE>

                      Pegasus Media & Communications, Inc.
            Combined Statements of Operations and Comprehensive Loss
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                       Nine Months Ended September 30,
                                                                       --------------------------------
                                                                         1999                   2000
                                                                       ---------              ---------
                                                                                  (unaudited)
                                                                                            (as restated,
                                                                                             see Note 3)
<S>                                                                   <C>                    <C>
Net revenues:
     DBS                                                               $ 118,863              $ 314,775
     Broadcast                                                            26,401                 26,038
                                                                       ---------              ---------
       Total net revenues                                                145,264                340,813

Operating expenses:
     DBS
        Programming, technical, general and administrative                82,448                221,145
        Marketing and selling                                             54,646                 94,590
        Incentive compensation                                               795                  1,433
        Depreciation and amortization                                     30,618                 62,902
     Broadcast
        Programming, technical, general and administrative                15,910                 18,226
        Marketing and selling                                              4,448                  5,523
        Incentive compensation                                               202                    204
        Depreciation and amortization                                      3,771                  3,848

     Corporate expenses                                                    3,068                  7,990
     Corporate depreciation and amortization                                 526                    147
     Development costs                                                        76                  2,310
     Other expense, net                                                      250                    828
                                                                       ---------              ---------
       Loss from operations                                              (51,494)               (78,333)

Interest expense                                                         (12,153)               (33,570)
Interest income                                                              171                    867
Other non-operating expenses, net                                           --                     (314)
                                                                       ---------              ---------

     Loss from continuing operations before income
       taxes and extraordinary items                                     (63,476)              (111,350)

Provision (benefit) for income taxes                                         406                (41,649)
                                                                       ---------              ---------

     Loss from continuing operations before
       extraordinary items                                               (63,882)               (69,701)
Discontinued operations:
     Income from discontinued operations of cable segment,
       net of income taxes of $0 in 1999 and $469 in 2000                  1,375                    765
     Gain on sale of discontinued operations, net of taxes                  --                   59,366
                                                                       ---------              ---------
     Loss before extraordinary items                                     (62,507)                (9,570)
Extraordinary loss from extinguishment of debt, net of
     income taxes of ($3,526)                                               --                   (5,754)
                                                                       ---------              ---------
     Net loss                                                            (62,507)               (15,324)

     Other comprehensive loss                                               --                  (11,670)
                                                                       ---------              ---------

     Comprehensive loss                                                ($ 62,507)             ($ 26,994)
                                                                       =========              =========

</TABLE>
             See accompanying notes to combined financial statements

                                        7
<PAGE>
                      Pegasus Media & Communications, Inc.
                   Condensed Combined Statements of Cash Flows
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                      Nine Months Ended September 30,
                                                                      --------------------------------
                                                                        1999                   2000
                                                                      ---------              ---------
                                                                                 (unaudited)
<S>                                                                   <C>                    <C>
Cash flows from operating activities:
     Net cash used for operating activities                           ($ 17,299)             ($ 46,399)
                                                                      ---------              ---------

Cash flows from investing activities:
        Acquisitions, net of cash acquired                             (104,059)               (95,643)
        Cash acquired from merger with affiliate                           --                    3,236
        Capital expenditures                                             (8,950)               (22,268)
        Purchase of intangible assets                                    (2,092)               (11,989)
        Payments for programming rights                                  (2,156)                (3,334)
        Proceeds from sale of cable system                                 --                  166,937
        Investment in affiliates                                         (4,829)               (14,560)
        Other                                                              --                     (519)
                                                                      ---------              ---------

     Net cash (used for) provided by investing activities              (122,086)                21,860
                                                                      ---------              ---------

Cash flows from financing activities:
        Repayments of long-term debt                                     (9,589)               (13,841)
        Net borrowings on bank credit facilities                         58,400                 70,800
        Net advances to affiliates                                      (13,223)                (3,578)
        Restricted cash                                                   1,000                 (3,000)
        Debt financing costs                                                (18)                (8,574)
        Contributions by parent                                          98,038                123,550
        Other                                                               (91)                  (542)
                                                                      ---------              ---------

     Net cash provided by financing activities                          134,517                164,815
                                                                      ---------              ---------

Net (decrease) increase in cash and cash equivalents                     (4,868)               140,276
Cash and cash equivalents, beginning of year                             22,707                 21,351
                                                                      ---------              ---------

Cash and cash equivalents, end of period                              $  17,839              $ 161,627
                                                                      =========              =========
</TABLE>

             See accompanying notes to combined financial statements

                                        8

<PAGE>

                         PEGASUS MEDIA & COMMUNICATIONS
                     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 wholly owned subsidiary of Pegasus Communications Corporation
("PCC" or the "Parent"). Pegasus' significant operating subsidiaries are Pegasus
Broadcast Television, Inc. ("PBT") and Pegasus Satellite Television, Inc.
("PST").

         Pegasus' subsidiaries provide direct broadcast satellite television
("DBS") services to customers in various rural areas of the United States and
own and/or program broadcast television ("Broadcast" or "TV") stations.
Discontinued operations on the statements of operations and comprehensive
loss/income represent the Company's cable operations, which were sold on
September 15, 2000 (see Note 9).

         In January 2000, Digital Television Services, Inc. ("DTS"), formerly a
direct subsidiary of PCC, was merged with and into a subsidiary of Pegasus.

2. Basis of Presentation

         The accompanying unaudited combined financial statements are 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 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 comprehensive
loss/income and its cash flows for the interim period. The amounts on the
balance sheet as of December 31, 1999 were derived from the audited balance
sheet as of that date. For further information, refer to the combined financial
statements and footnotes thereto included in Pegasus' Annual Report on Form 10-K
for the year then ended December 31, 1999.

         The financial statements include the accounts of Pegasus and all of its
subsidiaries on a consolidated basis combined with the accounts of Pegasus
Development Corporation ("PDC"). PDC, a subsidiary of PCC, provided capital for
various satellite initiatives, such as subscriber acquisition costs. The
accounts of PDC have been included in the accompanying combined financial
statements since the satellite initiatives 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
comprehensive loss/income and its cash flows. All intercompany transactions and
balances have been eliminated. The balance sheet and statement of cash flows are
presented on a condensed basis. Certain amounts for 1999 have been reclassified
for comparative purposes, and certain amounts for 2000 have been restated (see
Note 3).

         Development costs on the statements of operations and comprehensive
loss/income represent the combined expenses of other corporate initiatives that
are in their infancy of development. Most of these initiatives are presently
being sponsored by PDC. The operations of each initiative will be separately
presented on the statements of operations and comprehensive loss/income when
they are determined to be of a material continuing nature.

         In May 2000, PCC completed a two-for-one stock split of its outstanding
Class A and Class B common stock in the form of a stock dividend. All references
to PCC's shares and options to purchase these shares reflect the effects of the
stock split.

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

                                        9
<PAGE>

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

3. Restatement of Financial Statements (continued)

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 nine months ended September
30, 2000 are shown below.

As of September 30, 2000:
o Reduction of $67.1 million in the valuation allowance against deferred tax
  assets;
o Reduction of $49.2 million in DBS rights assets;
o Reduction of $20.6 million in accumulated amortization of DBS rights assets;
o Reduction in deferred income tax liabilities of $11.7 million; and
o An increase in other stockholder's equity of $48.3 million.

For the three months ended September 30, 2000:
o Reduction of amortization expense for DBS rights assets of $4.7 million; and
o Increase in net income tax benefits of $16.5 million.

For the nine months ended September 30, 2000:
o Reduction of amortization expense for DBS rights assets of $10.7 million; and
o Increase in net income tax benefits of $35.4 million.

         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 nine months ended September 30, 2000. The following
presents the financial statement items that were restated along with their
amounts previously reported, excluding certain subtotals on the financial
statements.

<TABLE>
<CAPTION>
                                                                                        As            As Previously
(in thousands)                                                                       Restated           Reported
                                                                                     --------         -------------
<S>                                                                                 <C>                  <C>
Balance sheet items as of September 30, 2000:
Intangible assets, net of accumulated amortization                                  $ 794,799            $  823,382
Noncurrent deferred tax assets, after reclassification of restated deferred
   tax assets of $90.7 million to deferred tax liabilities                                 --                23,673
Noncurrent deferred tax liabilities, net of restated deferred tax assets of
   $90.7 million                                                                           715              103,205
Other stockholder's equity                                                             695,618              647,328
Total assets and total liabilities and stockholder's equity                          1,238,509            1,290,765

Statement of operations items for the three months ended September 30, 2000:
DBS depreciation and amortization                                                       21,754               26,451
Income tax benefit for continuing operations                                           (19,215)              (2,446)
Income from discontinued operations, net of income taxes                                   360                  580
Net income                                                                              32,388               11,142

Statement of operations items for the nine months ended September 30, 2000:
DBS depreciation and amortization                                                       62,902               73,632
Income tax benefit for continuing operations                                           (41,649)              (9,271)
Income from discontinued operations, net of income taxes                                   765                1,234
Loss before extraordinary items                                                         (9,570)             (52,209)
Extraordinary loss, net of income taxes                                                 (5,754)              (9,280)
Net loss                                                                               (15,324)             (61,489)
</TABLE>

         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 other than
the netting of deferred income taxes on the balance sheet at December 31, 1999.

                                       10
<PAGE>

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

4. Investment in Affiliates

         In January 2000, PDC made an investment of approximately $112.0 million
in Personalized Media Communications, LLC ("PMC"), an advanced communications
technology company, that 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. These warrants at the time of their issuance were estimated
to have a fair value of $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. Through September 30, 2000,
PDC's equity in the losses of PMC was not material.

5. Relationship with Affiliate

         On May 5, 2000, PCC acquired Golden Sky Holdings, Inc. ("GSH") along
with its indirect wholly owned principal operating subsidiary Golden Sky
Systems, Inc. ("GSS"). GSH is a direct wholly owned subsidiary of PCC. GSS
provides DBS services to subscribers in rural areas of 24 states. The Company,
through PST, provides management of and sales and administrative support
functions to GSS. Operational costs are allocated by the Company to GSS based on
a proportion of GSS' number of subscribers to the combined number of subscribers
of the Company and GSS. The Company owns and manages the inventory for both, and
supplies inventory to GSS to satisfy specific subscriber demands. The Company
performs most cash management functions for GSS, including accounts payable. The
cost of services provided and incurred by the Company for or on behalf of GSS is
charged to GSS. Balances due to or from the Company and GSS are settled in cash
periodically.

6. Long-Term Debt

         In January 2000, Pegasus amended and restated its credit facility,
consisting of a $225.0 million senior revolving credit facility that expires in
2004, a $275.0 million senior term credit facility that expires in 2005 and an
uncommitted facility for an additional $200.0 million through June 30, 2001
(collectively, the "New Credit Facility"). The New 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. With the
closing of the New Credit Facility, the Company borrowed $275.0 million under
the term loan facility and used a portion of the proceeds to pay off balances
aggregating $221.5 million outstanding under its prior credit facility and a
credit facility of DTS. These other credit facilities along with their related
commitments and a letter of credit facility were then terminated. At September
30, 2000, $275.0 million was outstanding under the term loan facility, with
$38.2 million of stand-by letters of credit issued thereunder.

7. Other Stockholder's Equity

         The increase in other stockholder's equity, exclusive of the current
year's comprehensive loss as restated, principally represents capital
contributions provided by PCC. This capital was in the form of PCC equity issued
in acquisitions made by the Company amounting to $187.1 million, the
contribution of DTS to the Company of $171.9 million and cash provided for
working capital needs of the Company of $138.1 million.

8. Acquisitions, as restated

         During the nine months ended September 30, 2000, the Company completed
16 acquisitions of independent providers of DIRECTV(R) ("DIRECTV"). These
acquisitions principally consisted of the rights to provide DIRECTV programming
in various rural areas of the United States. The total consideration paid by the
Company for these acquisitions of $194.5 million consisted of cash of $95.6
million, 873,184 shares of PCC's Class A common stock (amounting to $39.7
million), 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), warrants to purchase 3,000 shares of the Class A common stock
(amounting to $166,000), a deferred tax liability incurred of $24.4 million,
$200,000 in promissory notes and $1.8 million in assumed net liabilities. These
acquisitions were accounted for by the purchase method, wherein substantially
all of the total consideration for these acquisitions was allocated to DBS
rights. The DBS rights are being amortized on a straight-line basis over 10

                                       11
<PAGE>

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

8. Acquisitions, as restated (continued)

years. The Company's results of operations include the operations of these
acquisitions from their respective effective dates of acquisition.

         The following unaudited pro forma financial information presents the
Company's consolidated results of operations as if the above noted acquisitions
had occurred at the beginning of the periods presented. This unaudited pro forma
financial information is presented for comparative purposes only and does not
necessarily reflect the results of operations of the Company had the
acquisitions occurred on the dates indicated nor results that may occur in the
future.

<TABLE>
<CAPTION>
                               (In thousands)              Nine Months Ended September 30,
                                                           -------------------------------
                                                              1999                 2000
                                                              ----                 ----
                                                                     (unaudited)
<S>                                                         <C>                 <C>
Net revenues ...........................................    $168,204            $347,275
                                                            ========            ========
Loss before extraordinary items, as restated............     (54,157)             (8,512)
                                                            ========            ========
Net loss, as restated...................................     (54,157)            (14,266)
                                                            ========            ========
</TABLE>

9. Discontinued Operations, as restated

         Discontinued operations on the statements of operations and
comprehensive loss/income represent the Company's cable operations located in
Puerto Rico. The measurement date for accounting for the cable operations as
discontinued was December 31, 1999. Since net income from and a gain on the sale
of the operations was expected, net income and gain after the measurement date
was recognized when earned. Revenues of the Puerto Rico cable operations for the
three and nine months ended September 30, 2000 and 1999 were $5.4 million and
$18.1 million, respectively, and $6.2 million and $14.9 million, respectively.
Income from the discontinued operations of the cable segment, net of income
taxes, was restated for the three and nine months ended September 30, 2000, to
$360,000 and $765,000, respectively, to include an allocable portion of income
taxes that resulted from the purchase accounting corrections (see Note 3).

         On September 15, 2000, the Company sold to an unrelated third party its
interests in the assets of its entire cable operations in Puerto Rico. The sale
price was $170.0 million cash. Cash proceeds received at closing, after
adjustment for transaction costs paid at that time and $3.0 million placed in
escrow, were $164.5 million. The after tax gain on the sale was $59.4 million.
The net amount of assets and liabilities associated with the sale was $80.5
million and $1.2 million, respectively. The net assets primarily consisted of
net property, plant and equipment of $19.1 million and net intangibles
associated with prior acquisitions amounting to $60.9 million. Escrow remaining
after satisfaction of valid claims of indemnification, if any, made by the buyer
pursuant to the asset purchase agreement will be released to the Company. Taxes
recognized on the gain from the sale of $28.0 million are for Puerto Rico
capital gains and withholding taxes and are currently payable.

10. Extraordinary Loss from Extinguishment of Debt, as restated

         Balances of unamortized deferred financing fees associated with debt
facilities terminated in January 2000 were written off at that time, resulting
in an extraordinary loss on the extinguishment of debt of $5.8 million, net of
income tax benefit of $3.5 million, as restated. The reported amount was
restated to include an allocable portion of income taxes resulting from the
purchase accounting corrections (see Note 3).

11. Sale and Leaseback of Tower Assets and Related Accounting

         On July 17, 2000, the Company jointly with a subsidiary of PCC sold 11
broadcast towers and related assets for approximately 1.4 million shares of
restricted common stock of the buyer. Of the 11 towers sold, eight belonged to
the Company. The sale closing date value of the buyer's common stock allocated
to the Company based on the relative fair value of the towers sold was $36.4
million, and the book value of the assets sold was $2.2 million. Coincident with
the sale of the towers, the Company leased back from the buyer its eight towers
sold. The lease has an initial term of 10 years with five successive 10-year
renewal periods at the option of the Company.

                                       12
<PAGE>

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

11. Sale and Leaseback of Tower Assets and Related Accounting (continued)

         Aggregate minimum lease payments in each of the next five fiscal years
and in total over the remaining initial lease term are: $683,000 in 2001;
$711,000 in 2002; $739,000 in 2003; $769,000 in 2004; $799,000 in 2005; and $4.1
million in total thereafter. The Company's receipt of the buyer's common stock
represents a continuing involvement by the Company in the towers sold and leased
back. Accordingly, the sale and leaseback of these towers is accounted for as a
financing. As a result, the Company recorded a finance obligation in the amount
of $36.1 million, which in essence represents a deferral of the net gain and
related costs of the sale that might be otherwise recognized on the date of
sale. Under the finance method, lease payments made on the assets leased back
are allocated between a reduction of the finance obligation and interest as
appropriate. Because of the amount of the finance obligation relative to the
amount of the payments, the Company expects that all future payments will be
applied to interest expense. The eight towers and related assets remain on the
Company's records and continue to be depreciated by the Company as long as the
financing method applies. The accounting as a financing of the eight towers sold
and leased back will continue as long as the Company's continuing involvement in
the towers, as represented by the Company's ownership of the buyer's common
stock, remains.

         The stock received by the Company in the towers sale is accounted for
as an investment in marketable securities available for sale. Accordingly,
unrealized gain or loss on the investment is recorded as a component of the
Company's stockholder's equity. Other comprehensive loss on the statements of
operations and comprehensive loss/income reflects the unrealized loss on this
investment amounting to $11.7 million at September 30, 2000.

         The Company has an agreement with the buyer of the tower assets in
which the buyer will build future towers for the Company when needed as
determined by the Company.

12. Income Taxes, as restated

         As a result of the restatements to deferred income taxes resulting from
the purchase accounting corrections discussed in Note 3, the Company's overall
deferred income tax liabilities exceeded its deferred income tax assets in 2000.
Accordingly, valuation allowances previously established against deferred income
tax assets in 2000, as restated, were no longer required, and the benefits of
these deferred income tax assets were recognized in 2000, as restated. The
Company had established valuation allowances against most of its deferred income
tax assets in 1999 in the belief at that time that the benefits of these tax
assets would not be realized. These valuation allowances negated virtually all
of the benefits of these tax assets in 1999.

13. Industry Segments, as restated

         At September 30, 2000, the Company's two reportable segments were DBS
and Broadcast. Information on each of these segments' revenue and measure of
profit or loss is as presented on the statements of operations and comprehensive
loss/income. Each segment derived its revenues from external customers for each
period presented therein. Identifiable total assets for DBS increased by $141.1
million, as restated, from December 31, 1999 to $843.0 million, as restated, at
September 30, 2000 (see Note 3). This increase was principally due to additional
DBS rights obtained in acquisitions completed during 2000 and the assets of DTS
obtained in the merger with DTS. Broadcast's identifiable total assets increased
from December 31, 1999 by $28.5 million to $98.8 million at September 30, 2000
principally due to the current fair market value of the common stock received in
the sale and leaseback of the tower assets.


                                       13
<PAGE>

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

14. Supplemental Cash Flow Information

     Significant non-cash investing and financing activities were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                    Nine Months Ended September 30,
                                                                                    -------------------------------
                                                                                       1999               2000
                                                                                       ----               ----
<S>                                                                                  <C>                 <C>
Barter revenue and related expense ...........................................        $5,657             $ 5,377
Marketable securities received in sale of tower assets .......................            --              36,427
Customer conversion costs and costs of related equipment .....................            --              13,680
Acquisition of program rights and assumption of related program payables               6,072               3,427
Capital contribution and related acquisition of intangibles ..................         1,364              78,141
Capital contribution and related investment in affiliates ....................            --              97,555
Notes payable and related acquisition of intangibles .........................         4,690                 515
Deferred taxes, net and related acquisition of intangibles ...................            29              27,985
</TABLE>

15. 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
operations, liquidity, cash flows or financial position of the Company.

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

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

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

         On January 10, 2000, the Company and GSS filed a lawsuit in federal
court against DIRECTV which contains causes of action for various torts, common
law 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 GSS. The claims are also based on DIRECTV's
position with respect to launch fees and other benefits, term and rights of
first refusal. The complaint seeks monetary damages and a court order regarding
the rights of the NRTC and its members and affiliates.

                                       14
<PAGE>

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

15. Commitments and Contingent Liabilities (continued)

         On February 10, 2000, the Company and GSS 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 GSS later withdrew the class action
allegations previously filed 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 pending before the same judge. On
November 20, 2000, the court will hear argument on the motion for class
certification and on DIRECTV's motion to dismiss certain of the Company's claims
and claims by the class members. DIRECTV's motion for partial summary judgment
on the right of first refusal will be heard on or about December 11, 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.

16. New Accounting Pronouncements

         Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended by SFAS
No. 138, becomes effective for the Company starting January 1, 2001. SFAS 133
establishes accounting and reporting standards for derivative instruments and
hedging activities. At September 30, 2000, the Company's use of derivative
instruments is confined to two interest rate swap and two interest rate cap
instruments. These instruments were entered into in connection with the
Company's credit facility. The Company does not use these instruments for
trading or speculative purposes. The notional amounts associated with these
instruments range from $33.9 million to $37.1 million. The Company believes that
it does not possess any derivative instruments that may be embedded in other
contracts or agreements. The Company continues to analyze SFAS 133 for any
material impacts of its adoption that it is not presently aware of. Because of
the limited number and use of derivative instruments that the Company has and
the relatively minor notional amounts associated with these instruments, the
Company believes at the present time that the accounting for its derivative
instruments under SFAS 133 will not have a material impact on the Company.

         The Securities and Exchange Commission issued Staff Accounting Bulletin
No. 101 "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101
addresses revenue recognition policies and practices of companies that report to
the SEC. The Company will adopt SAB 101 in the fourth quarter of 2000. The
Company believes that the adoption of SAB 101 will not have a material impact.

         In September 2000, the Financial Accounting Standards Board issued SFAS
No. 140 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". This statement revises standards for accounting
for securitizations and other transfers of financial assets and collateral. The
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. This standard
is effective for transfers occurring after March 31, 2001 and for fiscal years
ending after December 15, 2000 with respect to recognition and reclassification
of collateral and for disclosures relating to securitization transactions and
collateral. The Company is still analyzing the requirements of this statement
and does not fully know whether or not the impact of this statement will be
material. At the present time, the Company is not involved with any
securitization transactions.

17. Subsidiary Guarantees, as restated

         Pegasus, 12.5% Series B Notes due 2005 are guaranteed on a full,
unconditional, senior subordinated basis, jointly and severally by each of the
100% 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 and Pegasus Cable Television of Connecticut, Inc., all
of which are direct or indirect subsidiaries of Pegasus, are not guarantors of
the 12.5% Series B Notes ("Non-guarantor Subsidiaries"). Due to 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

                                       15
<PAGE>

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

17.  Subsidiary Guarantees, as restated (continued)

discussed in Note 3. The Company believes separate financial statements and
other disclosures concerning the Guarantor Subsidiaries are not deemed material.


<TABLE>
<CAPTION>
Condensed Combined Balance Sheets
(in thousands)
                                                 Guarantor       Non-guarantor                                       Pegasus
As of September 30, 2000                       Subsidiaries       Subsidiaries      Pegasus       Eliminations       Subtotal
                                               ------------      -------------      --------      ------------      ----------
<S>                                                 <C>                <C>            <C>             <C>                <C>
Assets:
Cash and cash equivalents                         $11,395               $180        $149,847                          $161,422
Accounts receivable, net                           36,807                                                               36,807
Other current assets                               39,632                                  3                            39,635
                                               -------------------------------------------------------------------------------
  Total current assets                             87,834                180         149,850                           237,864

Property and equipment, net                        37,232                                                               37,232
Intangible assets, net                            788,442                                156                           788,598
Other assets                                       17,827                             33,834                            51,661
Investment in subsidiaries and affiliates                             71,042         781,696        ($852,738)
                                               -------------------------------------------------------------------------------
  Total assets                                   $931,335            $71,222        $965,536        ($852,738)      $1,115,355
                                               ===============================================================================
Liabilities and total equity:
Current portion of long-term debt                 $11,257                                                              $11,257
Accounts payable                                    3,036                                                                3,036
Other current liabilities                         126,050                             $3,507          ($3,507)         126,050
                                               -------------------------------------------------------------------------------
  Total current liabilities                       140,343                              3,507           (3,507)         140,343
Long-term debt                                  1,127,105               $314          83,076         (849,231)         361,264
Other liabilities                                  32,619            (11,975)         20,213                            40,857
                                               -------------------------------------------------------------------------------
  Total liabilities                             1,300,067            (11,661)        106,796         (852,738)         542,464
Total equity (deficit)                           (368,732)            82,883         858,740                           572,891
                                               -------------------------------------------------------------------------------
  Total liabilities and equity                   $931,335            $71,222        $965,536        ($852,738)      $1,115,355
                                               ===============================================================================

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                            431,712              2,440           3,083                           437,235
Other assets                                       10,396                              6,452                            16,848
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>
                                                Pegasus
                                              Development
As of September 30, 2000                      Corporation      Eliminations       Totals
                                              -----------      ------------     ----------
<S>                                               <C>             <C>             <C>
Assets:
Cash and cash equivalents                          $205                          $161,627
Accounts receivable, net                         (4,742)                           32,065
Other current assets                              3,195                            42,830
                                               ------------------------------------------
  Total current assets                           (1,342)                          236,522

Property and equipment, net                         996                            38,228
Intangible assets, net                            6,201                           794,799
Other assets                                        900                            52,561
Investment in subsidiaries and affiliates       116,399                           116,399
                                               ------------------------------------------
  Total assets                                 $123,154                        $1,238,509
                                               ==========================================
Liabilities and total equity:
Current portion of long-term debt                                                 $11,257
Accounts payable                                   $145                             3,181
Other current liabilities                           280                           126,330
                                               ------------------------------------------
  Total current liabilities                         425                           140,768
Long-term debt                                                                    361,264
Other liabilities                                                                  40,857
                                               ------------------------------------------
  Total liabilities                                 425                           542,889
Total equity (deficit)                          122,729                           695,620
                                               ------------------------------------------
  Total liabilities and equity                 $123,154                        $1,238,509
                                               ==========================================

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                           437,774
Other assets                                        425                            17,273
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>

                                       16
<PAGE>




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

17.  Subsidiary Guarantees, as restated (continued)

<TABLE>
<CAPTION>
Condensed Combined Statements of Operations and Comprehensive Income (Loss)
For the Nine Months ended September 30, 2000
(in thousands)
                                                    Guarantor       Non-guarantor                                     Pegasus
                                                  Subsidiaries       Subsidiaries      Pegasus      Eliminations      Subtotal
                                                  ------------      -------------      -------      ------------      --------
<S>                                                 <C>                 <C>                 <C>        <C>            <C>
Total revenue                                       $340,813            $3,217                         ($3,217)       $340,813
Total operating expenses                             325,145            94,743             $72          (3,217)        416,743
                                                  -----------------------------------------------------------------------------
Income (loss) from operations                         15,668           (91,526)            (72)                        (75,930)

Interest expense                                       9,593                            31,751          (7,774)         33,570
Other                                                   (513)                             (354)                           (867)
                                                  -----------------------------------------------------------------------------
Income (loss) from continuing operations
  before income taxes                                  6,588           (91,526)        (31,469)          7,774        (108,633)
Provision for income taxes                           (32,378)                           (9,271)                        (41,649)
Discontinued operations                               60,162               (31)                                         60,131
                                                  -----------------------------------------------------------------------------
Income (loss) before extraordinary item               99,128           (91,557)        (22,198)          7,774          (6,853)
Extraordinary loss on extinguishment of debt          (3,315)                           (2,439)                         (5,754)
                                                  -----------------------------------------------------------------------------
Net income (loss)                                    $95,813          ($91,557)       ($24,637)         $7,774        ($12,607)
                                                  =============================================================================

<CAPTION>

                                                   Pegasus
                                                  Development
                                                  Corporation      Eliminations      Totals
                                                  -----------      ------------      ------
<S>                                                     <C>              <C>        <C>
Total revenue                                                                       $340,813
Total operating expenses                            $2,403                           419,146
                                                  ------------------------------------------
Income (loss) from operations                       (2,403)                          (78,333)

Interest expense                                                                      33,570
Other                                                  314                              (553)
                                                  ------------------------------------------
Income (loss) from continuing operations
  before income taxes                               (2,717)                         (111,350)
Provision for income taxes                                                           (41,649)
Discontinued operations                                                               60,131
                                                  ------------------------------------------
Income (loss) before extraordinary item             (2,717)                           (9,570)
Extraordinary loss on extinguishment of debt                                          (5,754)
                                                  ------------------------------------------
Net income (loss)                                  ($2,717)                         ($15,324)
                                                  ==========================================
</TABLE>

<TABLE>
<CAPTION>
Condensed Combined Statements of Operations
For the Nine Months ended September 30, 1999
(in thousands)
                                                    Guarantor       Non-guarantor                                     Pegasus
                                                  Subsidiaries       Subsidiaries      Pegasus      Eliminations      Subtotal
                                                  ------------      -------------      -------      ------------      --------
<S>                                                 <C>                 <C>                 <C>        <C>            <C>
Total revenue                                       $145,297            $2,021                         ($2,054)       $145,264
Total operating expenses                             143,488            54,799            $522          (2,054)        196,755
                                                  -----------------------------------------------------------------------------
Income (loss) from operations                          1,809           (52,778)           (522)                        (51,491)

Interest expense                                       8,424                            11,466          (7,737)         12,153
Other                                                   (454)                              207                            (247)
                                                  -----------------------------------------------------------------------------
Income (loss) from continuing operations
  before income taxes                                 (6,161)          (52,778)        (12,195)          7,737         (63,397)
Provision for income taxes                               406                                                               406
Discontinued operations                                1,397               (22)                                          1,375
                                                  -----------------------------------------------------------------------------
Net income (loss)                                    ($5,170)         ($52,800)       ($12,195)         $7,737        ($62,428)
                                                  =============================================================================

<CAPTION>

                                                    Pegasus
                                                  Development
                                                  Corporation      Eliminations      Totals
                                                  -----------      ------------      ------
<S>                                                     <C>              <C>        <C>
Total revenue                                                                       $145,264
Total operating expenses                                $3                           196,758
                                                  ------------------------------------------
Income (loss) from operations                           (3)                          (51,494)

Interest expense                                                                      12,153
Other                                                   76                              (171)
                                                  ------------------------------------------
Income (loss) from continuing operations
  before income taxes                                  (79)                          (63,476)
Provision for income taxes                                                               406
Discontinued operations                                                                1,375
                                                  ------------------------------------------
Net income (loss)                                     ($79)                         ($62,507)
                                                  ==========================================
</TABLE>


                                       17
<PAGE>

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

17.  Subsidiary Guarantees, as restated (continued)

<TABLE>
<CAPTION>
Condensed Combined Statements of Cash Flows
For the Nine Months ended September 30, 2000
(in thousands)
                                                    Guarantor       Non-guarantor                                     Pegasus
                                                  Subsidiaries       Subsidiaries      Pegasus      Eliminations      Subtotal
                                                  ------------      -------------      -------      ------------      --------
<S>                                                 <C>                 <C>                 <C>        <C>            <C>
Cash flows from operating activities:
Net cash provided by (used for) operating
   activities                                        $58,457          ($89,117)       ($17,713)                       ($48,373))
                                                  -----------------------------------------------------------------------------
Cash flows from investing activities:
   Acquisitions                                      (95,643)                                                          (95,643))
   Capital expenditures                              (21,280)                                                          (21,280))
   Purchase of intangible assets                      (9,107)                            2,873                          (6,234))
   Other                                             719,289                          (455,253)                        264,036
                                                  -----------------------------------------------------------------------------
Net cash provided by (used for) investing
   activities                                        593,259                          (452,380)                        140,879

Cash flows from financing activities:
   Net proceeds from debt                             70,800                                                            70,800
   Other                                            (726,206)           88,803         614,184                         (23,219)
                                                  -----------------------------------------------------------------------------
Net cash provided by (used for) financing
   activities                                       (655,406)           88,803         614,184                          47,581

Net increase (decrease) in cash and
   cash equivalents                                   (3,690)             (314)        144,091                         140,087
Cash and cash equivalents, beginning of year          15,085               494           5,756                          21,335
                                                  -----------------------------------------------------------------------------
Cash and cash equivalents, end of period             $11,395              $180        $149,847                        $161,422
                                                  =============================================================================

<CAPTION>

                                                   Pegasus
                                                  Development
                                                  Corporation      Eliminations      Totals
                                                  -----------      ------------      ------
<S>                                                     <C>              <C>        <C>
Cash flows from operating activities:
Net cash provided by (used for) operating
   activities                                       $1,974                          ($46,399)
                                                  ------------------------------------------
Cash flows from investing activities:
   Acquisitions                                                                      (95,643)
   Capital expenditures                               (988)                          (22,268)
   Purchase of intangible assets                    (5,755)                          (11,989)
   Other                                          (112,276)                          151,760
                                                  ------------------------------------------
Net cash provided by (used for) investing
   activities                                     (119,019)                           21,860

Cash flows from financing activities:
   Net proceeds from debt                                                             70,800
   Other                                           117,234                            94,015
                                                  ------------------------------------------
Net cash provided by (used for) financing
   activities                                      117,234                           164,815

Net increase (decrease) in cash and
   cash equivalents                                    189                           140,276
Cash and cash equivalents, beginning of year            16                            21,351
                                                  ------------------------------------------
Cash and cash equivalents, end of period              $205                          $161,627
                                                  ==========================================

</TABLE>
                                       18
<PAGE>

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

17.  Subsidiary Guarantees, as restated (continued)

<TABLE>
<CAPTION>
Condensed Combined Statements of Cash Flows
For the Nine Months ended September 30, 1999
(in thousands)
                                                    Guarantor       Non-guarantor                                     Pegasus
                                                  Subsidiaries       Subsidiaries      Pegasus      Eliminations      Subtotal
                                                  ------------      -------------      -------      ------------      --------
<S>                                                 <C>                 <C>                 <C>        <C>            <C>
Cash flows from operating activities:
Net cash provided by (used for) operating
   activities                                        $42,445          ($52,652)        ($7,268)                       ($17,475)
                                                  -----------------------------------------------------------------------------
Cash flows from investing activities:
   Acquisitions                                     (104,059)                                                         (104,059)
   Capital expenditures                               (8,952)                                                           (8,952)
   Purchase of intangible assets                      (1,769)                              (33)                         (1,802)
   Other                                              51,599                           (53,755)                         (2,156)
                                                  -----------------------------------------------------------------------------
Net cash provided by (used for) investing
   activities                                        (63,181)                          (53,788)                       (116,969)

Cash flows from financing activities:
   Net proceeds from debt                             48,811                                                            48,811
   Other                                             (25,341)           50,039          56,179                          80,877
                                                  -----------------------------------------------------------------------------
Net cash provided by (used for) financing
   activities                                         23,470            50,039          56,179                         129,688

Net increase (decrease) in cash and cash
   equivalents                                         2,734            (2,613)         (4,877)                         (4,756)
Cash and cash equivalents, beginning of year          14,143             3,092           5,318                          22,553
                                                  -----------------------------------------------------------------------------

Cash and cash equivalents, end of period             $16,877              $479            $441                         $17,797
                                                  =============================================================================
<CAPTION>

                                                   Pegasus
                                                  Development
                                                  Corporation      Eliminations      Totals
                                                  -----------      ------------      ------
<S>                                                     <C>              <C>        <C>
Cash flows from operating activities:
Net cash provided by (used for) operating
   activities                                         $176                          ($17,299)
                                                  ------------------------------------------
Cash flows from investing activities:
   Acquisitions                                                                     (104,059)
   Capital expenditures                                  2                            (8,950)
   Purchase of intangible assets                      (290)                           (2,092)
   Other                                            (4,829)                           (6,985)
                                                  ------------------------------------------
Net cash provided by (used for) investing
   activities                                       (5,117)                         (122,086)

Cash flows from financing activities:
   Net proceeds from debt                                                             48,811
   Other                                             4,829                            85,706
                                                  ------------------------------------------
Net cash provided by (used for) financing
   activities                                        4,829                           134,517

Net increase (decrease) in cash and cash
   equivalents                                        (112)                           (4,868)
Cash and cash equivalents, beginning of year           154                            22,707
                                                  ------------------------------------------

Cash and cash equivalents, end of period               $42                           $17,839
                                                  ==========================================
</TABLE>

                               19

<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 previously filed on November 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 on November 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 us and our 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 November 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, we are
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 our results of operations 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.

Significant Developments during 2000

         In January 2000, we amended and restated our credit facility,
consisting of a $225.0 million senior revolving credit facility that expires in
2004, a $275.0 million senior term credit facility that expires in 2005 and an
uncommitted facility for an additional $200.0 million through June 30, 2001.
With the closing of the new credit facility, we borrowed $275.0 million under
the term loan facility and used a portion of the proceeds to pay off balances
aggregating $221.5 million outstanding under other credit facilities.

         Also in January 2000, Digital Television Services, Inc., formerly a
direct subsidiary of our parent company, was merged with and into one of our
subsidiaries. At December 31, 1999, DTS had subscribers of 264,600, DIRECTV
distribution rights to 1.8 million households, and net assets of approximately
$172.0 million. Revenues for 1999 were $112.7 million.

         During the nine months ended September 30, 2000, we completed 16
acquisitions of independent providers of DIRECTV. These acquisitions principally
consisted of the rights to provide DIRECTV programming in various rural areas of
the United States. The total consideration we paid for these acquisitions of
$194.5 million consisted of cash of $95.6 million, 873,184 shares of our
parent's Class A common stock (amounting to $39.7 million), 22,500 shares of our
parent's Series D preferred stock (amounting to $22.5 million), 10,000 shares of
our parent's Series E preferred stock (amounting to $10.0 million), warrants to
purchase 3,000 shares of the Class A common stock (amounting to $166,000), a
deferred tax liability incurred of $24.4 million, $200,000 in promissory notes

                                       20
<PAGE>

and $1.8 million in assumed net liabilities. Substantially all of the total
consideration for these acquisitions was allocated to DBS rights.

         On July 17, 2000, we jointly with a subsidiary of Pegasus
Communications Corporation sold 11 broadcast towers and related assets for
approximately 1.4 million shares of restricted common stock of the buyer. Of the
11 towers sold, eight belonged to us. The sale closing date value of the buyer's
common stock allocated to us based on the relative fair value of the towers sold
was $36.4 million, and the book value of the assets sold was $2.2 million.
Coincident with the sale of the towers, we leased back from the buyer the eight
towers we sold. The aggregate minimum lease payments in each of the next five
fiscal years and in total over the remaining initial lease term are: $683,000 in
2001; $711,000 in 2002; $739,000 in 2003; $769,000 in 2004; $799,000 in 2005;
and $4.1 million in total thereafter. Our receipt of the buyer's common stock
and resultant ownership interest in the buyer represents a continuing
involvement by us in the tower assets sold and leased back. As a result, the
gain that would otherwise be recognized on the sale at the date of the sale is
deferred as a finance obligation amounting to $36.1 million. While we continue
to own the buyer's common stock, we expect that the lease payments we make on
the assets leased back will be allocated to interest expense due to the amount
of the finance obligation relative to the amount of the payments. We also will
continue to depreciate the tower assets sold as if we still owned them while the
financing method applies.

         On September 15, 2000, we sold to an unrelated third party our
interests in the assets of our entire cable operations in Puerto Rico. The cash
proceeds we received at closing, after adjustment for transaction costs paid at
that time and $3.0 million placed in escrow, were $164.5 million and the after
tax gain on the sale was $59.4 million. Escrow remaining after satisfaction of
valid claims of indemnification, if any, made by the buyer pursuant to the asset
purchase agreement will be released to the Company.

         On September 15 2000, the board of directors of our parent approved a
reorganization of the current corporate structure. Under the new structure, a
new publicly-held parent holding company ("New PCC") will be formed and will
assume the identity and capital stock structure of the existing Pegasus
Communications Corporation ("Old PCC"). Debt securities held by Old PCC will
remain with Old PCC. New PCC will not issue or hold any debt securities as a
consequence of the reorganization. In the reorganization, Old PCC will become a
direct wholly-owned subsidiary of New PCC and will be renamed Pegasus Satellite
Communications, Inc. The Company is presently a subsidiary of Old PCC, and in
the reorganization will be a subsidiary of Pegasus Satellite Corporation. It is
anticipated that the reorganization will be accounted for as a recapitalization
in which the historical basis of assets and liabilities are not changed. The
reorganization is expected to become effective by the end of 2000.

Pre-marketing and Location Cash Flows

         In this section we use the terms pre-marketing cash flow and location
cash flow. Pre-marketing cash flow of the DBS business is calculated by taking
the DBS revenues and deducting from them their related programming, technical,
general and administrative expenses. Location cash flow of the DBS business is
its pre-marketing cash flow less DBS marketing and selling expenses. The DBS
marketing and selling expenses are also known as subscriber acquisition costs.
Subscriber acquisition costs are sales and marketing expenses incurred and
promotional programming provided in connection with the addition of new DBS
subscribers. Location cash flow for the broadcast television business is
calculated by taking the broadcast revenues and deducting from them their
related programming, technical, general and administrative and marketing and
selling expenses.

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

                                       21
<PAGE>

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.

General

         We are a rapidly growing company that is highly leveraged. We have a
history of reported losses from our operations principally due to our
significant amounts of interest expense and amortization and depreciation. We
are likely to continue to report losses for the foreseeable future due to these
two items.

         At the present, our principal operations are based on the distribution
of DBS services from DIRECTV. We are currently involved in litigation with
DIRECTV. An outcome in this litigation that is unfavorable to us could have a
material adverse effect on our DBS business. Refer herein to Note 15 of the
Notes to Consolidated Financial Statements and Item 1 - Legal Proceedings under
Part II for a more descriptive account of the litigation.

Restatement of Financial Statements

         At year end 2000, we corrected the purchase accounting and allocation
of the purchase consideration in the acquisition of Digital Television Services,
Inc. Digital Television Services was acquired by our parent Pegasus
Communications Corporation in 1998 and then contributed by Pegasus
Communications to us in January 2000. Digital Television Services was then
merged with and into one of our subsidiaries. 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 us 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 three and
nine months ended September 30, 2000 are shown below.

As of September 30, 2000:
o Reduction of $67.1 million in the valuation allowance against deferred tax
  assets;
o Reduction of $49.2 million in DBS rights assets;
o Reduction of $20.6 million in accumulated amortization of DBS rights assets;
o Reduction in deferred income tax liabilities of $11.7 million; and
o An increase in other stockholder's equity of $48.3 million.

For the three months ended September 30, 2000:
o Reduction of amortization expense for DBS rights assets of $4.7 million; and
o Increase in net income tax benefits of $16.5 million.

For the nine months ended September 30, 2000:
o Reduction of amortization expense for DBS rights assets of $10.7 million; and
o Increase in net income tax benefits of $35.4 million.

         Because of the magnitude of the corrections discussed above, we
restated financial information herein from that previously reported as of and
for the three and nine months ended September 30, 2000. The following presents
the financial statement items that were restated along with their amounts
previously reported, excluding certain subtotals on the financial statements.

<TABLE>
<CAPTION>
                                                                                       As             As Previously
(in thousands)                                                                      Restated            Reported
                                                                                   ----------         -------------
<S>                                                                                <C>                <C>
Balance sheet items as of September 30, 2000:
Intangible assets, net of accumulated amortization                                 $  794,799          $  823,382
Noncurrent deferred tax assets, after reclassification of restated deferred
   tax assets of $90.7 million to deferred tax liabilities                                 --              23,673
Noncurrent deferred tax liabilities, net of restated deferred tax assets of
   $90.7 million                                                                          715             103,205
Other stockholder's equity                                                            695,618             647,328
Total assets and total liabilities and stockholder's equity                         1,238,509           1,290,765

Statement of operations items for the three months ended September 30, 2000:
DBS depreciation and amortization                                                      21,754              26,451
</TABLE>
                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                                                       As             As Previously
(in thousands)                                                                      Restated            Reported
                                                                                   ----------         -------------
<S>                                                                                <C>                <C>
Income tax benefit for continuing operations                                       $  (19,215)         $   (2,446)
Income from discontinued operations, net of income taxes                                  360                 580
Net income                                                                             32,388              11,142

Statement of operations items for the nine months ended September 30, 2000:
DBS depreciation and amortization                                                      62,902              73,632
Income tax benefit for continuing operations                                          (41,649)             (9,271)
Income from discontinued operations, net of income taxes                                  765               1,234
Loss before extraordinary items                                                        (9,570)            (52,209)
Extraordinary loss, net of income taxes                                                (5,754)             (9,280)
Net loss                                                                              (15,324)            (61,489)
</TABLE>

         Our cash flows were not impacted by the corrected purchase accounting
and consideration allocation.

Results of Operations

         In this section, amounts specified are for the nine months ended
September 30, 2000, as restated, and the changes to these amounts are with
respect to the corresponding nine months ended September 30, 1999, unless
indicated otherwise.

Comparison of Nine Months Ended September 30, 2000, as restated, and 1999

DBS Business

         Revenues increased $195.9 million to $314.8 million. This increase was
primarily due to the incremental impacts of acquisitions we made over the last
12 months and the merger of Digital Television Services into us. During the 12
months ended September 30, 2000, through acquisitions we obtained 88,500
subscribers and the exclusive DIRECTV distribution rights to approximately
680,500 households in rural areas of the United States. Additionally, we added
192,400 subscribers during the last 12 months through internal growth. The DTS
merger added 264,600 subscribers and 1.8 million households. At September 30,
2000, we had exclusive DIRECTV distribution rights to 5.5 million households and
937,600 subscribers compared to 3.1 million households and 392,100 subscribers
at September 30, 1999. Our subscriber penetration within territories in which we
have exclusive DIRECTV distribution rights increased to 17.0% at September 30,
2000 from 12.7% at September 30, 1999. Average monthly revenue per subscriber
was $43.63 for the nine months ended September 30, 2000 compared to $43.41 for
the same period in 1999. The variance in the average monthly revenue per
subscriber was due to a combination of the impacts of across the board price
increases instituted in 2000 offset in part by lower contributions from pay per
view and lower average revenues of subscribers obtained in acquisitions relative
to our other subscribers.

         Programming, technical and general and administrative expenses
increased $138.7 million to $221.1 million. This increase was due to the growth
in the number of subscribers. The rate of increase of these expenses was
consistent with the increased average number of subscribers for the nine months
ended.

         Subscriber acquisition costs increased $39.9 million to $94.6 million.
This increase was principally due to increased commissions and subsidies to our
dealer network resulting from the subscriber growth we experienced and due to
revisions to our commission and subsidy plans. During 2000, we revised our
commission and subsidy plans to be more competitive. In the third quarter of
2000, we also expanded our commission plans to include large, national dealers
affiliated with DIRECTV to whom commissions previously were paid directly by

                                       23
<PAGE>

DIRECTV. Subscriber acquisition costs per gross subscriber addition based on
subscribers added through internal growth was $387 for 244,300 subscribers added
for the nine months ended September 30, 2000 compared to $354 for 154,200
subscribers added for the same period in 1999.

         Depreciation and amortization increased $32.3 million to $62.9 million,
as restated. This increase was primarily due to increased amortization of DBS
rights as a result of additional DBS rights incurred in acquisitions over the 12
months ended September 30, 2000 amounting to $206.0 million. Also adding to
these increased expenses is depreciation of DBS equipment that is rented to
subscribers. Renting units to subscribers commenced in the second quarter of
2000 with respect to our conversions of subscribers of a former DBS provider
that we converted into our subscribers. These converted subscribers had rented
their equipment from the former DBS provider, and we have added this service as
a convenience to these subscribers. Rented equipment capitalized during the nine
months ended was $8.4 million. Rental units are depreciated over a three-year
period. We expect that rental units and related depreciation will increase as
more of our subscribers choose a rental alternative.

         Pre-marketing cash flow was $93.6 million compared to $36.4 million for
the same period in 1999. Location cash flow was ($960,000) compared to ($18.2)
million for the same period in 1999.

Broadcast Business

         Revenues decreased $363,000 to $26.0 million. Reduced ratings this year
for our affiliated Fox network stations combined with lower television
advertising in general in 2000 contributed to this decrease. Also, contributing
to the decrease is that 1999 included revenues related to the National Football
League's Super Bowl held in January 1999 that was carried by the Fox network.
Despite strong revenues of our other affiliated stations, we expect overall that
revenues for the fourth quarter and year 2000 will be lower relative to the
prior year.

         Programming, technical, and general and administrative expenses
increased $2.3 million to $18.2 million. This increase principally reflects
increased amortization of additional programming costs incurred and fees charged
by the Fox network that commenced in July 1999. The additional programming costs
were incurred in the purchase of new and additional programming, some of which
were for premier shows that have a higher programming premium associated with
them.

         Marketing and selling expenses increased $1.1 million to $5.5 million.
This increase was primarily due to increased promotional costs associated with
the launch of new stations and news programs.

         Location cash flow was $2.3 million compared to $6.0 million for the
same period in 1999.

Other Statements of Operations and Comprehensive Loss Items

         Corporate expenses increased $4.9 million to $8.0 million. This
increase reflects growth in the corporate infrastructure in support of the
overall growth in business experienced by us.

         Development costs of $2.3 million represent the combined expenses of
corporate initiatives that are in their infancy of development and not yet of a
material, continuing nature. Most of these initiatives are presently being
sponsored by Pegasus Development Corporation.

         Other expenses, net from continuing operations increased $578,000 to
$828,000. This increase principally reflects expenses associated with our
ongoing litigation with DIRECTV.

         Interest expense increased $21.4 million to $33.6 million. This
increase was due to additional borrowings outstanding and higher rates of
interest incurred during the period. Variable rate borrowings under credit
facilities we maintain increased from September 30, 1999 by $189.1 million to
$275.0 million at September 30, 2000 as a result of net additional amounts
borrowed when the credit facility was amended in January 2000. The weighted
average amount of principal and interest rates outstanding associated with
outstanding variable rate debt was $268.9 million at 9.86%, respectively,
compared to $38.3 million at 7.28%, respectively, for the prior year.

                                       24
<PAGE>

         We had an income tax benefit of $41.6 million, as restated, for the
nine months ended September 30, 2000 compared to income tax expense of $406,000
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,
which permitted us to recognize the tax benefits of the deferred tax assets in
the current year.

         Within discontinued operations, a gain of $59.4 million, net of taxes
of $28.0 million, was recognized on the sale of our Puerto Rico cable
operations. The taxes recognized on the gain relate to Puerto Rico capital gain
and withholding taxes and are currently payable.

         Extraordinary loss from the extinguishment of debt, net of income
taxes, was $5.8 million, as restated, for the nine months ended. This reflects
the write-off of unamortized balances of deferred financing costs connected with
our debt that was refinanced when Pegasus Media & Communications' credit
facility was amended in January 2000.

         Other comprehensive loss represents the unrealized loss on the common
stock we obtained in the sale and leaseback of our tower assets.

         In compliance with the indenture governing our 12.5% Series B Notes, we
provide below adjusted operating cash flow data for our restricted subsidiaries
on a combined basis. Under the governing indenture, 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
adjusted operating cash flow is a recognized measure of performance within the
industries we operate. This data is also used by analysts who report publicly on
the performance of companies in the industries within which we operate.
Including in the calculation the effects of DBS acquisitions completed in the
third quarter of 2000, as if these acquisitions had occurred on October 1, 1999,
and the merger of Digital Television Services, pro forma adjusted operating cash
flow would have been as follows:

<TABLE>
<CAPTION>
                                                                                    Four Quarters Ended
                                       (in thousands)                               September 30, 2000
                                                                                    -------------------
<S>                                                                                      <C>
Revenues..........................................................................       $462,190
Direct operating expenses, excluding depreciation, amortization and other
  non-cash charges................................................................        326,385
                                                                                         --------
Income from operations before incentive compensation, corporate
  `expenses, depreciation and amortization and other non-cash charges.............        135,805
Corporate expenses................................................................          8,212
                                                                                         --------
Adjusted operating cash flow......................................................       $127,593
                                                                                         ========
</TABLE>

Seasonality

         Our revenues vary throughout the year. As is typical in the broadcast
television industry, our first quarter generally produces the lowest revenues
for the year and the fourth quarter generally produces the highest revenues for
the year. Our operating results in any period may be affected by the incurrence
of advertising and promotional 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.

                                       25
<PAGE>

New Accounting Pronouncements

         Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities", as amended by SFAS No. 138,
becomes effective for us starting January 1, 2001. SFAS 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities. At September 30, 2000, our use of derivative instruments is confined
to two interest rate swap and two interest rate cap instruments. These
instruments were entered into in connection with our credit facility. We do not
use these instruments for trading or speculative purposes. The notional amounts
associated with these instruments range from $33.9 million to $37.1 million. At
the present time, we believe that we do not possess any derivative instruments
that may be embedded in other contracts or agreements. We continue to analyze
SFAS 133 for any material impacts of its adoption that we are not presently
aware of. Because of the limited number and use of derivative instruments that
we have and the relatively minor notional amounts associated with these
instruments, we believe at the present time that the accounting for our
derivative instruments under SFAS 133 will not have a material impact on us.

         The Securities and Exchange Commission issued Staff Accounting Bulletin
No. 101 "Revenue Recognition in Financial Statements". SAB 101 addresses revenue
recognition policies and practices of companies that report to the SEC. We will
adopt SAB 101 in the fourth quarter of 2000. The Company believes that the
adoption of SAB will not have a material impact.

         In September 2000, the Financial Accounting Standards Board issued SFAS
No. 140 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". This statement revises standards for accounting
for securitizations and other transfers of financial assets and collateral. The
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. This standard
is effective for transfers occurring after March 31, 2001 and for fiscal years
ending after December 15, 2000 with respect to recognition and reclassification
of collateral and for disclosures relating to securitzation transactions and
collateral. We are still analyzing the requirements of this statement and we do
not fully know whether or not the impact of this statement will be material. At
the present time, we are not involved with any securitization transactions.


                                       26
<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 our 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 our
relationships with manufacturers, distributors and dealers of direct broadcast
satellite equipment. We and Golden Sky later withdrew the class action
allegations we previously filed to allow a new class action to be filed on
behalf of the members and affiliates of the National Rural Telecommunication
Cooperative. The class action was filed on February 27, 2000. All four actions
are pending before the same judge. On November 20, 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 or
about December 11, 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 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

         On September 29, 2000, we filed a Current Report on Form 8-K dated
September 15, 2000 reporting under Item 2 the sale of our Puerto Rico cable
operations that included an unaudited pro forma condensed combined balance sheet
as of June 30, 2000.

                                       27
<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.



October 17, 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)


                                       28
<PAGE>

Exhibit 27.1  Financial Data Schedule, as restated

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



             (Dollars in thousands, except per share data)

    Multiplier                                                        1
    Currency                                               U.S. Dollars
    Period - Type                                              9 Months
    Fiscal Year End                                   December 31, 2000
    Period- End                                      September 30, 2000
    Cash                                                        161,627
    Securities                                                        0
    Receivables                                                  34,112
    Allowances                                                    2,047
    Inventory                                                    20,415
    Current Assets                                              236,522
    PP&E                                                         61,706
    Depreciation                                                 23,478
    Total Assets                                              1,238,509
    Current Liabilities                                         140,768
    Bonds                                                        83,076
    Preferred - Mandatory                                             0
    Preferred                                                         0
    Common                                                            2
    Other - SE                                                  695,618
    Total Liabilities and Equity                              1,238,509
    Sales                                                       340,813
    Total Revenues                                              340,813
    CGS                                                               0
    Total Costs                                                 419,146
    Other Expenses                                                  553
    Loss - Provision                                                  0
    Interest Expense                                             33,570
    Income Pretax                                             (111,350)
    Income Tax                                                 (41,469)
    Income Continuing                                          (69,701)
    Discontinued                                                 60,131
    Extraordinary                                               (5,754)
    Changes                                                           0
    Net Income                                                 (15,324)
    EPS - Primary                                                     0
    EPS - Diluted                                                     0