<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   (MARK ONE)

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2000

                                       OR

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

                  FOR THE TRANSITION PERIOD FROM ____ TO _____

                             COMMISSION FILE NUMBER:
                                    000-26009

                           JUNO ONLINE SERVICES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

   to
transact business with non-affiliated parties, and could negatively affect us.
  DELAWARE                                           13-3914547
-------------------------------             ------------------------------------
(STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

                        1540 BROADWAY, NEW YORK, NY 10036
               ---------------------------------------------------
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 597-9000
                                                           --------------

(FORMER NAME, FORMER ADDRESS, AND FORMER YEAR, IF CHANGED SINCE LAST REPORT:)
                                 NOT APPLICABLE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

               Yes     X                    No_____

As of July 31, 2000, there were 38,870,340 shares of the Registrant's common
stock outstanding.


<PAGE>


                               INDEX TO FORM 10-Q
                                       FOR
                           JUNO ONLINE SERVICES, INC.
<TABLE>
<CAPTION>

                                                                                                       PAGE

<S>      <C>                                                                                             <C>
PART I.  FINANCIAL INFORMATION..........................................................................  3

Item 1.       Condensed Consolidated Financial Statements (unaudited)...................................  3

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

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

              Condensed Consolidated Statement of Stockholders' Equity - Six months ended
                  June 30, 2000.........................................................................  6

              Condensed Consolidated Statements of Cash Flows - Six months ended
                  June 30, 2000 and 1999................................................................  7

              Notes to Condensed Consolidated Financial Statements......................................  8

Item 2.       Management's Discussion and Analysis of Financial Condition and Results of
              Operations................................................................................  11

PART II. OTHER INFORMATION...........................................................................     44

Item 1.       Legal Proceedings.........................................................................  44

Item 4.       Submission of Matters to a Vote of Security Holders.......................................  44

Item 6.       Exhibits and Report on Form 8-K...........................................................  44

Item 7.       Signatures................................................................................  45
</TABLE>


<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                   JUNO ONLINE SERVICES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>


                                                                           JUNE 30,                      December 31,
                                                                             2000                            1999
                                                                        -------------                  --------------
                                                                         (UNAUDITED)
ASSETS
Current assets:
<S>                                                                     <C>                            <C>
     Cash and cash equivalents....................................      $     85,473                   $    91,497
     Accounts receivable, net of allowance for
       doubtful accounts of $1,047 and $544 in 2000
       and 1999, respectively.....................................            14,347                         6,370
     Prepaid expenses and other current assets....................             9,709                        15,437
                                                                        ------------                   -----------

          Total current assets....................................           109,529                       113,304

Fixed assets, net.................................................             9,735                         5,684
Other assets......................................................               504                           100
                                                                        ------------                   -----------

          Total assets............................................      $    119,768                   $   119,088
                                                                        ============                   ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued expenses........................      $     36,846                   $    29,800
     Current portion of capital lease obligations.................             1,212                         1,423
     Deferred revenue.............................................            16,806                        14,510
                                                                        ------------                   -----------

          Total current liabilities...............................            54,864                        45,733

Capital lease Obligations.........................................               531                         1,455
Deferred rent.....................................................               203                           252
Deferred revenue..................................................               309                             -

Commitments and contingencies

Shareholders' equity:
   Preferred stock -$0.01 par value 5,000,000 shares
     authorized, none issued and outstanding......................                 -                             -
   Common stock -$0.01 par value; 133,333,334 shares authorized,
     38,792,285, and 34,833,568 shares issured and outstanding
     in 2000, and 1999, respectively..............................               388                           348
   Additional paid-in capital.....................................           205,998                       123,530
   Unearned compensation..........................................              (563)                         (745)
   Cumulative translation adjustment..............................                (1)                           (1)
   Accumulated deficit............................................          (141,961)                      (51,484)
                                                                        ------------                   -----------

          Total shareholders' equity..............................            63,861                        71,648
                                                                        ------------                   -----------

          Total liabilities and shareholders' equity..............      $    119,768                   $   119,088
                                                                        ============                   ===========

</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       3
<PAGE>


                   JUNO ONLINE SERVICES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                            THREE MONTHS               SIX MONTHS
                                            ENDED JUNE 30,            ENDED JUNE 30,
                                          -----------------         -----------------
                                           2000         1999         2000         1999
                                        ---------    ---------    ---------    ---------
<S>                                     <C>          <C>          <C>          <C>
Revenues:
  Billable services .................   $  18,429    $   7,069    $  35,165    $  12,875
  Advertising and transaction fees...      10,685        2,703       17,094        4,968
  Direct product sales ..............         439        1,350        1,341        2,999
                                        ---------    ---------    ---------    ---------
    Total revenues ..................      29,553       11,222       53,600       20,842
                                        ---------    ---------    ---------    ---------

Cost of revenues:
  Billable services .................      12,557        5,481       24,597       10,159
  Advertising and transaction fees...       2,262        1,162        4,012        2,242
  Direct product sales ..............         414        1,165        1,270        2,589
                                        ---------    ---------    ---------    ---------
    Total cost of revenues ..........      15,233        7,808       29,879       14,990
                                        ---------    ---------    ---------    ---------

Operating expenses:
  Operations, free service ..........       9,506        1,771       15,650        3,617
  Subscriber acquisition ............      38,119       13,920       82,870       16,620
  Sales and marketing ...............       5,610        2,716        9,225        5,028
  Product development ...............       3,100        1,977        5,563        3,831
  General and administrative ........       2,486          982        4,262        1,686
                                        ---------    ---------    ---------    ---------
    Total operating expenses ........      58,821       21,366      117,570       30,782
                                        ---------    ---------    ---------    ---------
    Loss from operations ............     (44,501)     (18,052)     (93,849)     (24,930)

Interest income, net ................       1,650          795        3,372          906
                                        ---------    ---------    ---------    ---------
    Net loss ........................   $ (42,851)   $ (17,257)   $ (90,477)   $ (24,024)
                                        =========    =========    =========    =========
</TABLE>

The accompany notes are an integral part of these condenses consolidated
financial statements.


                                       4
<PAGE>


                  JUNO ONLINE SERVICES, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
     (IN THOUSANDS, EXCEPT PER LIMITED PARTNERSHIP UNIT AND PER SHARE DATA)
                                  (UNAUDITED)


<TABLE>
<CAPTION>

                                                                                                SIX MONTHS ENDED JUNE 30, 1999
                                                                                             ------------------------------------
                                                     THREE MONTHS ENDED       SIX MONTHS     TWO MONTHS     FOUR MONTHS
                                                          JUNE 30,              ENDED          ENDED           ENDED
                                                    --------------------       JUNE 30,     FEBRUARY 28,     JUNE 30,
                                                    2000          1999          2000            1999           1999         TOTAL
                                                  --------     --------       -------         -------        --------     --------
<S>                                               <C>          <C>           <C>              <C>            <C>          <C>
Net loss .....................................    $(42,851)    $(17,257)     $(90,477)        $(4,350)       $(19,674)    $(24,024)
                                                  ========     ========       =======         =======        ========     ========

Basic and diluted net loss per share ..........   $  (1.11)    $  (1.28)     $  (2.39)                       $  (1.95)
                                                  ========     ========       =======                        ========

Basic and diluted net loss per Class A limited
  partnership unit ...........................                                                $ (0.25)
                                                                                              =======

Weighted average number of:

  Shares of common stock .....................      38,715       13,479        37,901                          10,109
                                                  ========     ========       =======                        ========
  Class A limited partnership units ..........                                                 17,684
                                                                                              =======

Pro forma basic and diluted net loss per
  share ......................................                 $  (0.56)                                                   $ (0.93)
                                                               ========                                                    =======

Weighted average shares outstanding used in
  pro forma basic and diluted per share
  calculation ................................                   30,601                                                     25,939
                                                               ========                                                    =======


</TABLE>




   The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       5

<PAGE>



                  JUNO ONLINE SERVICES, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                       COMMON STOCK      ADDITIONAL                 CUMULATIVE
                                    ------------------     PAID-IN      UNEARNED    TRANSLATION  ACCUMULATED
                                    SHARES      AMOUNT     CAPITAL    COMPENSATION  ADJUSTMENT     DEFICIT       TOTAL
                                  ---------   ---------   ---------    ---------    ---------    ---------    ---------
<S>                                  <C>      <C>         <C>          <C>          <C>          <C>          <C>
Balance, December 31, 1999 ....      34,834   $     348   $ 123,530    $    (745)   $      (1)   $ (51,484)   $  71,648
  Issuance of common stock,
   net of offering costs ......       3,600          36      81,044           --           --           --       81,080
  Issuance of common stock upon
   exercise of stock options ..         293           3         775           --           --           --          778
  Issuance of common stock in
   connection with employee
   stock purchase plan ........          65           1         714           --           --           --          715
  Forfeitures of unearned
   compensation ...............          --          --         (65)          65           --           --           --
  Amortization of unearned
   compensation ...............          --          --          --          117           --           --          117
  Net loss ....................          --          --          --           --           --      (90,477)     (90,477)
                                  ---------   ---------   ---------    ---------    ---------    ---------    ---------
Balance, June 30, 2000 ........      38,792   $     388   $ 205,998    $    (563)   $      (1)   $(141,961)   $  63,861
                                  =========   =========   =========    =========    =========    =========    =========
</TABLE>


The accompanying notes are an integral part of these condensed consolidated
financial statements.


                                       6

<PAGE>

                   JUNO ONLINE SERVICES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                              SIX MONTHS ENDED JUNE 30,
                                                                                              -------------------------
                                                                                                  2000           1999
                                                                                              -----------    ----------
<S>                                                                                           <C>            <C>
Cash flows from operating activities:
  Net loss.................................................................................     $(90,477)    $ (24,024)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization..........................................................        1,729         1,159
    Non-cash subscriber acquisition........................................................          181            --
    Amortization of deferred rent..........................................................          (40)          (31)
    Amortization of unearned compensation..................................................          117           210
    Changes in operating assets and liabilities:
     Accounts receivable...................................................................       (7,977)       (1,296)
     Prepaid expenses and other current assets.............................................        5,728       (11,226)
     Accounts payable and accrued expenses.................................................        6,856         4,429
     Deferred revenue......................................................................        2,605         4,371
                                                                                                --------      --------
       Net cash used in operating activities...............................................      (81,278)      (26,408)
                                                                                                --------      --------

Cash flows from investing activities:
  Purchases of fixed assets................................................................       (5,780)         (229)
  Other assets.............................................................................         (404)           71
                                                                                                --------      --------
       Net cash used in investing activities...............................................       (6,184)         (158)
                                                                                                --------      --------
Cash flows from financing activities:
  Payments on capital lease obligations....................................................       (1,135)         (370)
  Payments on senior note..................................................................                     (9,129)
  Net proceeds from issuance of redeemable
    convertible preferred stock ...........................................................            -        61,859
  Net proceeds from issuance of common stock...............................................       81,080        77,285
  Proceeds from issuance of common stock
   in connection with employee stock purchase plan.........................................          715            --
  Proceeds from issuance of common stock
   upon exercise of stock options..........................................................          778           152
                                                                                                --------      --------
       Net cash provided by financing activities...........................................       81,438       129,797
                                                                                                --------      --------
       Net (decrease) increase in cash and cash equivalents................................       (6,024)      103,231

Cash and cash equivalents, beginning of period.............................................       91,497         8,152
                                                                                                --------      --------
Cash and cash equivalents, end of period...................................................     $ 85.473      $111.383
                                                                                                ========      ========
Supplemental disclosure of cash flow information:
  Cash paid for interest...................................................................     $     96      $    293
Supplemental disclosure of noncash
  investing and financing activities:
  Capital lease obligations incurred for
  network equipment........................................................................     $     --      $    871


</TABLE>

        The accompanying notes are an integral part of these condensed
                  consolidated financial statements.


                                       7
<PAGE>

                   JUNO ONLINE SERVICES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
         (IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
                                   (UNAUDITED)

1. BASIS OF PRESENTATION

      The accompanying unaudited condensed consolidated financial statements
include the accounts of Juno Online Services, Inc.; its wholly owned subsidiary,
Juno Internet Services, Inc.; and its majority-owned, India-based subsidiary,
Juno Online Services Development Private Limited (collectively, the "Company" or
"Juno"). These financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all necessary adjustments, consisting only of normal
recurring adjustments, have been included in the accompanying unaudited
condensed consolidated financial statements. All significant intercompany
transactions and balances have been eliminated in consolidation. Operating
results for the three and six months ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the full year ending December
31, 2000. For further information, refer to the consolidated financial
statements and notes thereto, which are included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1999, which was filed with the
Securities and Exchange Commission on February 15, 2000.

      The Company is a provider of Web access and other Internet-related
services throughout the United States. The Company offers several levels of
service, ranging from basic dial-up Internet access--which is provided to the
end user for free--to high-speed broadband Internet access. Revenues are derived
primarily from the subscription fees charged for use of the Company's premium
services, from the sale of advertising, and from various forms of electronic
commerce.

      The Company announced the expansion of its free basic service to include
full Internet access on December 20, 1999. Prior to this announcement, the
Company's free basic service provided only basic dial-up e-mail functionality.

      The Company has experienced operating losses since its inception. Such
losses have been due, in part, to the Company's efforts to maximize the number
of subscribers to both its free basic service and its premium services and to
its development of computer systems and related infrastructure that could be
rapidly expanded to accommodate additional users. The Company expects that it
will continue to incur net losses as it expends substantial additional resources
in the operation of its business, including in connection with its subscriber
acquisition activities and to cover the increased costs associated with the
service expansion it announced in December 1999. There can be no assurance that
the Company will achieve or sustain profitability or positive cash flow from its
operations.

      Juno Online Services, Inc. is the surviving entity of a statutory merger
with Juno Online Services, L.P. (the "Partnership"). On March 1, 1999, the
Partnership and Juno Online Services, Inc., entities under common control,
effected the statutory merger pursuant to which the Partnership was merged with
and into Juno Online Services, Inc., in a manner similar to a pooling of
interests (the "Statutory Merger"). This tax-free transaction resulted in the
combination of the Partnership with its wholly owned subsidiary, Juno Online
Services, Inc. such that Juno Online Services, Inc. is the surviving entity. In
connection with the Statutory Merger, the Class A Units of the Partnership were
converted into Series A Redeemable Convertible Preferred Stock, and accumulated
losses of the Partnership were reclassified to additional paid-in capital.

                                       8
<PAGE>
                   JUNO ONLINE SERVICES, INC. AND SUBSIDIARIES
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
         (IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
                                   (UNAUDITED)


      Certain reclassifications have been made to the prior year's financial
statements to conform to the current period presentation.

2. EARNINGS PER SHARE

      Basic and diluted net loss per share for the six months ended June 30,
1999 is calculated separately for the periods prior and subsequent to the March
1999 statutory merger.

      The pro forma information regarding net loss per share and weighted
average shares outstanding set forth below gives effect to the treatment of
Series A (Class A limited partnership units prior to March 1, 1999) and Series B
Redeemable Convertible Preferred Stock as shares of common stock for the period
following the March 1999 statutory merger.

<TABLE>
<CAPTION>

                                                          THREE MONTHS     SIX MONTHS
                                                             ENDED            ENDED
                                                            JUNE 30,         JUNE 30,
                                                              1999             1999
                                                              ----             ----
<S>                                                        <C>             <C>
Numerator:
  Net loss ............................................      $(17,257)      $(24,024)
                                                          ===========    ===========

Denominator:
  Weighted average number of:
    Shares of common stock ............................    13,785,251      6,972,179
    Redeemable Convertible Preferred Stock
      treated as shares of common stock:
      Series B ........................................     6,127,795      4,800,055
      Series A (Class A limited partnership
        units prior to March 1, 1999) .................    10,688,153     14,166,768
                                                          -----------    -----------
    Denominator for pro forma basic and
      diluted net loss per share ......................    30,601,199     25,939,002
                                                          -----------    -----------
Pro forma basic and diluted net loss per share ........   $     (0.56)   $     (0.93)
                                                          ===========    ===========
</TABLE>

3.  COMMITMENTS AND CONTINGENCIES

COMMITMENTS

    The Company has entered into a number of telecommunications and subscriber
referral agreements that contain usage and/or payment commitments. Pursuant to
the telecommunications agreements, the Company has committed to minimum usage
levels for certain telecommunications services. Under the subscriber referral
agreements, the Company has committed to pay a specified amount for each
referred subscriber who satisfies certain pre-determined activity criteria.
Total commitments pursuant to the telecommunication agreements and estimated
commitments under the subscriber referral agreements are as follows, on a
combined basis: $22,697 for the six months ending December 31, 2000, and
$14,785, $7,200, and $4,200 for the years ending December 31,

                                       9
<PAGE>
                   JUNO ONLINE SERVICES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
         (IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
                                   (UNAUDITED)


2001, 2002, and 2003, respectively. Certain of these commitments may, at the
Company's option, be satisfied in whole or in part in the form of the Company's
common stock. The Company currently estimates that the amount that may be
payable in common stock represents approximately 62% of the combined commitments
shown above. The Company currently intends to pay these obligations with its
common stock to the greatest extent permissible, but may ultimately choose to
pay some or all of these amounts in cash instead.

      Telecommunications services expenses for the six-month periods ended June
30, 2000 and 1999 were approximately $29,961 and $17,492, respectively. Total
subscriber acquisition expenses incurred during the six months ended June 30,
2000 were $82,870, of which subscriber referral expenses of the sort described
above represented approximately $1,044.

      The Company has also entered into various non-cancelable operating leases.
D. E. Shaw & Co., L.P. ("DESCO, L.P.") has also entered into a leasing
arrangement for office space used by the Company. A portion of the Company's
operations are located in a single location that is leased by DESCO, L.P. The
Company, which benefits from the use of this office space, has agreed to assume
performance of DESCO L.P.'s payments obligations under the lease to the extent
the Company occupies such office space. Minimum lease payments below include
$8,685 related to this arrangement with DESCO, L.P. and $2,005 related to a
lease that was signed in July 2000. The remaining commitments under these
operating leases are $2,579 for the six months ending December 31, 2000 and
$4,586, $4,073, $1,318, $859, and $215 for the years ending December 31, 2001,
2002, 2003, 2004, and 2005, respectively. The Company's rental expense under
operating leases in the six months ended June 30, 2000 and 1999 was
approximately $2,490 and $957, respectively.

CONTINGENCIES

      Various claims and actions have been asserted or threatened against the
Company in the ordinary course of business. There are no threats, asserted
claims or actions, the outcome of which, in the opinion of management, would
have a materially adverse effect on the Company's consolidated financial
position, results of operations, and cash flows, taken as a whole.

                                       10
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF JUNO SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN
THIS QUARTERLY REPORT AS WELL AS OUR AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO, AND THE INFORMATION UNDER THE CAPTION "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
CONTAINED IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 15, 2000.
THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. JUNO'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED
OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS THAT MAY
AFFECT FUTURE RESULTS" AND ELSEWHERE IN THIS QUARTERLY REPORT, AND IN OTHER
REPORTS AND DOCUMENTS FILED FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE
COMMISSION.

OVERVIEW

      Juno Online Services, Inc. is a leading provider of Web access and other
Internet-related services to millions of computer users throughout the United
States. We provide several levels of service, ranging from basic dial-up
Internet access--provided to the end user for free--to high-speed broadband
Internet access, currently available in selected markets. Our revenues are
derived primarily from the fees we charge for the use of our premium services,
from the sale of advertising, and from various forms of electronic commerce.

      We launched our basic service in April 1996. Initially, this service
provided only basic dial-up e-mail services. In July 1998, we introduced our
first premium services, which offered features ranging from enhanced e-mail
services to full access to the World Wide Web, and for which we charged
subscription fees. In December 1999, we announced a major expansion of our
services:

      -     Our BASIC SERVICE now provides full Internet access for free in
            addition to e-mail.

      -     JUNO WEB provides competitively priced premium Internet access,
            supplementing the features of the basic service with free live
            technical support and customer service, priority access to Juno's
            network, several hundred additional local access numbers, and the
            elimination of a persistent advertising and navigation banner that
            is displayed to our basic service users at all times while they are
            connected to the Web.

      -     JUNO EXPRESS is a broadband service, available through multiple
            technologies, that provides all the features of Juno Web at speeds
            up to 21 times faster than an ordinary dial-up Internet connection.
            Among other benefits, this enables users to rapidly download
            high-bandwidth content such as video, music files, and software.

      In December 1999, in connection with the expansion of our free basic
service, we upgraded all subscribers using our enhanced e-mail service, Juno
Gold, to Juno Web at no additional cost.

      In the month of June 2000, our base of active subscribers increased to
3.38 million, up from 3.05 million in the month of March 2000. Our billable
subscriber base also continued to grow during the second quarter of 2000, to
730,000 at June 30, 2000, up from 661,000 at March 31, 2000. During the same
period, our total registered subscriber base grew by 17% to 11.05 million. As of
June 2000, 85% of our active subscribers had full Web access, up from 77% in
March 2000. See Selected Subscriber Data after the Results of Operations section
in this Item for a presentation of subscriber data over the last 5 fiscal
quarters. Our base of active subscribers


                                       11
<PAGE>


encompasses all registered subscriber accounts that connected at least once
during the month, together with all subscribers to a billable service, in each
case regardless of the type of activity or activities engaged in by such
subscribers.

      The provision of full Internet access for free has significantly
increased and is expected to continue to increase the costs associated with
providing our basic service. These costs are reflected in the Operations,
free service line of our statement of operations. We believe that the
expansion of our free basic service, which included the introduction of a
persistent advertising and navigation banner displayed at all times while a
user is connected to the Web, has generated and will continue to generate a
substantial amount of advertising inventory available for potential sale to
advertising customers. Our long-term strategy contemplates that we will be
able to generate sufficient additional revenues from this persistent
advertising banner and from other advertising inventory we control to cover
the increased costs associated with our service expansion. If our advertising
and transaction fee revenues continue to rise and our telecommunication rates
continue to decline on a per-subscriber basis, revenues associated with our
free basic service could exceed the sum of the expenses reported on our
Operations, free service line and the portion of our Cost of revenues line
that is associated with the free basic service at some point over the next 12
months. However, sales to date of advertising inventory associated with the
persistent advertising banner have lagged relative to sales of other
categories of advertising inventory: in the quarter ended June 30, 2000, this
banner represented approximately one-third of our advertising inventory
available for sale but generated just under 10% of our advertising and
electronic commerce revenue for the quarter. We have also experienced a
number of cancellations of advertising contracts, principally from other
companies in the Internet sector, as well as a slowdown in the signing of new
advertising contracts. Our business may suffer if the market for
Internet-based advertising fails to continue to develop, or develops more
slowly than expected. Our strategy contemplates that subscription fees for
billable premium services are likely to remain the largest source of revenues
for Juno in the immediate future.

      We classify our revenues as follows:

      (1)   Billable services revenues, consisting of:

            (a)   subscription fees that we receive from subscribers to our
                  premium services;

            (b)   technical support fees received when subscribers to our free
                  basic service and those subscribers to Juno Web who are
                  subscribed at our lowest price point call a 900 number for
                  live assistance from a support technician, as well as fees for
                  other billable services; and

            (c)   fees charged, at various times, for shipping and handling
                  associated with mailing disks upon request to prospective Juno
                  subscribers, and for short-term consulting engagements.

      (2)   Advertising and transaction fees, consisting of revenues earned from
            advertisers and strategic marketing partners for displaying
            advertisements to, and facilitating electronic commerce with, our
            subscribers. These advertisements are displayed on the persistent
            advertising and navigation banner displayed while users of our free
            basic service are connected to the Web, within the main Juno
            software while a Juno subscriber reads or writes e-mail and on
            Juno's Web portal site.

      (3)   Direct product sales, consisting of revenues generated from the sale
            of products directly by us to our subscribers and the associated
            shipping and handling fees.

      The introduction of our billable premium services significantly affected
the composition of our revenues. We launched our premium services on July 22,
1998, and as of June 30, 2000, we had approximately 730,000


                                       12
<PAGE>


premium service subscribers. Since the launch of our billable premium services,
billable services revenues have increased, in absolute terms, on a quarterly
basis.

      We currently offer our billable premium services under a number of pricing
plans. The list price for Juno Web is a flat rate of $19.95 per month, but since
the launch of the service, we have offered a number of promotions, such as a
free month of service or a discounted rate for an initial or prepaid period, as
well as discounted flat-rate plans. The most common pricing plan for Juno Web,
and the one we currently promote most actively, is a flat fee of $9.95 per month
following a free initial month. Juno ExpressSM is currently offered through a
number of different broadband technologies, including digital subscriber line
("DSL") technology and mobile wireless technology, at price points starting at
$49.95 per month. DSL subscribers currently receive their installation and
equipment for free after a manufacturer rebate of $198. Fewer than 1,000
subscribers had signed up for broadband service through Juno Express as of June
30, 2000. Subscription revenues for our billable premium services accounted for
approximately 96.7% and 97.1% of billable services revenues during the three and
six months ended June 30, 2000, respectively.

      As of June 30, 2000, we held a total of $85 million in cash and cash
equivalents. We currently expect the cash portion of our net loss in the
third quarter ending September 30, 2000, to improve by more than 50% as
compared to the second quarter of 2000, to between $10 million and $20
million, largely as a result of reduced cash expenditures for subscriber
acquisition and an increased focus on less cash-intensive subscriber
acquisition methods. "Cash portion of net loss" is not a measurement of
financial performance under generally accepted accounting principles and should
not be considered an alternative to net loss. "Cash portion of net loss"
excludes non-cash expenses such as depreciation, amortization, and charges for
stock-based subscriber acquisition. Examples of such methods include the
subscriber referral agreements we recently announced with Worldspy and
Freewwweb, the possible outright acquisition of other Internet service
providers, the "upselling" of Juno's free subscribers to our billable premium
services, the possible exchange of Juno advertising impressions or other
non-cash resources for subscriber referrals, and/or other approaches
entailing the expenditure of lesser amounts of cash than the direct mail
advertising on which we relied heavily during previous quarters. We may also
seek to raise additional capital. We believe that recent changes in the
market environment have both increased the value of cash reserves and created
new opportunities for companies like Juno to use stock for the acquisition of
smaller, often privately held companies that may no longer have access to the
capital markets, or to acquire subscribers or other assets from such firms.
These changes also increase the relative attractiveness of other non-cash
intensive subscriber acquisition channels, including those based on our
ability to communicate inexpensively with our large subscriber base. Whether
such acquisitions and other channels will prove sufficient to grow or
maintain our subscriber base over time will depend on the number of
attractive opportunities we are able to identify and exploit, and on how the
Internet sector evolves. We may respond on an opportunistic basis to further
changes within the industry, but at least for the time being we expect to
reduce our use of cash-intensive subscriber acquisition channels, while
considering various opportunities for the exploitation of non-cash resources.
Additionally, we may significantly reduce overall subscriber acquisition
expenses, and expect to significantly reduce the cash portion of such
expenses, during the second half of 2000 as compared to the first half of
2000.

      We face intense competition to acquire both free and billable service
subscribers. Our competitors for such subscribers include companies that have
substantially greater market presence and financial, technical, distribution,
marketing, and other resources than we have. This competitive environment could
have a variety of harmful effects on us, including limiting our ability to enter
into or renew agreements with distribution partners, necessitating price
reductions for our billable services, or placing us at a competitive
disadvantage if we are unable to maintain or increase our spending in areas such
as marketing, telecommunications, and product development.

                                       13
<PAGE>


      We are subject to industry trends that affect Internet access providers
generally, including seasonality and subscriber cancellations. We believe
Internet access providers typically incur higher expenses during the last and
first calendar quarters, corresponding to heavier usage during the fall and
winter, and experience relatively lighter usage and relatively fewer account
registrations during the summer. We believe certain subscriber acquisition
methods also tend to be most effective during the first and last calendar
quarters of each year, and we may take these types of seasonal effects into
consideration in scheduling such marketing activities as we might choose to
undertake. Although we have relied heavily on direct mail in the past, we do not
currently plan to use direct mail for subscriber acquisition during the
remainder of 2000. The results of operations of Internet access providers,
including those of Juno, are significantly affected by subscriber cancellations.
The failure to retain subscribers to our billable premium services, or an
increase in the rate of cancellations of those services, would cause our
business and financial results to suffer.

      Additionally, our strategy contemplates continued increases in revenues
from advertising and transaction fees, although management currently expects
such growth to slow for at least the immediate future due in part to reductions
in advertising spending by other Internet companies. We expect that strategic
marketing alliances will continue to account for a significant portion of
advertising and transaction fee revenues. This is due in part to our expectation
that we may secure additional strategic marketing alliances. Our competitors for
revenues from advertising and electronic commerce include companies that have
substantially greater market presence, and financial, technical, distribution,
marketing, and other resources than we have. This competitive environment could
have a variety of harmful effects on us, including necessitating advertising
rate reductions and limiting our ability to enter into or renew advertising
agreements. We expect that revenues from direct product sales will be virtually
eliminated by the end of the third quarter of 2000, due to our strategic
decision to focus increasingly on higher margin activities.

      Our principal expenses consist of marketing, telecommunications, customer
service, and personnel and related costs. We have elected to obtain a number of
services principally from third-party providers. Services obtained from such
providers include telecommunications services, customer service and technical
support, services related to the sale of certain advertising inventory and the
delivery of the associated advertisements, and merchandising fulfillment for our
direct product sales activities.

      We have incurred net losses of $238.5 million from our inception on June
30, 1995 through June 30, 2000. In addition, we have recorded cumulative
unearned compensation of $1.2 million, which represents the difference between
the exercise price and the deemed fair market value at the date of grant for
shares of common stock issuable upon the exercise of stock options. Of the total
unearned compensation recorded, $56,000, $117,000 and $416,000 was amortized for
the three and six months ended June 30, 2000 and for the year ended December 31,
1999, respectively. The remaining balance of unearned compensation is expected
to be amortized over the remaining vesting periods of the related options.

      We have relied primarily on sales of equity securities, totaling $299.8
million, to fund our operations. Included in this amount are $81.1 million of
net proceeds from our February 2000 follow-on offering of common stock, $77.3
million of net proceeds from our May 1999 initial public offering of common
stock and $61.9 million of net proceeds from our March 1999 private placement of
Series B redeemable convertible preferred stock, which automatically converted
into shares of common stock upon the closing of the initial public offering. We
expect net losses to continue for the foreseeable future as we continue to incur
significant expenses while pursuing our business strategy.

      Prior to March 1, 1999, we operated our business primarily through a
limited partnership, Juno Online Services, L.P. On that date, we completed a
statutory merger of Juno Online Services, L.P. into Juno Online Services, Inc.,
which had been a wholly owned subsidiary of Juno Online Services, L.P. Juno
Online Services,

                                       14
<PAGE>


Inc. is the surviving entity after completion of the statutory merger. The
consolidated financial statements for 1999 included herein consist of the
accounts of both Juno Online Services, L.P. and Juno Online Services, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Since we operated as a limited partnership prior to March 1,
1999, taxable losses incurred through that date have been allocated to the
partners for reporting on their respective income tax returns. Accordingly, as
of that date, we had no available net operating loss carryforwards available for
federal and state income tax purposes to offset future taxable income, if any.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999

      REVENUES

      Total revenues increased approximately $18.4 million, to $29.6 million for
the three months ended June 30, 2000 from $11.1 million for the three months
ended June 30, 1999, an increase of 166%. This increase was due to increases in
billable services revenues and in advertising and transaction fees, partially
offset by a decrease in direct product sales.

      BILLABLE SERVICES. Billable services revenues increased approximately
$11.4 million, to $18.4 million for the three months ended June 30, 2000 from
$7.1 million for the three months ended June 30, 1999, an increase of 161%. This
increase was due primarily to a greater number of billable service subscribers
in the three months ended June 30, 2000, as compared with the much smaller
number in the year-ago quarter. At June 30, 2000, there were approximately
730,000 billable service subscribers as compared with approximately 270,000
billable service subscribers at June 30, 1999.

      ADVERTISING AND TRANSACTION FEES. Advertising and transaction fees
increased $8.0 million, to $10.7 million for the three months ended June 30,
2000 from $2.7 million for the three months ended June 30, 1999, an increase of
295%. This increase was due primarily to larger average deal sizes associated
with the shift in our emphasis towards strategic marketing alliances, and
revenue earned from an increase in traffic to our Web portal site, partially
offset by declines in the number of and the aggregate revenue generated from
shorter term ad sales contracts. We currently expect that advertising and
transaction fees will continue to grow in the future on an absolute basis and as
a percentage of our total revenue, although such growth has recently slowed.
Barter transactions accounted for approximately 2.3% and 2.6% of total revenues
and approximately 6.5% and 10.7% of advertising and transaction fees for the
three months ended June 30, 2000 and 1999, respectively.

      DIRECT PRODUCT SALES. Direct product sales decreased approximately $0.9
million, to $0.4 million for the three months ended June 30, 2000 from $1.4
million for the three months ended June 30, 1999, a decrease of 67.5%. This
decline reflects our strategic decision to narrow the range of our direct
product sales activities and the types of products offered to our subscribers.
We decided to concentrate on forming strategic marketing alliances and
developing other uses for our advertising inventory that we believe should
generate revenues with higher margins than direct product sales. Pursuant to
this decision, in May 2000, we provided 90 days notice to our third-party
provider of merchandising fulfillment that we were canceling our contract. We
expect that revenues from direct product sales will be virtually eliminated by
the end of the third quarter of 2000.

                                       15
<PAGE>


      COST OF REVENUES

      Total cost of revenues increased approximately $7.4 million, to $15.2
million for the three months ended June 30, 2000 from $7.8 million for the three
months ended June 30, 1999, an increase of 95.1%. This increase was due
primarily to increases in costs associated with billable services and in
advertising and transaction fees, partially offset by a decrease in costs
associated with direct product sales.

      BILLABLE SERVICES. Cost of revenues related to billable services consists
primarily of the costs to provide billable premium services, including
telecommunications, customer service, operator-assisted technical support,
credit card fees, and personnel and related overhead costs. In addition, during
the three and six months ended June 30, 1999, cost of revenues related to
billable services included the costs of mailing disks upon request to
prospective Juno subscribers, who had to pay for delivery of the disks at that
time. Further, during the three and six months ended June 30, 1999, cost of
revenues related to billable services included personnel and related overhead
costs associated with our performance of a short-term consulting engagement.

      Cost of revenues related to billable services increased approximately $7.1
million, to $12.6 million for the three months ended June 30, 2000 from $5.5
million for the three months ended June 30, 1999, an increase of 129%. This
increase was due primarily to the costs of providing our billable premium
services to a substantially larger number of subscribers as compared with the
number of subscribers in the year-ago quarter. Costs related to the provision of
these billable subscription services, principally telecommunications, customer
service, and technical support expenses, accounted for 88.2% of the total costs
of revenues related to billable services during the three months ended June 30,
2000 and accounted for the majority of the increase relative to the year-ago
quarter. These expenses accounted for 83.6% of the total costs of revenues
during the three months ended June 30, 1999. Cost of billable services revenues
as a percentage of billable services revenues improved to 68.1% for the three
months ended June 30, 2000 from 77.5% for the three months ended June 30, 1999.
This improvement is primarily attributable to decreased customer service costs
as a percentage of revenues, and declining average telecommunications rates.

      ADVERTISING AND TRANSACTION FEES. Cost of revenues for advertising and
transaction fees consists primarily of the transmission costs associated with
downloading advertisements to the hard drives of subscribers' computers for
later display, the personnel and related costs associated with the creation and
distribution of these advertisements, and the costs associated with reporting
the results of ad campaigns to advertisers.

      Cost of revenues for advertising and transaction fees increased $1.1
million, to $2.3 million for the three months ended June 30, 2000 from $1.2
million for the three months ended June 30, 1999, an increase of 94.7%. This
increase was due primarily to the impact of additional strategic marketing
alliances. Cost of revenues related to advertising and transaction fees as a
percentage of advertising and transaction fees improved to 21.2% for the three
months ended June 30, 2000 from 43.0% for the three months ended June 30, 1999.
This improvement was due primarily to decreased telecommunications rates, faster
average connection speeds, larger average deal sizes over which to spread
production costs, and improvements in our production and distribution methods.
We currently expect cost of revenues for advertising and transaction fees to
remain in the 20% to 30% range over the long term.

      DIRECT PRODUCT SALES. Cost of revenues for direct product sales consists
primarily of the costs of merchandise sold directly by us to our subscribers and
the associated shipping and handling costs.

      The cost of revenues for direct product sales decreased $0.8 million, to
$0.4 million for the three months ended June 30, 2000 from $1.2 million for the
three months ended June 30, 1999, a decrease of 64.5%. This decrease corresponds
to the decrease in merchandise sold. The cost of revenues for direct product
sales as a

                                       16
<PAGE>


percentage of direct product sales revenues increased to 94.3% for the three
months ended June 30, 2000 from 86.3% for the three months ended June 30, 1999.
This increase was due primarily to a greater decline in the average retail price
of merchandise sold relative to the declines in the costs of such merchandise as
well as additional promotional pricing in response to increasing competition in
the computer hardware retail market, which category represents the majority of
our merchandise sold.

      OPERATING EXPENSES

      OPERATIONS, FREE SERVICE. Operations, free service consists of the costs
associated with providing our free basic service. Costs consist principally of
telecommunications costs, expenses associated with providing customer service,
depreciation of network equipment, and personnel and related overhead costs.

      Expenses associated with Operations, free service increased $7.7 million,
to $9.5 million for the three months ended June 30, 2000 from $1.8 million for
the three months ended June 30, 1999, an increase of 437%. This increase was due
primarily to additional telecommunications costs incurred as a result of the
expansion of our free service to include full Internet access. We currently
expect average hours of connection time by our active free subscribers to
increase from approximately 4 hours per active free subscriber per month during
the three months ended June 30, 2000 to approximately 7 hours per active free
subscriber per month by the end of 2000. Average monthly connection time for
free service subscribers has been, and we currently believe it is likely to
remain, significantly lower than connection time for billable service
subscribers. We believe that the expected increases in average connection times
per active subscriber will be partially offset by continued reductions in
telecommunication rates. However, there can be no assurance that
telecommunication rates will decline to the extent expected, or at all, or that
average connection times will rise within expectations.

      SUBSCRIBER ACQUISITION. Subscriber acquisition costs include all costs
incurred to acquire subscribers to either our free basic service or to one of
our billable premium services. These costs include the cost of direct mail
campaigns, advertising through conventional and computer-based media,
telemarketing, the production of advertisements to be displayed over the Juno
services and transmission of such advertisements to our subscribers, disk
duplication and fulfillment, and bounties paid to acquire subscribers, among
other marketing activities. These costs also include various subscriber
retention activities, as well as personnel and related overhead costs.

      Subscriber acquisition costs increased $24.2 million, to $38.1 million for
the three months ended June 30, 2000 from $13.9 million for the three months
ended June 30, 1999. These increases are due primarily to costs related to
external marketing, including direct mail campaigns, television and radio
commercials, outdoor advertising and various other advertising activities, all
of which are largely discretionary. To a lesser extent, the increase reflects
costs incurred in connection with a stock-based subscriber referral agreement
signed toward the end of the second quarter of 2000, as well as inbound
telemarketing costs incurred in connection with subscriber acquisition and
retention activities. As a percentage of revenues, subscriber acquisition costs
increased slightly to 129% in the three months ended June 30, 2000 from 125% in
the three months ended June 30, 1999. As mentioned above, we may significantly
reduce these expenses, and expect to significantly reduce the cash portion of
these expenses, during the second half of 2000 as compared to the first half. We
expect that the expenses we incur during the second half of 2000 will include a
significantly larger non-cash component than those in the first half. The
percentage of total subscriber acquisition costs that will be non-cash will
depend in part on the number of attractive non-cash opportunities we are able to
identify and exploit and the performance of such non-cash subscriber acquisition
channels.

      SALES AND MARKETING. Sales and marketing expenses consist primarily of the
personnel and related overhead costs of the following departments: advertising
sales and business development; direct product sales; and product marketing.
Also included are costs associated with trade advertising intended to support
our advertising sales

                                       17
<PAGE>


effort, corporate branding activities unrelated to subscriber acquisition, and
public relations, as well as advertising production, advertising transmission,
customer service and fulfillment costs associated with our direct product sales
activities.

      Sales and marketing costs increased $2.9 million, to $5.6 million for the
three months ended June 30, 2000 from $2.7 million for the three months ended
June 30, 1999, an increase of 107%. This increase is due primarily to an
increase in trade advertising as well as in personnel and related costs,
including sales commissions. As a percentage of revenues, sales and marketing
costs improved to 19.0% in the three months ended June 30, 2000 from 24.4% in
the three months ended June 30, 1999. This improvement was due primarily to an
increase in revenues for the three months ended June 30, 2000 as compared to the
year ago quarter.

      PRODUCT DEVELOPMENT. Product development includes research and development
expenses and other product development costs. These costs consist primarily of
personnel and related overhead costs as well as, for periods prior to May 1999,
the costs associated with research and development and other product development
activities performed for us on a contract basis by a related party in Hyderabad,
India. In May 1999, we hired as employees substantially all of the individuals
involved in this India-based contract.

      Product development costs increased $1.1 million, to $3.1 million for the
three months ended June 30, 2000 from $2.0 million for the three months ended
June 30, 1999, an increase of 56.8%. This increase is due primarily to
additional personnel and related costs in both our U.S. and India offices
related to the development of our Juno Express premium service as well as the
development of enhancements to our client-side software. These costs were
partially offset by the lower costs associated with operating our India-based
research and development efforts as a majority-owned subsidiary rather than
obtaining these services on a contract basis. To date, we have not capitalized
any expenses related to any software development activities.

      GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel and related overhead costs associated with executive,
finance, legal, recruiting, human resources and facilities functions, as well as
various professional expenses.

      General and administrative costs increased $1.5 million, to $2.5 million
for the three months ended June 30, 2000 from $1.0 million for the three months
ended June 30, 1999, an increase of 153%. This increase is due primarily to a
rise in insurance costs for directors' and officers' liability insurance,
professional service fees and personnel and related overhead costs. As a
percentage of revenues, general and administrative costs improved to 8.4% for
the three months ended June 30, 2000 as compared to 8.8% for the three months
ended June 30, 1999.

      INTEREST INCOME, NET. Interest income, net increased $0.9 million to $1.7
million for the three months ended June 30, 2000, from $0.8 million for the
three months ended June 30, 1999. This increase was due primarily to interest
income earned on higher average cash balances in the three months ended June 30,
2000 as compared to the three months ended June 30, 1999. Interest income, net,
includes interest expense of $47 and $114 for the three months ended June 30,
2000 and 1999, respectively.

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999

      REVENUES

      Total revenues increased $32.8 million, to $53.6 million for the six
months ended June 30, 2000 from $20.8 million for the six months ended June 30,
1999, an increase of 157%. This increase was due to increases in billable
services and in advertising and transaction fees, partially offset by a decrease
in direct product sales.

                                       18
<PAGE>


      BILLABLE SERVICES. Billable services revenues increased $22.3 million, to
$35.2 million for the six months ended June 30, 2000 from $12.9 million for the
six months ended June 30, 1999, an increase of 173%. This increase was due
primarily to a greater number of billable service subscribers in the six months
ended June 30, 2000, as compared with the much smaller number in the year ago
quarter.

      ADVERTISING AND TRANSACTION FEES. Advertising and transaction fees
increased $12.1 million, to $17.1 million for the six months ended June 30, 2000
from $5.0 million for the six months ended June 30, 1999, an increase of 244%.
This increase was due primarily to the increase in our subscriber base (both
free and billable), which helped to enhance our ability to attract Web-based
advertisers. At June 30, 2000 we had approximately 3,379,000 active subscribers,
of which 85% had full Web access, as compared with approximately 2,311,000
active subscribers at June 30, 1999, of which 7% had full Web access. To a
lesser extent, the revenue increase resulted from a large targeted e-mail
marketing agreement. We expect that advertising and transaction fees will
continue to grow in the future on an absolute basis and as a percentage of our
total revenue, although such growth has recently slowed. Barter transactions
accounted for approximately 1.9% and 1.5% of total revenues and 6.0% of
advertising and transaction fees for the six months ended June 30, 2000 and
1999, respectively.

      DIRECT PRODUCT SALES. Direct product sales decreased $1.7 million, to $1.3
million for the six months ended June 30, 2000 from $3.0 million for the six
months ended June 30, 1999, a decrease of 55.3%. This decline reflects our
strategic decision to narrow the range of our direct product sales activities
and the types of products offered to our subscribers. We decided to concentrate
on forming strategic marketing alliances and developing other uses for our
advertising inventory that we believe should generate revenues with higher
margins than direct product sales. We expect that revenues from direct product
sales will be virtually eliminated by the end of the third quarter of 2000.

      COST OF REVENUES

      Total cost of revenues increased approximately $14.9 million, to $29.9
million for the six months ended June 30, 2000 from $15.0 million for the six
months ended June 30, 1999, an increase of 99.3%. This increase was due
primarily to increases in costs associated with billable services and in
advertising and transaction fees, partially offset by a decrease in costs
associated with direct product sales.

      BILLABLE SERVICES. Cost of revenues related to billable services increased
approximately $14.4 million, to $24.6 million for the six months ended June 30,
2000 from $10.2 million for the six months ended June 30, 1999, an increase of
142%. This increase was due primarily to the costs of providing our billable
subscription services to a substantially larger number of subscribers as
compared with the number of subscribers in the same year-ago period. Costs
related to the provision of these billable subscription services, principally
telecommunications, customer service, and technical support expenses, accounted
for 88.4% of the total costs of revenues related to billable services during the
six months ended June 30, 2000 and accounted for the majority of the increase.
Cost of billable services revenues as a percentage of billable services revenues
improved to 69.9% for the six months ended June 30, 2000 from 78.9% for the six
months ended June 30, 1999. This improvement is primarily attributable to
decreased customer service costs per subscriber and declining average
telecommunications rates, partially offset by increased average hours of usage
per subscriber.

      ADVERTISING AND TRANSACTION FEES. Cost of revenues for advertising and
transaction fees increased $1.8 million, to $4.0 million for the six months
ended June 30, 2000 from $2.2 million for the six months ended June 30, 1999, an
increase of 78.9%. This increase was due primarily to the impact of additional
strategic marketing alliances. Cost of revenues related to advertising and
transaction fees as a percentage of advertising and transaction fees improved to
23.5% for the six months ended June 30, 2000 from 45.1% for the six months ended
June 30, 1999. This improvement is due primarily to decreased telecommunications
rates, faster average

                                       19
<PAGE>


connection speeds, larger average deal sizes over which to spread production
costs, and improvements in our production and distribution methods.

      DIRECT PRODUCT SALES. The cost of revenues for direct product sales
decreased approximately $1.3 million, to $1.3 million for the six months ended
June 30, 2000 from $2.6 million for the six months ended June 30, 1999, a
decrease of 50.9%. This decrease corresponds to the decrease in merchandise
sold. The cost of revenues for direct product sales as a percentage of direct
product sales revenues increased to 94.7% for the six months ended June 30, 2000
from 86.3% for the six months ended June 30, 1999. This increase was due
primarily to a greater decline in the average retail price of merchandise sold
relative to the declines in the costs of such merchandise and additional
promotional pricing in response to increasing competition in the computer
hardware retail market, which category represents the majority of our
merchandise sold.

      OPERATING EXPENSES

      OPERATIONS, FREE SERVICE. Expenses associated with operations, free
service increased approximately $12.0 million, to $15.7 million for the six
months ended June 30, 2000 from $3.6 million for the six months ended June 30,
1999, an increase of 333%. This increase was due primarily to additional
telecommunications costs incurred as a result of the expansion of our free
service to include full Internet access.

      SUBSCRIBER ACQUISITION. Subscriber acquisition costs increased $66.3
million, to $82.9 million for the six months ended June 30, 2000 from $16.6
million for the six months ended June 30, 1999. These increases are due
primarily to costs related to external marketing, including direct mail
campaigns, television and radio commercials, outdoor advertising and various
other advertising activities, all of which are largely discretionary. To a
lesser degree, the increase reflects costs incurred in connection with a
stock-based subscriber referral agreement as well as inbound telemarketing costs
incurred in connection with subscriber acquisition and retention activities. As
a percentage of revenues, subscriber acquisition costs increased to 155% in the
six months ended June 30, 2000 from 79.7% in the six months ended June 30, 1999.
As mentioned above, we may significantly reduce these expenses, and expect to
significantly reduce the cash portion of these expenses, during the second half
of 2000 as compared to the first half. We expect that the expenses we incur
during the second half of 2000 will include a significantly larger non-cash
component than those in the first half. The percentage of total subscriber
acquisition costs that will be non-cash will depend in part on the number of
attractive non-cash opportunities we are able to identify and exploit and the
performance of such non-cash subscriber acquisition channels.

      SALES AND MARKETING. Sales and marketing costs increased $4.2 million, to
$9.2 million for the six months ended June 30, 2000 from $5.0 million for the
six months ended June 30, 1999, an increase of 83.5%. This increase is due
primarily to an increase in trade advertising as well as personnel and related
costs and commissions. As a percentage of revenues, sales and marketing costs
improved to 17.2% in the six months ended June 30, 2000 from 24.1% in the six
months ended June 30, 1999. This improvement was due primarily to an increase in
revenues for the six months ended June 30, 2000 as compared to the year-ago
quarter.

      PRODUCT DEVELOPMENT. Product development costs increased approximately
$1.7 million, to $5.6 million for the six months ended June 30, 2000 from $3.8
million for the six months ended June 30, 1999, an increase of 45.2%. This
increase is due primarily to additional personnel and related costs in both our
domestic and India offices related to the development of our Juno Express
premium service as well as the development of enhancements to our client-side
software. These costs were partially offset by the lower costs associated with
operating our India-based research and development efforts as a majority-owned
subsidiary rather than obtaining these services on a contract basis. To date, we
have not capitalized any expenses related to any software development
activities.

                                       20
<PAGE>


      GENERAL AND ADMINISTRATIVE. General and administrative costs increased
$2.6 million, to $4.3 million for the six months ended June 30, 2000 from $1.7
million for the six months ended June 30, 1999, an increase of 153%. This
increase is due primarily to a rise in insurance costs for directors' and
officers' liability insurance, professional service fees and additional
personnel and related overhead costs. As a percentage of revenues, general and
administrative costs remained relatively flat at approximately 8.0% for the six
months ended June 30, 2000 and 1999.

      INTEREST INCOME, NET. Interest income, net increased $2.5 million to $3.4
million for the six months ended June 30, 2000, from $0.9 million for the six
months ended June 30, 1999. This increase is due primarily to interest income
earned on higher average cash balances in the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999. Interest income, net includes
interest expense of $91 and $252 for the six months ended June 30, 2000 and
1999, respectively.

SELECTED SUBSCRIBER DATA

      The following table sets forth selected subscriber data for each of the
five quarters ended June 30, 2000:

<TABLE>
<CAPTION>

                                                JUNE 30,         MAR. 31,       DEC. 31,       SEPT. 30,       JUNE 30,
                                                 2000             2000           1999            1999           1999
-------------------------                       --------        --------       --------       ---------       --------

<S>                                             <C>             <C>            <C>             <C>            <C>
Total registered subscriber
   accounts as of (1).................          11,048,000      9,430,000      8,137,000       7,613,000      7,175,000
Active subscriber accounts
   in month ended (2).................           3,379,000      3,053,000      2,394,000       2,326,000      2,311,000
Active Web-enabled
   subscribers in month ended (3).....           2,876,000      2,358,000        771,000         268,000        160,000
Billable service accounts
   as of (4)..........................             730,000        661,000        550,000         400,000        270,000

</TABLE>

------------------------------------------

(1)  Includes all subscriber accounts created since Juno's inception, computed
     after deduction of any accounts that have since been cancelled, but
     regardless of current activity, if any.

(2)  Encompasses all registered subscriber accounts that connected at least once
     during the month, together with all subscribers to a billable service, in
     each case regardless of the type of activity or activities engaged in by
     such subscribers.

(3)  Refers to the subset of active subscriber accounts that have been centrally
     provisioned for, and provided with the client-side software necessary to
     access, not only e-mail, but also the World Wide Web, regardless of the
     extent, if any, to which such subscribers have actually used the Web.

(4)  Represents the subset of active subscriber accounts that carry a charge for
     premium functionality.

                                       21
<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

      Since our formation, we have financed our operations primarily from funds
generated by the sale of equity securities. Sales of equity securities include
$81.1 million of net proceeds from our February 2000 follow-on offering of
common stock, $77.3 million of net proceeds from our May 1999 initial public
offering of common stock and $61.9 million of net proceeds from our March 1999
private placement of redeemable convertible preferred stock, which converted
into common stock upon the completion of our initial public offering. We have
incurred significant losses since inception, totaling $238.5 million through
June 30, 2000. As of June 30, 2000 we had $85.5 million in cash and cash
equivalents.

      Net cash used in operating activities for the six months ended June 30,
2000 increased $54.9 million to $81.3 million, up from $26.4 million for the six
months ended June 30, 1999. This increase was primarily the result of additional
subscriber acquisition expenses, which represented the most significant portion
of the overall increase in the net loss, partially offset by changes in other
working capital accounts. During 1999, we prepaid $10.0 million of advertising
costs. At June 30, 2000, $6.4 million of the prepaid advertising remained
unused. This prepaid advertising is available to be used at any time prior to
March 2001.

      Net cash used in investing activities was $6.2 million and $0.2 million
for the six months ended June 30, 2000, and 1999, respectively. The principal
use of cash for the periods presented was for the purchase of fixed assets.

      Net cash provided by financing activities was $81.4 million and $129.8
million for the six months ended June 30, 2000 and 1999, respectively. Financing
activities for the six months ended June 30, 2000 primarily included $81.1
million in net proceeds we received from our February 2000 follow-on offering of
common stock. Financing activities for the six months ended June 30, 1999
included $61.8 million of net proceeds received from our March 1999 private
placement and $77.3 million of net proceeds from our May 1999 initial public
offering of common stock.

      In July 1999, we entered into a credit facility with a bank that provides
for borrowings up to $10.0 million. During August 2000, we extended this
facility through October 2000. Borrowings can be in the form of advances or
standby letters of credit. The facility is collateralized by substantially all
of Juno's assets. It is not collateralized by assets established pursuant to
capital leases. Advances outstanding under the facility bear interest at the
bank's prime rate, 9.50% at June 30, 2000. Under the terms of the facility, Juno
is required to maintain certain quarterly financial and operational ratios and
to obtain bank approval for certain mergers or acquisitions and fixed asset
financing. As of the date of this report, there were no amounts outstanding
under the facility.

    During the three months ended June 30, 2000, we entered into
telecommunications and subscriber referral agreements that represent commitments
which are larger than historical trends. We expect the total of these
commitments to be approximately $48.9 million through 2003. Certain of these
commitments may, at the Company's option, be satisfied in whole or in part in
the form of the Company's common stock. The Company currently estimates that the
amount that may be payable in common stock represents approximately 62% of the
combined commitments described above. The Company currently intends to pay these
obligations with its common stock to the greatest extent permissible, but may
ultimately choose to pay some or all of these amounts in cash instead.

      We may increase our capital expenditures and lease commitments further
beyond recent historical trends to expand our infrastructure to the extent that
we anticipate growth of our subscriber base. As a result of our

                                       22
<PAGE>


outsourcing arrangements for telecommunications services and customer service,
we have substantially reduced the level of capital expenditures that would
otherwise have been necessary to develop our product offerings. In the event
that these outsourcing arrangements were no longer available to us, significant
capital expenditures would be required and our business and financial results
could suffer. The expansion of our free basic service to include full Web access
may continue to significantly increase the telecommunications costs that we
incur, to the extent that Web usage per subscriber or number of active
subscribers continues to grow. As mentioned above, we may significantly reduce
subscriber acquistion expenses, and expect to significantly reduce the cash
portion of such expenses, during the second half of 2000 as compared to the
first half. We expect that the expenses we incur during the second half of 2000
will include a significantly larger non-cash component than those in the first
half. The percentage of total subscriber acquisition costs that will be non-cash
will depend in part on the number of attractive non-cash opportunities we are
able to identify and exploit and the performance of such non-cash subscriber
acquisition channels. However, to the extent we continue to undertake cash-based
subscriber acquisition activities, subscriber acquisition expenditures are
likely to represent a material use of our cash resources. Expenditures
associated with the purchase of telecommunications capacity are expected to
continue to represent a material use of our cash resources.

      We believe that our existing cash and cash equivalents will be sufficient
to meet our anticipated cash needs for at least the next twelve months. One of
the ways we manage cash flow is by adjusting our discretionary cash
expenditures. Subscriber acquisition expenses represent our primary
discretionary expenditure and can be adjusted in response to such factors as
seasonal variations in the cost-effectiveness of the various marketing channels
we employ, the availability of funding, and overall market conditions.
Evaluating our loss before subscriber acquisition expenses, while not a
measurement of financial performance under generally accepted accounting
principles, can be a useful way to understand the effect that adjustments to
discretionary costs might have on our cash flow. During the six months ended
June 30, 2000, loss before subscriber acquisition expenses was $7.6 million, as
compared to $7.4 million during the six months ended June 30, 1999. Overall net
loss was $90.5 million during the six months ended June 30, 2000, as compared to
$24.0 million during the six months ended June 30, 1999. In addition to reducing
the level of discretionary expenditures, we believe we can also manage our cash
flow by using non-cash resources, such as Juno common stock, to satisfy certain
discretionary and non-discretionary obligations. During the three months ended
June 30, 2000, we entered into a number of agreements that enable us to issue
our equity securities as consideration for certain telecommunications and
subscriber referral costs. We may find opportunities to issue our equity
securities as consideration for other subscriber acquisition,
telecommunications, or other significant operating costs in the future. Finally,
we may also seek to sell additional equity or debt securities or to increase,
extend or supplement our existing credit facility. If non-cash methods for
payment of operating costs are used or additional funds are raised by our
issuing equity securities, stockholders may experience significant dilution of
their ownership interest and the newly issued securities may have rights
superior to those of our common stock. If additional funds are raised by our
issuing debt, we may be subject to limitations on our operations. There can be
no assurance that financing will be available in amounts or on terms acceptable
to us, or at all.

                                       23
<PAGE>


RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

OUR BILLABLE PREMIUM SERVICES AND OUR FREE BASIC WEB ACCESS SERVICE HAVE A
   LIMITED OPERATING HISTORY AND FACE NUMEROUS RISKS AND UNCERTAINTIES

      We have a limited operating history upon which you can evaluate our
business and our services. We began offering our free basic service to the
public in its original form in April 1996, first offered billable premium
services to the public in July 1998 and expanded our free basic service to
include full Internet access in addition to e-mail in December 1999. As a
company in the rapidly evolving market for Internet services, we face numerous
risks and uncertainties. Some of these risks relate to our ability to:

      -     attract and retain subscribers to our free basic service and our
            billable premium services;

      -     anticipate and adapt to the changing Internet market;

      -     generate revenues from the sale of our billable premium services and
            from the sale of advertising that are sufficient to cover our
            operating expenses;

      -     preserve or raise the capital necessary to finance our operations to
            the extent that they are not profitable;

      -     maintain and develop strategic relationships with business partners
            to market their products over our services;

      -     implement an effective marketing strategy to promote awareness of
            the Juno services;

      -     respond to actions taken by our competitors and the entry of new
            competitors into our markets;

      -     develop and deploy successive versions of the Juno software;

      -     operate computer systems and related infrastructure adequate to
            effectively manage our growth and provide our basic service and our
            billable premium services;

      -     operate broadband Internet access services, whether independently or
            in collaboration with one or more third parties;

      -     manage the billing systems used to invoice subscribers to our
            billable premium services; and

      -     attract, retain and motivate qualified personnel.

      Our business and financial results will depend heavily on the commercial
acceptance and profitability of both our free basic and our billable premium
services. If we are unsuccessful in addressing these risks or in executing our
business strategy, our business and financial results may suffer.

WE HAVE A HISTORY OF LOSSES SINCE OUR INCEPTION IN 1995 AND EXPECT CONTINUED
  LOSSES FOR THE FORESEEABLE FUTURE

      Since our inception in 1995, we have not been profitable. We have incurred
substantial costs to create and introduce our various services, to operate these
services, to promote awareness of these services and to grow our business. We
incurred net losses of approximately $3.8 million from inception through
December 31, 1995, $23.0 million for the year ended December 31, 1996, $33.7
million for the year ended December 31, 1997, $31.6 million for the year ended
December 31, 1998, $55.8 for the year ended December 31, 1999 and $90.5 million
for the six months ended June 30, 2000. As of June 30, 2000, our accumulated net
losses totaled $238.5 million. We incurred negative cash flows from operations
of approximately $16.4 million for the year ended December 31,


                                       24
<PAGE>


1996, $33.6 million for the year ended December 31, 1997, $20.9 million for the
year ended December 31, 1998 and $45.1 million for the year ended December 31,
1999. For the six months ended June 30, 2000, we used $81.3 million in cash for
working capital purposes and to fund losses from operations. At June 30, 2000,
$6.4 million remained prepaid for advertising that may be used at any time prior
to March 2001.

    Since we operated as a limited partnership prior to the merger of Juno
Online Services, L.P. into Juno Online Services, Inc. in March 1999, taxable
losses incurred prior to the merger were allocated to the partners of Juno
Online Services, L.P. for reporting on their income tax returns. As a result, we
will not be able to offset future taxable income, if any, against losses
incurred prior to the merger.

      We expect operating losses and negative cash flows to continue for the
foreseeable future as we continue to incur significant expenses. We cannot
assure you that we will ever be successful in implementing our business
strategies or in addressing the risks and uncertainties facing our company. Even
if we do address these risks successfully, we may not be profitable in the
future. Were we to achieve profitability, we cannot assure you that we would be
able to sustain or increase profitability on a quarterly or annual basis in the
future.

JUNO'S BUSINESS IS SUBJECT TO FLUCTUATIONS IN OPERATING RESULTS WHICH MAY
  NEGATIVELY IMPACT THE PRICE OF OUR STOCK

      Our revenues, expenses and operating results have varied in the past and
may fluctuate significantly in the future due to a variety of factors. These
include factors within and outside of our control. Some of these factors
include:

      -     patterns of subscriber acquisition and retention, and seasonal
            trends relating to subscriber usage of our services;

      -     whether we maintain past levels of marketing activity to acquire
            subscribers and promote the Juno brand, and the extent to which any
            marketing activities we do undertake are timely and effective;

      -     the timing and effectiveness of any revenue sharing arrangements or
            other strategic alliances into which we enter;

      -     the demand for Internet advertising and seasonal trends relating to
            Internet advertising spending;

      -     seasonal trends relating to the demand for products sold over the
            Internet;

      -     capital expenses related to upgrading our computer systems and
            related infrastructure;

      -     our ability to protect our systems from any telecommunications
            failures, power loss, or software-related system failures;

      -     our ability to integrate operations and technologies from any
            acquisitions or other business combinations or relationships into
            which we enter;

      -     the extent to which we experience increased competition in the
            markets for Internet services, Internet advertising and electronic
            commerce;

      -     changes in operating expenses including, in particular,
            telecommunications expenses and the cost of

                                       25
<PAGE>


            providing various types of technical and non-technical customer
            support to our subscribers; and

      -     economic conditions specific to the Internet as well as general
            economic and market conditions.

      Since we expect to be heavily dependent on revenues from our billable
premium services in the foreseeable future, our revenues are likely to be
particularly affected by our ability to recruit new subscribers directly to our
billable premium services, upgrade users of our free basic service to our
billable premium services, and retain subscribers to our billable premium
services. In addition, our operating expenses are based on our expectations of
our future revenues and are relatively fixed in the short term, except for
subscriber acquisition expenses which are largely, although not entirely,
discretionary. We may be unable to adjust spending quickly enough to offset any
unexpected revenue shortfall, which may cause our business and financial results
to suffer.

      Due to all of the above factors and the other risks discussed in this
section, you should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. It is possible that in some
future periods our results of operations may be below the expectations of public
market analysts and investors. In this event, the price of our common stock is
likely to fall.

THE EXPANSION OF OUR FREE BASIC SERVICE TO INCLUDE FULL WEB ACCESS HAS CREATED
  SUBSTANTIAL BUSINESS RISKS

      In December 1999, we announced the expansion of our free basic service to
include full Internet access, including access to the World Wide Web. We face
numerous costs, risks, and uncertainties associated with the provision of free
Web access to consumers, including the following:

      -     OUR PAYING SUBSCRIBERS MAY CANCEL THEIR BILLABLE SERVICE
            SUBSCRIPTIONS AND SWITCH TO THE EXPANDED FREE SERVICE. Now that
            users of our basic service can access the Web for free, some Juno
            Web subscribers may cancel their billable service subscriptions and
            switch to the free basic service. If the number of Juno Web
            subscribers who switch to the free basic service is significant, our
            business and financial results may suffer. Net growth of our Juno
            Web subscriber base did, in fact, slow between the first and second
            quarters of 2000, possibly in part due to such cancellations.

      -     USERS OF OUR EXPANDED FREE BASIC SERVICE MAY REACT NEGATIVELY TO THE
            PERSISTENT ADVERTISING BANNER DISPLAYED WHILE THEY USE THE WEB.
            Users of our expanded free basic service are required to view a
            prominent advertising and navigation banner at all times while they
            are connected to the Web. Some users, particularly those using
            low-resolution computer monitors to view the Web, may consider this
            banner to be intrusive to an extent that interferes with their use
            of the service. Some competitors have introduced free Internet
            access services that do not require the user to view an additional
            advertising banner. If these competitive services become popular, or
            if additional competitors introduce free Internet access services
            that do not require the user to view a persistent advertising
            banner, then our ability to retain users of our free basic service
            or our ability to derive revenue by displaying advertisements to
            such users may be harmed.

      -     OUR TELECOMMUNICATIONS COSTS HAVE INCREASED AND MAY INCREASE
            FURTHER. When using e-mail, subscribers need to be connected to our
            central computers for the relatively short period of time required
            to send e-mail they have written or download e-mail that has been
            sent to them. When using the Web, a subscriber must remain
            continuously connected to the Internet for the entire duration of a
            Web session. The expansion of our free basic service to include Web
            access has increased and is expected to continue to increase the
            amount of time that users spend connected, and correspondingly to
            increase our telecommunications costs both on an absolute and a
            per-subscriber basis. The expansion of our service to include free
            Web access may also continue to attract new subscribers to our free
            basic service, further

                                       26
<PAGE>


            increasing our telecommunications costs on an absolute basis. Our
            telecommunications costs represent one of the most significant
            expenses of providing our free basic service. We cannot assure you
            that we will be able to achieve adequate reductions in our
            per-subscriber telecommunications costs, or any such reductions, and
            if we are unable to achieve such reductions, our business and
            financial results will suffer.

      -     REVENUES GENERATED FROM THE SALE OF ADDITIONAL ADVERTISING INVENTORY
            CREATED BY THE EXPANSION OF OUR FREE BASIC SERVICE MAY BE
            INSUFFICIENT TO COVER OUR INCREASED COSTS. The expansion of our free
            basic service may make us more dependent on advertising as a source
            of revenue in the future. The addition of a persistent advertising
            banner displayed to users of our expanded basic service when they
            use the Web has created a significant amount of additional
            advertising inventory, and we have engaged a third party, 24/7
            Media, to bear primary responsibility for the sales of this
            inventory in return for a commission. However, do date, this
            additional advertising inventory has not generated significant
            additional revenues. There can be no assurance that in the future we
            will be able to generate significant revenues from the sale of this
            new advertising inventory, or that any portion of it that we, 24/7
            Media, or any other agent engaged by us might be able to sell will
            be sold at favorable rates. If we are unable to sell this inventory
            or to do so at favorable rates, our business and financial results
            may suffer.

WE EXPECT TO REDUCE OUR USE OF CASH-INTENSIVE MARKETING CHANNELS FOR SUBSCRIBER
   ACQUISITION AND OUR BUSINESS MAY SUFFER TO THE EXTENT THAT ALTERNATIVE
   SUBSCRIBER ACQUISITION CHANNELS PROVE LESS EFFECTIVE

      We may not succeed in acquiring or retaining a sufficiently large
subscriber base for our free basic service and our billable premium services, or
in persuading a significant number of our free basic subscribers to upgrade to
our premium services.

      To acquire new subscribers, we have historically relied on a number of
cash-intensive distribution channels for our free proprietary software that
enables subscribers to use our services. The most significant channel has
been the use of direct mail to circulate diskettes or CDs containing our
software to large numbers of prospective subscribers. We have recently
suspended nearly all use of direct mail and although our plans could change
in response to any of a number of factors, we do not currently expect to
substantially increase its use in the near future. We have also reduced our
use of certain other subscriber acquisition channels that require significant
cash expenditures, in favor of pursuing alternative subscriber acquisition
opportunities that entail the expenditure of lesser amounts of cash. These
alternative methods have included stock-based subscriber referral agreements
and may, in the future, include the outright acquisition of other Internet
service providers or their subscriber accounts or other assets, or the
exchange of Juno advertising impressions or other non-cash resources for
subscriber referrals. In most of these cases, we expect to use Juno common
stock or other non-cash resources as payment. However, there can be no
assurance that we will be successful in identifying or exploiting a
sufficient number of such alternative subscriber acquisition opportunities,
if any, or that the number of subscribers generated by any such opportunities
we do identify and exploit will be sufficient, to grow, or even to maintain,
the size of our subscriber base. To the extent that alternative subscriber
acquisition methods we employ involve the issuance of Juno common stock as
consideration, stockholders may experience significant dilution of their
ownership interest and the newly issued securities may have rights superior
to those of our common stock.

    We have recently entered into two transactions in which smaller providers of
free Web access, Freewwweb and WorldSpy, elected to cease operations and agreed
that they would refer their subscribers to Juno in return for success-based
compensation from us, paid primarily or entirely in the form of our common
stock. The conversion of subscribers to our services from these two referral
arrangements did not begin until July 19, 2000 and June 30, 2000, respectively,
and there is limited operating history on the basis of which these arrangements
can be evaluated. If subscribers to the Freewwweb and WorldSpy services do not
elect to subscribe to Juno, or if Juno experiences high rates of attrition from
those who do, then our business and financial results may suffer. In

                                       27
<PAGE>


light of our recent suspension of virtually all direct mail advertising and
certain other cash-intensive subscriber acquisition activities, we expect to
be increasingly dependent on the results of less cash-intensive subscriber
acquisition activities, possibly including other transactions analogous to
the subscriber referral agreements we have executed with Freewwweb and
WorldSpy, as a source of gross new subscribers in the near future. If our
curtailment of cash-intensive subscriber acquisition activities and our
substituted reliance on alternative subscriber acquisition channels causes us
to fall short of anticipated subscriber goals or usage levels, then our
business and financial results may suffer.

      Furthermore, our business strategy contemplates that a significant
percentage of the subscribers to our free basic service will decide over time to
upgrade to our premium services. We are relying on this migration as a major
source of subscribers to our billable premium services and, since July 1998, we
have conducted advertising to our free basic service subscribers to encourage
them to upgrade. Over time, repeated exposure to these advertisements may cause
their effectiveness to decline. As a result, such advertisements may prove
insufficient to generate growth in our billable subscriber base. It may become
more difficult and expensive to effectively market our premium services to users
of our free basic service and the rate at which users of the free basic service
upgrade to our billable premium services may decline. If our marketing
techniques fail to generate the anticipated conversion rate from free to
billable premium services, if the acquisition cost for subscribers acquired
directly into our billable premium services is greater than expected, if
diminished capital resources require us to curtail our use of external marketing
channels, or if technical limitations make the conversion process more difficult
or time-consuming than anticipated, our business and financial results will
suffer.

OUR MARKETING PROGRAM MAY NOT SUCCEED IN GENERATING NEW SUBSCRIBERS OR AWARENESS
  OF OUR SERVICES

      We currently expect to continue, at least over the near term, with
marketing activities directed at increasing awareness of our services and
encouraging prospective subscribers to begin using our services. Such
marketing activities are expected to continue to include forms of
advertising, such as television advertising, with which we have limited
experience. In light of our objective of preserving cash resources, we expect
to limit the extent of such marketing activities, and there is a risk that,
as a result, these activities may not be effective in accomplishing our
goals. Although many of our competitors have engaged in significant
advertising campaigns for their services, we cannot predict the timing, the
type, or the extent of future advertising activities by our competitors. Many
of our competitors have greater financial resources than we do and have
undertaken significant advertising campaigns utilizing the same advertising
media that we use. It is possible that these campaigns will have an adverse
effect on our own marketing plans or expenses. If we incur costs in
implementing our marketing campaign without generating sufficient new
subscribers to our services, or if capital limitations prevent us from
implementing our marketing campaigns, our business and financial results will
suffer.

DIFFICULTY RETAINING SUBSCRIBERS TO OUR SERVICES MAY CAUSE OUR BUSINESS TO
  SUFFER

      Our business and financial results are also dependent on our ability to
retain subscribers to our services. Each month, a significant number of
subscribers to our billable premium services choose to cancel the service. In
addition, each month a significant number of subscribers to our free basic
service become inactive. We believe that intense competition has caused, and may
continue to cause, some of our subscribers to switch to other services. It is
easy for Internet users to switch to competing providers and we cannot be
certain that any steps we take will maintain or improve subscriber retention. In
addition, new subscribers may decide to use our services out of curiosity
regarding the Internet, or to take advantage of free or low-cost introductory
offers for our billable premium services, and may later discontinue using our
services. Furthermore, we may in the future charge a fee for our basic service
or limit the amount a subscriber may use this service in a given period. In the
event we were to implement these kinds of charges or restrictions, we may lose a
significant number of our basic service subscribers.

                                       28
<PAGE>


      In the past, we have experienced lengthy periods during which the total
number of subscribers using our services in a given month remained relatively
static despite our addition of a substantial number of new users to our
services. In the future, we expect to reduce significantly our levels of cash
expenditure for subscriber acquisition and retention activity. As a result,
we may experience similar periods in the future in which our active
subscriber levels remain static. We may also experience periods in which our
active subscriber counts decline, especially if we are unable to identify and
successfully exploit non-cash-intensive subscriber acquisition and retention
channels sufficient to offset the effects of subscriber attrition. If we are
unable to acquire enough new subscribers or retain enough current subscribers
to our basic service or our billable premium services, we may experience a
decline in the net number of active subscribers to one or more of our
services. Either of these declines might cause our business and financial
results to suffer.

SOME USERS OF OUR FREE BASIC SERVICE MAY BE UNABLE TO ACCESS THE WEB

      In order to obtain access to the Web, users of our free basic service
must be equipped with a version of our software at least as recent as version
4.0, as well as a recent version of Microsoft Internet Explorer, the Web
browsing software that our free basic service requires. At July 31, 2000,
approximately 20% of active users of our free basic service used versions of
our software older than version 4.0. Although we plan to upgrade such users'
software to a more recent version automatically by downloading the newer
version to their computer during one of their connections, technical
constraints prevent us from completing automatic upgrades for users of the
oldest versions of our software. Instead, these users must choose to install
the current version of our software and, in some cases, need to be sent a
copy of the software by mail before they can complete this process.
Approximately 4% of our free basic service users currently use a version of
the Microsoft Windows operating system older than Windows 95, and cannot
upgrade to a current version of the Juno software unless they upgrade to a
more current version of Windows. There is a risk that some portion of our
basic service user base will never upgrade to a current version of the Juno
software and will be unable to access the Web through our free basic service.

      If a significant percentage of our basic service users do not use the Web,
our ability to display Web-related advertisements and generate associated
revenues may be harmed.

COMPETITION IN THE MARKETS FOR INTERNET SERVICES, INTERNET ADVERTISING AND
   ELECTRONIC COMMERCE IS LIKELY TO INCREASE IN THE FUTURE AND MAY HARM OUR
   BUSINESS

      The market for Internet services is extremely competitive and includes a
number of substantial participants, including America Online, Microsoft and
AT&T. The markets for Internet-based advertising and electronic commerce are
also very competitive. Our ability to compete depends upon many factors, many of
which are outside of our control.

      INTENSE COMPETITION EXISTS IN THE MARKET FOR INTERNET SERVICES

      We may not be able to compete successfully against current or future
competitors, and the competitive pressures that we face may cause our business
and financial results to suffer. We believe that the primary competitive factors
determining success in these markets include effective marketing to promote
brand awareness, a reputation for reliability and service, effective customer
support, pricing, easy-to-use software and geographic coverage. Other important
factors include the timing and introduction of new products and services and
industry and general economic trends. The market for Internet services has begun
to consolidate, and we expect competition to increase as some of our competitors
grow larger through consolidation or begin to bundle Internet services with
other products and services. Our current and potential competitors include many
large national companies that have substantially greater market presence and
financial, technical, distribution, marketing and other resources than we have.
This may allow them to devote greater resources than we can to the

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<PAGE>


development, promotion and distribution and sale of products and services.
Additionally, our competitors may be able to charge less for premium Internet
services than we do for our billable premium services, or offer services for
free that we currently provide only for a fee, which may put pressure on us to
reduce or eliminate, or prevent us from raising, the fees we charge for our
billable premium services. We may choose to lower or eliminate the fees we
currently charge for our billable premium services, or enhance the features
available to users of our free basic service, in order to remain competitive
with other industry participants. If we do so, our business and financial
results may suffer.

      In recruiting subscribers for our services, we currently compete, or
expect to compete, with the following types of companies, among others:

      -     Established online service providers such as America Online,
            CompuServe, and The Microsoft Network;

      -     National Internet service providers such as EarthLink and Prodigy,
            including a number of companies, such as 1stUp, NetZero and Spinway,
            that offer Web access for free;

      -     Numerous independent regional and local Internet service providers
            that may offer lower prices than a national Internet service
            provider;

      -     Various national and local telephone companies such as AT&T, MCI
            WorldCom and Pacific Bell;

      -     Companies providing Internet access through "set-top boxes"
            connected to a user's television, such as WebTV, or through a "cable
            modem" connected to a user's personal computer, such as Excite@Home;
            and

      -     Companies providing Internet access services using other broadband
            technologies, including digital subscriber line technology, commonly
            known as DSL, such as the Regional Bell Operating Companies and
            various partners of Covad, Rhythms, and NorthPoint.

      In addition, Microsoft and Netscape, publishers of the Web browsers
utilized by most Internet users, including Juno subscribers, each own or are
owned by online or Internet service providers that compete with Juno.

      In addition to competition from the types of companies listed above, we
also face the risk that subscribers to our premium billable services will
migrate to our free basic service, which would result in a decrease in our
subscription revenues.

      We do not currently offer services internationally, other than to a small
base of users located in Canada. If the ability to provide Internet services
internationally becomes a competitive advantage in our markets and we do not
begin to provide services internationally, we will be at a competitive
disadvantage.

      WE RELY ON REVENUES FROM ADVERTISING AND ELECTRONIC COMMERCE

      With respect to the generation of advertising revenue, we compete with
many of the market participants listed above as well as with various
advertising-supported Web sites, including portal sites such as Yahoo! and
Excite, content sites such as CNET and CNN.com, and interactive advertising
networks and agencies such as DoubleClick and 24/7 Media. We also compete with
traditional media such as print and television for a share of advertisers' total
advertising budgets. If advertisers perceive the Internet to be a limited or
ineffective advertising

                                       30
<PAGE>


medium or perceive us to be less effective or less desirable than other Internet
advertising vehicles, advertisers may be reluctant to advertise on our services.

      OUR COMPETITION IS LIKELY TO INCREASE IN THE FUTURE

      Our competition has increased and is likely to continue to increase. We
believe this will probably happen as Internet service providers and online
service providers consolidate and become larger, more competitive companies, and
as large diversified telecommunications and media companies acquire Internet
service providers.. Since our announcement of free Internet access in December
1999, a number of competitors have announced the introduction of services
similar to ours, and we believe that other Internet service providers may
introduce their own free services. The larger Internet service providers and
online service providers, including America Online, offer their subscribers a
number of services that we do not currently provide. Some diversified
telecommunications and media companies, such as AT&T, have begun to bundle other
services and products with Internet access services, potentially placing us at a
significant competitive disadvantage. Additionally, some Internet service
providers and personal computer manufacturers have formed strategic alliances to
offer free or deeply discounted computers to consumers who agree to sign up with
the service provider for a one-year or multi-year term. In a variant on this
approach, some Internet service providers have secured strategic relationships
with manufacturers or retailers of computer equipment in which the service
provider finances a rebate to consumers who sign up with the service provider
for one or more years. We have formed several such relationships, and have not
found them effective as a means of attracting new subscribers to our services.
Our competitors may be able to establish strategic alliances or form joint
ventures that put us at a serious competitive disadvantage. Increasing
competition could result in increased subscriber attrition. It could also put
pressure on us to increase our spending for sales and marketing and for
subscriber acquisition and retention activities at a time when we may not have
adequate cash resources to devote to such activities. Competition could also
require us to lower the prices we charge for our billable premium services, or
eliminate such fees altogether, in order to maintain our marketplace position.
Any of these scenarios could harm our business and financial results, and we may
not have the resources to continue to compete successfully.

WE ARE DEPENDENT ON STRATEGIC MARKETING ALLIANCES AS A SOURCE OF REVENUES AND
   OUR BUSINESS COULD SUFFER IF ANY OF THESE ALLIANCES ARE TERMINATED

      We have strategic marketing alliances with a number of third parties, and
most of our strategic marketing partners have the right to terminate their
agreements with us on short notice. If any of our strategic marketing agreements
are terminated, we cannot assure you that we will be able to replace the
terminated agreement with an equally beneficial arrangement. We also expect that
we will not be able to renew all of our current agreements when they expire or,
if we are, that we will be able to do so on acceptable terms. We also do not
know whether we will be successful in entering into additional strategic
marketing alliances, or that any additional relationships, if entered into, will
be on terms favorable to us. Our receipt of revenues from our strategic
marketing alliances may also be dependent on factors which are beyond our
control, such as the quality of the products or services offered by our
strategic marketing partners. Additionally, many of our strategic marketing
partners are concentrated within the Internet industry. As a result, any
downturn that affects the Internet industry generally, and, in particular, any
downturn that affects the ability of our partners to pay revenues or advances
against revenue as they become due, could cause our business and financial
results to suffer.

WE MUST ADAPT TO TECHNOLOGY TRENDS AND EVOLVING INDUSTRY STANDARDS OR WE WILL
   NOT BE COMPETITIVE

      Our failure to respond in a timely and effective manner to new and
evolving technologies, including cable modem and other broadband technology,
could harm our business and financial results. The Internet services market is
characterized by rapidly changing technology, evolving industry standards,
changes in member needs

                                       31
<PAGE>


and frequent new service and product introductions. Our business and financial
results depend, in part, on our ability to use leading technologies effectively,
to develop our technical expertise, to enhance our existing services and to
develop new services that meet changing member needs on a timely and
cost-effective basis. In particular, we must provide subscribers with the
appropriate products, services and guidance required to best take advantage of
the rapidly evolving Internet. If the market for our services should fail to
develop, develop more slowly than we expect, become saturated with competitors,
or develop in a fashion that renders our services uncompetitive or otherwise
unappealing to consumers, our business and financial results may suffer.

      We are also at risk due to fundamental changes in the way that Internet
access may be provided in the future. Currently, consumers access Internet
services primarily through computers connected by telephone lines. Broadband
connections, however, allow significantly faster access to the Internet than is
possible using the telephone-based analog modems currently used by most of our
subscribers. In many regions, cable television companies, local and long
distance telephone companies, and wireless communications companies, have begun
to provide Internet access. These competitors, including cable television
operators, may include Internet access in their basic bundle of services or may
offer Internet access for a nominal additional charge. We have begun to enter
into arrangements with providers of broadband connections to allow the delivery
of our services over distribution channels they own or control. However, the
majority of our broadband relationships are at a developmental or initial
implementation stage and the associated services are used by a negligible number
of subscribers at the current time. Moreover, only a portion of our subscriber
base is currently served by broadband providers with which we have existing
agreements. In other segments of our market, there is a risk that we may be
unable to offer our subscribers high-speed Internet access. In the future, we
might also be prevented from delivering high-speed Internet access through
networks controlled by competitors of ours, or from doing so on a cost-effective
basis.

      Even if we are not prevented from delivering our Internet services through
the broadband connections owned by other companies, the delivery of our Internet
services using broadband technology is subject to significant risks and
uncertainties, and we may be unable to adapt to the challenges posed by
broadband technologies.

      We may also have to modify the means by which we deliver our Internet
services, in which case we would incur significant costs. If consumers adopt
alternative forms of Internet access that provide a continuous connection to the
Internet rather than relying on a series of separate dial-up connections, then
any competitive advantage that we currently realize because our technology
minimizes connect time may diminish. If other companies are able to prevent us
from delivering our Internet services through the wire, cable and wireless
connections that they own, if we are unable to adapt to the challenges posed by
broadband technologies or if we incur significant costs without generating
sufficient revenues, our business and financial results may suffer.

IF THE MARKET FOR BROADBAND ACCESS IN GENERAL, OR FOR JUNO EXPRESS IN
   PARTICULAR, FAILS TO DEVELOP, OUR BUSINESS MAY BE HARMED

      Juno Express, our billable broadband service, delivers Internet access at
broadband speeds currently through the use of DSL and mobile wireless
technologies.

      As our DSL service is currently designed, before we can provide service to
a subscriber, the subscriber's local telephone company frequently must either
install and configure an additional copper telephone line at the subscriber's
residence or reconfigure an existing telephone line if a line that can be
dedicated exclusively to the DSL connection is available. Accordingly, consumers
who wish to subscribe to the DSL version of Juno Express currently must go
through a complex installation process, for which we are dependent on the
performance of the local telephone company. We are also currently dependent on
the performance of a national supplier of DSL

                                       32
<PAGE>


services, Covad Communications, with whom we have chosen to partner for the
delivery of Juno Express using DSL technology. Covad is responsible for
completing the installation process begun by the local telephone company.
Currently, a Covad technician must visit the residence of each Juno Express
subscriber to complete any necessary wiring and to deliver and test DSL
hardware. If our relationship with Covad is unsuccessful, or if Juno and Covad
are unable to coordinate the installation of necessary telephone lines with
local telephone companies, or if other factors delay or otherwise hinder our
ability to expand beyond the markets in which the service is currently
available, or if these or other factors affect our ability to introduce or
deliver DSL-based services in a timely and cost-effective fashion, then our
business and financial results may suffer.

      In addition to the DSL service described above, we have recently begun
offering Juno Express wireless mobile service powered by Metricom's Ricochet
technology. This service is currently being offered in only two markets, and
there can be no assurances that the performance or availability of this service
will be acceptable to us or to our subscribers, or that Metricom will
successfully expand this service offering beyond the current markets.
Additionally, use of this service requires subscribers to purchase and install
special hardware, in connection with which we are dependent on a third party
that must coordinate installation and activation with Metricom.

      Although Juno has begun to make arrangements for the provision of the Juno
Express service over other broadband platforms, the relationships on which such
expansion depends are new and are subject to significant risks and
uncertainties. We have recently entered into agreements with AT&T Broadband and
Time Warner for the provision of Internet services over cable technology. In the
case of AT&T Broadband, there is a significant risk that AT&T will not succeed
in renegotiating an existing agreement under which Excite@Home has the exclusive
right to provide high-speed broadband services through June 2002. If AT&T is
unsuccessful, we will not be able to offer Juno Express over AT&T's cable
systems at speeds of 128kbps until July 2002 at the earliest. Similarly, Time
Warner has existing commitments to make RoadRunner the exclusive provider of
residential broadband services on Time Warner cable through December 2001. If
Time Warner fails to renegotiate its commitment to RoadRunner, we will not be
able to offer residential broadband services over Time Warner's cable system
until January 2002. Additionally, there are risks that either of these companies
could exercise rights to terminate their relationship with Juno.

      Juno has entered into an arrangement to offer Juno Express through
broadband satellite services provided by Hughes. There are significant risks and
uncertainties associated with this arrangement. Considerable technical
development must occur before the service can be launched. Also, the technology
currently utilized provides "one-way" broadband functionality, so that users
must utilize traditional dial-up phone line service for the "upstream" portion
of their Internet connection. This feature may prove unattractive to subscribers
because of slower connection speeds and possible connection costs, and could
have an adverse affect on the acceptance of this broadband platform. There can
be no assurance that "two-way" functionality will be made available by this
partner.

      The market for broadband services is in the early stages of development,
and we cannot assure you that broadband services in general, or that any of DSL,
cable, mobile wireless or satellite technologies in particular, will become
popular with consumers. We cannot assure you that we will have adequate access
to any of these technologies at favorable rates. Additionally, Juno Express
faces competition in the market for broadband services from many competitors
with significant financial resources, well-established brand names, and large
existing customer bases. Many local telephone companies are themselves in some
stage of test marketing or offering broadband services. In many markets, these
competitors already offer, or are expected to offer, broadband Internet access
at prices lower than we expect to be able to offer to potential customers for
Juno Express. If we are unable to provide competitive broadband services at
competitive rates, our business and financial results may suffer.


                                       33
<PAGE>


OUR BUSINESS MAY BE ADVERSELY AFFECTED IF THE MARKET FOR INTERNET ADVERTISING
   FAILS TO DEVELOP

      Our business and financial results are dependent on the use of the
Internet as an advertising medium. Internet-based advertising accounts for only
a small fraction of all advertising expenditures, and we cannot be sure that
Internet-based advertising will ever grow to account for a substantial
percentage of total advertising spending or when an increase might occur. Our
business may suffer if the market for Internet-based advertising fails to
develop or develops more slowly than expected. Our business also may suffer if
users install "filter" software programs that limit or prevent advertising from
being delivered to their computers. Widespread adoption of this type of software
could harm the commercial viability of Internet-based advertising.

      Sales of advertising space on our services represent an important revenue
source for us. Competition for Internet-based advertising revenues is intense,
and this competition has resulted in significant price erosion over time, which
may continue. We cannot assure you that we will be successful in selling
advertising or capturing a significant share of the market for Internet-based
advertising. We also cannot assure you that we will be able to sell advertising
at the rates we currently project, and it may become necessary to lower the
rates for advertising space on our services. In addition, a substantial portion
of our future advertising revenues are expected to be derived from the sale of
advertising to other Internet companies, including companies that sell goods or
services over the Web. As a result, our advertising revenues are susceptible to
trends that affect other Internet companies, and are particularly dependent on
whether other companies within the Internet community have capital available to
pursue advertising and marketing campaigns that utilize our services.

      We currently rely on our internal sales and marketing personnel for
generating sales leads and promoting our services to the advertising community.
We also rely on revenue arrangements under third party relationships in which
Juno receives revenue in return for the display of advertising sold by a third
party partner. These include relationships with 24/7 Media and LookSmart Ltd.
Under our agreement with 24/7 Media, we are entitled to a portion of the
revenues earned from their sale of advertising on the persistent advertising and
navigation banner that is displayed to users who access the Web through using
our free basic service. Under our agreement with LookSmart, LookSmart provides
Internet search and directory features to our subscribers through the Juno Web
portal site, and we are entitled to receive payments based on the volume of Web
pages that are delivered to users of these features.

    We cannot be sure that our internal sales organization, 24/7 Media, or any
other independent sales organization will achieve our advertising sales
objectives or do so in a cost-effective manner. If Internet-based advertising
does not continue to grow or if we are unable to capture a sufficient share of
Internet-based advertising, our business and financial results may suffer.
Additionally, we have experienced some difficulties in achieving our projected
level of advertising sales, and if our internal sales organization, 24/7 Media
or other independent sales organizations are not able to accomplish desired
sales levels, then this may cause our business and financial results to suffer.
We cannot be sure that our users will find the services provided by LookSmart
useful, or that they will utilize LookSmart's search and directory features in a
manner that generates significant revenue to Juno. If usage of the LookSmart
features is less than projected, then our business and financial results may
suffer.

OUR ADVERTISING SYSTEM REQUIRES LABOR AND IMPOSES COSTS ON US BEYOND THOSE
   ASSOCIATED WITH STANDARD WEB ADVERTISING

      Some of the advertising inventory available on our services is
non-standard when compared to advertising on the Web and may put Juno at a
competitive disadvantage. Although the Juno Web portal site and the persistent
advertising and navigation banner shown to users of our free basic service when
they access the Web

                                       34
<PAGE>


utilize standard Web formatting, the significant amount of advertising inventory
associated with the e-mail portion of our services employs non-standard
formatting. The advertisements displayed while a subscriber reads and writes
e-mail are created using proprietary tools that are not fully compatible with
standard Web advertising. Therefore, many advertisements displayed on our
services require customization that would not be required by a Web site capable
of displaying previously prepared standard advertisements. This customization
work increases the time necessary to prepare an advertisement to be displayed on
our services and the costs associated with running these ads. We must also
absorb the telecommunications cost associated with downloading ads to our
subscribers, which is an expense that advertising-supported Web sites do not
incur. As ads become more complex, our telecommunications expenses may increase.
Furthermore, the costs associated with selling or attempting to sell advertising
space on our services are significant. These costs may be greater than the costs
associated with selling advertising space on Web sites that exclusively utilize
standard Web advertising formats. Additionally, our use of a proprietary
advertising format could interfere with our packaging a significant portion of
our advertising space for sale by an advertising network such as DoubleClick or
24/7 Media. We also rely on detailed data provided by our subscribers for
purposes of targeting some ads. We do not currently verify the accuracy of this
data at the time it is provided or require subscribers to update their
information thereafter. Furthermore, individuals who subscribe directly to one
of our billable premium services are not currently required to provide this
data. Any of the above factors could discourage advertising on our network by
some advertisers.

SEASONAL TRENDS IN INTERNET USAGE AND ADVERTISING SALES MAY NEGATIVELY AFFECT
   OUR BUSINESS

      Seasonal trends are likely to affect the revenues we generate from
operating our Internet services. Subscribers typically use our Internet services
less during the summer months and year-end holiday periods. To the extent that
our revenues depend on the amount of usage by our subscribers, our revenues may
be lower during these periods. For example, some of the subscribers to Juno Web
pay us based on the number of hours they spend using our services in a given
month. In addition, the rate at which new subscribers sign up for our billable
premium services may be lower during the summer months and year-end holiday
periods.

      Since our operating expenses are based on our expectations of future
revenues, including seasonal fluctuations, it is possible that operating results
will suffer if these seasonal trends do not continue in the future or if
different seasonal trends develop in the future.

WE ARE DEPENDENT ON A SMALL NUMBER OF TELECOMMUNICATIONS CARRIERS AND MAY BE
   UNABLE TO FIND ADEQUATE REPLACEMENTS IF THEIR RATES INCREASE, SERVICE QUALITY
   DECLINES, OR IF THEY DISCONTINUE DOING BUSINESS WITH US

      Our business and financial results depend in significant part on the
capacity, affordability, reliability and security of our telephone company data
networks. To use our services, subscribers must initiate telephone connections
between their personal computers and computer hardware in local or regional
facilities known as "points of presence." We contract for the use of points of
presence around the country from various telecommunications carriers. These
carriers currently include UUNET Technologies, which is operated by WorldCom;
Level 3; Concentric; Splitrock Services; Sprint; PSINet; and Navipath. We also
rely on these these telecommunications companies to carry data between their
points of presence and our central computers located in Cambridge, Massachusetts
and Jersey City, New Jersey.

      As of June 30, 2000, we had contracted for the use of more than 3,400
local telephone numbers associated with points of presence throughout the United
States. Nevertheless, a minority of our subscriber base may be unable to access
our services through a point of presence that is within their local calling
area. These users may be particularly reluctant to use the Web, either through
our free basic service or through Juno Web, due to the telecommunications
charges that they would incur during an extended connection to the Web. The
inability of some of our subscribers to access the Web with a local call in some
areas of the country could harm our business.


                                       35
<PAGE>


We cannot be sure if or when additional infrastructure developments by our
telecommunications providers will establish points of presence that cover these
areas.

      At various times in the past, network capacity constraints at particular
points of presence have prevented or delayed access by subscribers attempting to
connect to our services. This could happen in the future, especially during
times of peak usage. Difficulties accessing our services due to poor network
performance could cause our subscribers to terminate their subscriptions with
us. Because we depend on third-party telecommunications carriers for crucial
portions of our network infrastructure, we do not have direct control over
network reliability and some aspects of service quality. A natural disaster or
other unanticipated problem that affects the points of presence or the
telecommunications lines we use, or that affects the nation's telecommunications
network in general, could cause interruptions in our services.

      Only a small number of telecommunications companies can provide the
network services we require. This number has been reduced through consolidation
in the telecommunications industry, and there is a significant risk that further
consolidation could make us reliant on an even smaller number of providers.
Currently, we are particularly dependent on WorldCom, which, through UUNET
Technologies, provides more than 1,000 of the more than 3,400 points of presence
for which we contract, many of which are in locations not served competitively
by other telecommunications carriers. Our business could be significantly harmed
if we are unable to maintain a favorable relationship with WorldCom and the
companies they control. We cannot assure you that we would be able to replace
all of the services provided to us through WorldCom were our relationship with
them to be terminated.

      Our financial results are highly sensitive to variations in prices for the
telecommunications services described above. In the past, we have benefited from
reductions in per-unit pricing for telecommunications services. We cannot assure
you that telecommunications prices will continue to decline, or that there will
not be telecommunications price increases due to factors beyond our control. We
cannot assure you that our telecommunications carriers will continue to provide
us access to their points of presence on our current or better price terms, that
the price terms that they do offer us, if any, will be sufficiently low to meet
our needs, or that alternative services will be available in the event that
their quality of service declines or that our relationship with any of our
current carriers is terminated.

      Most of the telecommunications services we purchase are provided to us
under short-term agreements that the providers can terminate or elect not to
renew. As a result, there is a significant risk that any or all of our
telecommunications carriers could end their relationship with us. In addition,
each of our telecommunications carriers provides network access to some of our
competitors, and could choose to grant those competitors preferential network
access, potentially limiting our members' ability to access the Internet or
connect to our central computers. Furthermore, the majority of our
telecommunications providers compete, or have announced an intention to compete,
with us in the market to provide consumer Internet access. If our
telecommunications service providers were to decrease the levels of service or
access provided to us, or if they were to terminate their relationships with us
for competitive or other reasons, our business and financial results would
suffer.

WE ARE DEPENDENT ON THIRD PARTIES FOR TECHNICAL AND CUSTOMER SERVICE SUPPORT AND
   OUR BUSINESS MAY SUFFER IF THEY ARE UNABLE TO PROVIDE THESE SERVICES, CANNOT
   EXPAND TO MEET OUR NEEDS, OR IF THEY TERMINATE THEIR RELATIONSHIP WITH US

      Our business and financial results depend, in part, on the availability of
live technical and customer service support, and of inbound telemarketing and
disk distribution services. Should our ability to provide these services be
hampered, our business may suffer. Although many Internet service providers have
developed internal customer service operations designed to meet these needs, we
have elected to outsource these functions to third-

                                       36
<PAGE>


party vendors. We currently purchase almost all of our technical and customer
service support from ClientLogic Corporation. As a result, we maintain only a
small number of internal customer service personnel. We are not equipped to
provide the necessary range of customer service and telemarketing services in
the event that either ClientLogic or other external providers become unable or
unwilling to offer these services to us.

        At June 30, 2000, ClientLogic provided more than 750 full-time or
part-time employees at its facilities to service our account. We believe the
availability of call-in technical support and customer service is especially
important to acquire and retain subscribers to our billable premium services,
and we are dependent on ClientLogic to provide this function. At times, our
subscribers have experienced lengthy waiting periods to reach representatives
trained to provide the technical or customer support they require. We believe
that failure to provide consistent customer support and to maintain
consumer-acceptable hold times could have an adverse effect on our subscriber
acquisition and retention efforts in the future. However, maintaining desired
customer support levels may require significantly more support personnel than
are currently available to us through ClientLogic, especially if we were to
experience an increase in the number of subscribers who were using our services
for the first time. Additionally, if we elect to offer customer service features
that we do not currently support, or to enhance the overall quality of our
customer support for competitive reasons, we may require even greater resources.
As a result, we are currently soliciting proposals from additional vendors to
supplement the services provided to us by ClientLogic, or to provide such
services in the event our relationship with ClientLogic terminates. Our current
agreement with ClientLogic converted to a month-to-month contract on August 1,
2000, under which either party has the right to terminate the relationship at
any time upon one month's notice. Although we are currently renegotiating the
terms of our relationship with ClientLogic, there is a significant risk that
ClientLogic could exercise its one-month termination rights under the current
agreement if the parties are unable to reach mutually acceptable terms. If our
relationship with ClientLogic terminates and we are unable to enter into a
comparable arrangement with a replacement vendor, if ClientLogic is unable to
provide enough personnel to provide the quality and quantity of service we
desire, if system failures, outages or other technical problems make it
difficult for our subscribers to reach customer service representatives at
ClientLogic, or if we are unable to obtain externally or develop internally the
additional customer service and technical support capacity we expect to need,
our business and financial results may suffer.

DISRUPTION OF OUR INTERNET SERVICES DUE TO SECURITY BREACHES AND SYSTEM FAILURES
  COULD RESULT IN SUBSCRIBER CANCELLATIONS

      Both our infrastructure and the infrastructure of our network providers
are vulnerable to security breaches or similar disruptive problems and system
failures. Our systems are also subject to telecommunications failures, power
loss, software-related system failures and various other events. Any of these
events, whether intentional or accidental, could lead to interruptions, delays
or cessation of service to our subscribers. This could cause some of our
subscribers to stop using our Internet services. Third parties could also
potentially jeopardize the security of confidential information stored in our
computer systems or our subscribers' computer systems through their
inappropriate use of the Internet, which could cause losses to us or our
subscribers or deter some people from subscribing to our services. People may be
able to circumvent our security measures or the security measures of our third
party network providers.

      We may have to interrupt, delay or cease service to our subscribers to
alleviate problems caused by computer viruses, security breaches or other
failures of network security. Any damage or failure that interrupts or delays
our operations could result in subscriber cancellations, could harm our
reputation, and could affect our business and financial results. Our insurance
coverage may not adequately compensate us for any losses that may occur due to
any failures in our systems or interruptions in our services.

                                       37
<PAGE>


IF OUR BUSINESS WERE TO EXPERIENCE ADDITIONAL GROWTH, IT COULD STRAIN OUR
   MANAGERIAL, OPERATIONAL, FINANCIAL, AND INFORMATION SYSTEMS RESOURCES

      In the past, we have expanded our company and our operations rapidly to
facilitate the growth of our business, and this expansion placed a significant
strain on our managerial, operational, financial and information systems
resources. If we continue to experience additional growth, our business and
financial results will be especially dependent on our ability to manage such
growth effectively, including the effective expansion of our sales effort, the
continued development of improved versions of our software, and the expansion of
the computer systems and related infrastructure used to provide our services.
Additionally, we expect that we will need to continually improve our financial
and managerial controls, billing systems, reporting systems and procedures, and
that we will also need to continue to recruit, train and manage members of our
workforce. We had 65 employees at December 31, 1996, 152 employees at December
31, 1997, 144 employees at December 31, 1998, 263 employees at December 31,
1999, including 60 employees in India, and 321 employees at June 30, 2000,
including 75 employees in India. Prior to May 21, 1999, consultants used in
India were employed by an affiliate of Juno. We expect to continue to rely on
outsourcing arrangements for our customer service needs and for the performance
of some advertising sales functions. Even with our reliance on outsourcing, we
expect that the size of our own workforce may need to continue to increase for
the foreseeable future.

      The demand on our network infrastructure, technical staff and technical
resources has grown rapidly as our subscriber base has expanded. We cannot be
certain that our infrastructure, technical staff and technical resources would
adequately accommodate or facilitate any future growth of our subscriber base
that we might experience. In particular, if we were to experience repeated or
prolonged system-wide service outages, our business and financial results would
suffer.

WE FACE POTENTIAL LIABILITY FOR INFORMATION TRANSMITTED OR RETRIEVED THROUGH OUR
   INTERNET SERVICES

      Our business and financial results may suffer if we incur liability as a
result of information transmitted or retrieved through our services. The
liability of Internet service providers and online services companies for
information transmitted or retrieved through their services is uncertain. It is
possible that claims may be filed against us based on a variety of theories,
including defamation, obscenity, negligence, copyright or trademark
infringement, or other theories based on the nature, publication or distribution
of this information. These types of claims have been brought, sometimes
successfully, against providers of Internet services in the past. Such claims,
with or without merit, would likely divert management time and attention and
result in significant costs to investigate and defend. In addition, if we become
subject to these types of claims and we are not successful in our defense, we
may be forced to pay substantial damages. We may also be forced to implement
expensive measures to alter the way our services are provided to avoid any
potential liability.

CHANGES IN GOVERNMENT REGULATION COULD DECREASE OUR REVENUES AND INCREASE OUR
   COSTS

      Changes in the regulatory environment could decrease our revenues and
increase our costs. As a provider of Internet access and e-mail services, we are
not currently subject to direct regulation by the Federal Communications
Commission. However, several telecommunications carriers are seeking to have
communications over the Internet regulated by the FCC in the same manner as
other more traditional telecommunications services. Local telephone carriers
have also petitioned the FCC to regulate Internet access providers in a manner
similar to long distance telephone carriers and to impose access fees on these
providers and some developments suggest that they may be successful in obtaining
the treatment they seek. In addition, we operate our services throughout the
United States, and regulatory authorities at the state level may seek to
regulate aspects of our activities as telecommunications services. As a result,
we could become subject to FCC and state regulation as Internet services and
telecommunications services converge.

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      We remain subject to numerous additional laws and regulations that could
affect our business. Because of the Internet's popularity and increasing use,
new laws and regulations with respect to the Internet are becoming more
prevalent. These laws and regulations have covered, or may cover in the future,
issues such as:

      -     user privacy;

      -     children's privacy;

      -     pricing;

      -     intellectual property;

      -     federal, state and local taxation;

      -     advertising;

      -     distribution; and

      -     characteristics and quality of products and services.

      Legislation in these areas could slow the growth in use of the Internet
generally and decrease the acceptance of the Internet as a communications and
commercial medium.

      It may take years to determine how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet. Any
new legislation or regulation regarding the Internet, or the application of
existing laws and regulations to the Internet, could harm us. Additionally, we
have begun to service a small number of subscribers who are located in Canada.
Laws and regulations relating to the Internet, or to doing business in Canada,
or similar laws and regulations in other jurisdictions should we choose to
continue to expand outside of the United States, could have an adverse effect on
our business.

      The growth of the Internet, coupled with publicity regarding Internet
fraud, may also lead to the enactment of more stringent consumer protection
laws. For example, numerous bills have been presented to Congress and various
state legislatures designed to address the prevalence of unsolicited commercial
bulk e-mail on the Internet. These laws may impose additional burdens on our
business. Additionally, because we rely on the collection and use of personal
data from our subscribers for targeting advertisements shown on our services, we
may be harmed by any laws or regulations that restrict our ability to collect or
use this data. The Federal Trade Commission has conducted investigations into
the privacy practices of companies that collect information about individuals on
the Internet. The enactment of any additional laws or regulations in this area,
or renewed enforcement activity of existing laws and regulations, may impede the
growth of the Internet, which could decrease our potential revenues or otherwise
cause our business to suffer.

FEDERAL TRADE COMMISSION ACTION COULD IMPACT OUR MARKETING PRACTICES

      The FTC is conducting an ongoing investigation into the marketing
practices of various Internet-related companies, including Juno. At the FTC's
request, we have provided marketing-related and customer service-related
information concerning our services. On the basis of these submissions, the
FTC staff has asserted, among other claims, that Juno's disclosure practices
about the possibility of users incurring local telephone charges were
insufficient, and that Juno's cancellation policies for subscribers to its
billable services were unduly restrictive. On the basis of our preliminary
discussions with the FTC staff, we expect that we will begin implementing
modifications to the disclosure we make about telecommunications charges that
users might incur and to our billable services cancellation practices.
Depending on the final outcome of the FTC inquiry, we could be required to
modify our business practices or provide compensatory relief in a manner
adverse to us. Either of these outcomes could cause our business and
financial results to suffer.

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<PAGE>


IF INTERNET USAGE DOES NOT CONTINUE TO GROW, OUR BUSINESS WILL SUFFER

      Our business and financial results depend on continued growth in the use
of the Internet. We cannot be certain that this growth will continue or that it
will continue in its present form. If Internet usage declines or evolves away
from our business, our ability to grow, if any, will be harmed.

UNANTICIPATED DELAYS OR PROBLEMS IN THE INTRODUCTION OF NEW FEATURES OR SERVICES
   MAY CAUSE CUSTOMER DISSATISFACTION

      If we experience problems related to the reliability and quality of our
services or delays in the introduction of new versions of or enhancements to our
services, we could experience increased subscriber cancellations, adverse
publicity and reduced sales of advertising and products. Our services are very
complex and are likely to contain a number of undetected errors and defects,
especially when new features or enhancements are first released. Furthermore, in
order to introduce new features or enhancements, we may elect to license
technology from other companies rather than develop such features or
enhancements ourselves, and we may be exposed to undetected errors or defects in
third-party technology that is out of our control. Any errors or defects, if
significant, could harm the performance of these services, result in ongoing
redevelopment and maintenance costs and cause dissatisfaction on the part of
subscribers and advertisers. These costs, delays or dissatisfaction could
negatively affect our business.

WE ARE DEPENDENT ON THIRD-PARTY SOFTWARE TO ACCURATELY BILL SUBSCRIBERS TO OUR
   BILLABLE PREMIUM SERVICES

      The operation of our billable premium services requires the accurate
operation of billing system software as well as our development of policies
designed to reduce the incidence of credit card fraud and other forms of
uncollectable "chargebacks." If we encounter difficulty with the operation of
these systems, or if errors, defects or malfunctions occur in the operation of
these systems, this could result in erroneous overcharges to customers or in the
under-collection of revenue, either of which could hurt our business and
financial results.

OUR RELATIONSHIP WITH D. E. SHAW & CO., L.P. MAY PRESENT POTENTIAL CONFLICTS OF
   INTEREST

      The Chairman of our board of directors and our largest stockholder, Dr.
David E. Shaw, is the Chairman and Chief Executive Officer of D. E. Shaw & Co.,
Inc., which is the general partner of D. E. Shaw & Co., L.P., a securities firm
whose activities focus on various aspects of the intersection between technology
and finance. Dr. Shaw devotes only a portion of his time to our company, and
spends most of his time and energy engaged in business activities unrelated to
us. Dr. Shaw indirectly owns a controlling interest in DESCO, L.P. and in some
of its affiliated entities. Transactions between us and these parties may occur
in the future and could potentially result in conflicts of interest that prove
harmful to us.

      We sublease office space in New York City from DESCO, L.P. We cannot be
sure that we would be able to lease other space on favorable terms in the event
this sublease were to be terminated.

      In May 1999, we terminated an agreement with DESCO, L.P. under which
individuals employed by its affiliates located in India provided consulting
services to us. Following the termination of this agreement, these individuals
became employees of a Juno subsidiary located in Hyderabad, India. We continue
to obtain some services in India from DESCO, L.P. or its affiliates.

      Dr. Shaw and entities affiliated with him are likely to manage, invest in
or otherwise be involved with other technology-related business ventures apart
from our company. These relationships could also restrict our ability
                                       40
<PAGE>

to transact business with non-affiliated parties, and could negatively affect
us.

OUR DIRECTORS AND OFFICERS EXERCISE SIGNIFICANT CONTROL OVER US

      As of July 31, 2000, the executive officers, directors, and persons and
entities affiliated with executive officers or directors beneficially owned in
the aggregate approximately 43.7% of our outstanding common stock. The Chairman
of our board of directors is Dr. David E. Shaw. Dr. Shaw continues to serve as
the Chairman and Chief Executive Officer of D. E. Shaw & Co., Inc., which is the
general partner of DESCO, L.P. As of July 31, 2000, Dr. Shaw and persons or
entities affiliated with him, including DESCO, L.P., beneficially owned, in the
aggregate, approximately 41.9% of our outstanding common stock as of that date.
As a result of this concentration of ownership, Dr. Shaw is able to exercise
significant influence over matters requiring approval by our stockholders,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership could also have the effect of
delaying or preventing a change in control of Juno.

IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY OR FACE A CLAIM OF
   INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, WE COULD LOSE OUR
   INTELLECTUAL PROPERTY RIGHTS OR BE LIABLE FOR SIGNIFICANT DAMAGES

      We have taken steps to protect our intellectual property rights, but we
cannot be certain that our efforts will be adequate to safeguard our rights to
technology we have developed. Disputes concerning the ownership or rights to use
intellectual property could be costly and time consuming to litigate, may
distract management from other tasks of operating the business, and may result
in our loss of significant rights and the loss of our ability to operate our
business.

      We have been granted four U.S. patents covering aspects of our technology
for the offline display of advertisements and the authentication and dynamic
scheduling of advertisements and other messages to be delivered to computer
users. We have also filed a number of other U.S. patent applications relating to
additional aspects of our business. We cannot assure you, however, that these
applications will result in the issuance of patents, that any patents that have
been granted or that might be granted in the future will provide us with any
competitive advantages or will be exploited profitably by us, or that any of
these patents will withstand any challenges by third parties. We also cannot
assure you that others will not obtain and assert patents against us which are
essential for our business. If patents are asserted against us, we cannot assure
you that we will be able to obtain license rights to those patents on reasonable
terms or at all. If we are unable to obtain licenses, we may be prevented from
operating our business and our financial results may therefore be harmed.

      Except as described above, we rely solely upon copyright and trademark
law, trade secret protection and confidentiality agreements with our employees
and with some third parties to protect our proprietary technology, processes,
and other intellectual property, to the extent that protection is sought or
secured at all. We cannot assure you that any steps we might take will be
adequate to protect against infringement and misappropriation of our
intellectual property by third parties. Similarly, we cannot assure you that
third parties will not be able to independently develop similar or superior
technology, processes, or other intellectual property. Furthermore, we cannot
assure you that third parties will not assert claims against us for infringement
and misappropriation of their intellectual property rights nor that others will
not infringe or misappropriate our intellectual property rights, for which we
may wish to assert claims.

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<PAGE>


WE ARE DEPENDENT ON KEY MANAGEMENT PERSONNEL FOR OUR FUTURE SUCCESS

      Our business and financial results depend in part on the continued service
of our key personnel. We do not carry key person life insurance on any of our
personnel. During the second quarter of 2000, our executive vice president,
sales and marketing, Robert H. Cherins, resigned from the Company. Our executive
vice president, technology, Mark Moraes, has announced his resignation effective
in August 2000. The loss of the services of these or any other executive
officers or the loss of the services of other key employees could harm our
business and financial results.

WE MAY NOT BE ABLE TO HIRE AND RETAIN QUALIFIED EMPLOYEES

      Our business and financial results depend in part on our ability to
attract, retain and motivate highly skilled employees. Competition for
employees in our industry is intense, and has become more pronounced
recently. We may be unable to retain our key employees or attract, assimilate
or retain other highly qualified employees. We have from time to time in the
past experienced, and we expect to continue to experience, difficulty in
hiring and retaining highly skilled employees with appropriate qualifications.

WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS AND WE MAY NOT BE ABLE TO SECURE
   ADDITIONAL FINANCING

      We may need to raise additional funds in the future to fund our
operations, to finance subscriber acquisition costs, to fund more aggressive
brand promotion, to enhance or expand the range of Internet services we offer or
to respond to competitive pressures or perceived opportunities. We cannot be
sure that additional financing will be available on terms favorable to us, or at
all. If adequate funds are not available or not available when required in
amounts or on acceptable terms, we may not be able to devote sufficient cash
resources to subscriber acquisition, successfully promote our brand, enhance or
expand our services, respond to competitive pressures or take advantage of
opportunities, and our business and financial results may suffer, or we could be
forced to cease our operations entirely. If additional funds are raised by our
issuing equity securities, stockholders may experience significant dilution of
their ownership interest and the newly issued securities may have rights
superior to those of our common stock. If additional funds are raised by our
issuing debt, we may be subject to limitations on our operations.

WE MAY ISSUE OUR COMMON STOCK TO PAY FOR SERVICES IN TRANSACTIONS THAT CAUSE
   DILUTION TO OUR SHAREHOLDERS

      We have recently entered into a number of relationships in which we expect
to use our common stock to compensate third parties for services performed for
us, including subscriber referral and telecommunications services. In most of
these transactions, the payments owed by Juno will be calculated in dollar
terms, with Juno having the right to issue an equivalent amount of its common
stock in lieu of making cash payments. We currently anticipate that we will
exercise those rights where available to us, although we may choose to pay for
some or all of such expenses in cash. If the price of Juno common stock should
decrease, our electing to pay with common stock would entail issuing a
relatively larger number of shares, increasing the dilutive effect on our
shareholders. Additionally, the third parties to whom we issue common stock will
have registration rights that require us to register these shares of common
stock for resale in the public markets. The market price of our common stock
could decline as a result of sales of a large number of these shares in the
market, or the perception that such sales could occur.

                                       42
<PAGE>


WE MAY NOT BE ABLE TO SUCCESSFULLY MAKE ACQUISITIONS OF OR INVESTMENTS IN OTHER
   COMPANIES

      We have entered into several transactions in which other companies have
agreed to refer their subscribers to us in return for compensation either
primarily or entirely in the form of Juno common stock. Although we have
recently entered into two such transactions, we do not have experience in
completing acquisitions of, or making investments in, companies or their assets.
From time to time we have had discussions with companies regarding our
acquiring, or investing in, their businesses, products or services, or
customers. If we buy a company, we could have difficulty in assimilating that
company's personnel and operations, and the key personnel of the acquired
company may decide not to work for us. We would expect that any acquisition may
present us with difficulties in assimilating the acquired services, technology
assets or customer bases into our operations. Similarly, subscriber referral
transactions may expose us to difficulties resulting from the conversion of
subscribers from a competitive service to our own services. Any of these
difficulties could disrupt our ongoing business, and distract our management and
employees. In addition, these transactions could increase our cash expenditures,
and require the amortization of goodwill, both of which could have an adverse
effect on our financial results. Furthermore, we may incur debt, and we expect
to issue equity securities, in order to pay for our subscriber referral
transactions or any other transactions we might choose to undertake. The
issuance of equity securities could be dilutive to our existing stockholders.

WE COULD FACE ADDITIONAL REGULATORY REQUIREMENTS, TAX LIABILITIES AND OTHER
   RISKS IF WE DECIDE TO EXPAND INTERNATIONALLY

      We currently provide services to a small number of users who are located
in Canada. We may decide to increase the international availability of our
services, and we believe that any international operations would be subject to
most of the risks of our business generally. In addition, there are risks
inherent in doing business in international markets, such as changes in
regulatory requirements, tariffs and other trade barriers, fluctuations in
currency exchange rates, and adverse tax consequences, and there are likely to
be different consumer preferences and requirements in such markets. We cannot
assure you that one or more of these factors would not harm any future
international operations.

FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE

      We have a large number of shares of common stock outstanding and available
for resale. The market price of our common stock could decline as a result of
sales of a large number of shares of our common stock in the market, or the
perception that such sales could occur. These sales also might make it more
difficult for us to sell equity securities in the future at a price that we
think is appropriate, or at all.

OUR STOCK PRICE HAS EXPERIENCED, AND IS LIKELY TO CONTINUE TO EXPERIENCE,
   EXTREME PRICE AND VOLUME FLUCTUATIONS

      The market price of our common stock has fluctuated in the past and is
likely to continue to be highly volatile, with extreme price and volume
fluctuations. The Nasdaq National Market, where most publicly held Internet
companies are traded, has experienced substantial price and volume fluctuations.
We believe these fluctuations have sometimes been unrelated or disproportionate
to the operating performance of these companies. These broad market and industry
factors may harm the market price of our common stock, regardless of our actual
operating performance, and we could continue to suffer significant declines in
the market price of our common stock.

      In the past, companies that have experienced volatility in the market
price of their stock have been the object of securities class action litigation.
If we were the object of securities class action litigation, it could result in

                                       43
<PAGE>


substantial costs and a diversion of our management's attention and resources.

WE HAVE ANTI-TAKEOVER PROVISIONS WHICH MAY MAKE IT DIFFICULT FOR A THIRD PARTY
   TO ACQUIRE US

      Provisions of our certificate of incorporation, our bylaws and Delaware
law could make it more difficult for a third party to acquire us, even if doing
so might be beneficial to our stockholders.

WE DO NOT PLAN TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE AND, AS A RESULT,
   STOCKHOLDERS WILL NEED TO SELL SHARES TO REALIZE A RETURN ON THEIR INVESTMENT

      We have not declared or paid any cash dividends on our capital stock since
inception. We intend to retain any future earnings to finance the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Consequently, stockholders will need to sell shares of
common stock in order to realize a return on their investment, if any.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      We are involved in disputes and litigation in the ordinary course of
business, including two currently pending lawsuits in which former employees of
Juno have asserted claims of sexual harassment and, in one of the cases,
wrongful termination, against us. We believe that these lawsuits are without
merit, and we intend to defend them vigorously. We do not believe that the
outcome of either of these lawsuits will have a material adverse effect on our
business, financial condition or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      We held our annual meeting of stockholders on May 24, 2000 in New York
City. At the meeting, Juno's stockholders voted to amend the company's 1999
Stock Incentive Plan to (i) increase the number of shares of common stock
available for issuance under the Plan by an additional 3,500,000 shares and (ii)
increase the number of shares by which the share reserve under the Plan will
increase on the first trading day of each calendar year to four percent of such
outstanding shares, subject to a maximum annual increase of 2,400,000 shares.
This proposal was approved with a vote of 19,848,286 in favor; 1,251,166
against; and 45,972 abstaining. The stockholders also elected to reappoint
PricewaterhouseCoopers LLP as our auditor. This proposal was approved with a
vote of 28,898,290 in favor; 58,167 against; and 22,301 abstaining.

ITEM 6. EXHIBITS AND REPORT ON FORM 8-K

(a)   The following exhibits are filed as part of this report:

         27.1       Financial Data Schedule

      No reports on Form 8-K were filed during the quarter ended June 30, 2000.

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<PAGE>


 ITEM 7. SIGNATURES

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

JUNO ONLINE SERVICES, INC.
(Registrant)

Date:  August 14, 2000           /s/  Charles E. Ardai
                                 ---------------------

                           Name: Charles E. Ardai
                          Title: President, Chief Executive Officer and Director
                                 (principal executive officer)

Date:  August 14, 2000           /s/  Richard M. Eaton, Jr.
                                 --------------------------

                          Name:  Richard M. Eaton, Jr.
                         Title:  Chief Financial Officer and Treasurer
                                 (principal accounting and financial officer)

                                       45