<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 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 no. 1-9728

                             J NET ENTERPRISES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            NEVADA                                       88-0169922
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


8750 N. Central Expressway, Suite #600, Dallas, Texas                   75231
------------------------------------------------------              ------------
      (Address of principal executive offices)                       (Zip Code)


                                  214-696-8830
              ---------------------------------------------------
              (Registrant's telephone number, including area code)

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

There were 8,869,245 shares of the Registrant's common stock outstanding as of
February 9, 2001.

<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
                                      INDEX


<TABLE>
<CAPTION>
                                                                                          PAGE NO.
<S>       <C>                                                                               <C>
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements
            Condensed Consolidated Balance Sheets (Unaudited) -
              December 31, 2000 and June 30, 2000                                           3-4
            Condensed Consolidated Statements of Operations (Unaudited) -
              Three and Six Months Ended December 31, 2000 and 1999                           5
            Condensed Consolidated Statement of Stockholders'
              Equity (Unaudited) - Six Months Ended December 31, 2000                         6
            Condensed Consolidated Statements of Cash Flows (Unaudited) -
              Six Months Ended December 31, 2000 and 1999                                     7
            Notes to Condensed Consolidated Financial Statements                            8 - 20

Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations                                    21

Item 3.   Quantitative and Qualitative Disclosure About Market Risk                          26


PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                                                   27
</TABLE>


                                       -2-

<PAGE>



                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                    December 31,      June 30,
                   ASSETS                              2000             2000
                   ------                           -----------      ----------
<S>                                                   <C>             <C>
Current assets:
    Cash and cash equivalents                         $ 46,140        $ 60,090
    Marketable securities                               15,444              --
    Current portion of notes receivable                    500              --
    Net assets of discontinued operations                   --          16,645
    Other current assets                                 1,147             697
                                                      --------        --------
        Total current assets                            63,231          77,432
                                                      --------        --------

Note receivable - related parties                        1,297           1,000

Investments in technology-related businesses            39,083          24,136

Excess of costs over equity in underlying
    net assets of investments in technology-related
    businesses, net of amortization                      1,530           1,657

Notes receivable                                        11,946              --

Leasehold improvements and other equipment,
    net of accumulated depreciation                      1,390              --

Deferred tax asset                                       3,137              --

Other non-current assets                                   796             510
                                                      --------        --------

        Total assets                                  $122,410        $104,735
                                                      ========        ========
</TABLE>


See Notes to Condensed Consolidated Financial Statements.


                                      -3-
<PAGE>



                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (Dollars in thousands, except share data)
                                   (Concluded)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                   December 31,   June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY                   2000         2000
------------------------------------               -----------  -----------
<S>                                                 <C>          <C>
Current liabilities:
   Accounts payable and other current liabilities   $   1,691    $     799
   Accrued federal taxes payable                        4,823           --
                                                    ---------    ---------
       Total current liabilities                        6,514          799

Convertible subordinated notes, net of amortized
   discount of $1,841 and $2,500                       25,908       12,750
Deferred income tax                                        --          762
Minority interest in subsidiary                         1,114        2,514
                                                    ---------    ---------
       Total liabilities and minority interest         33,536       16,825
                                                    ---------    ---------

Stockholders' equity:
   Preferred stock - authorized
     1,000,000 shares of $1 par value;
     none issued
   Common stock - authorized
     60,000,000 shares of $.01 par
     value; 10,233,470 shares issued                      102          102
   Additional paid-in capital                          75,250       73,875
   Retained earnings                                   27,704       27,710
   Less 1,338,624 and 1,258,624 shares of
     common stock in treasury, at cost                (14,182)     (13,777)
                                                    ---------    ---------
       Total stockholders' equity                      88,874       87,910
                                                    ---------    ---------
       Total liabilities and
         stockholders' equity                       $ 122,410    $ 104,735
                                                    =========    =========
</TABLE>


See Notes to Condensed Consolidated Financial Statements.


                                      -4-
<PAGE>



                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              THREE AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
                 (Dollars in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   Three Months Ended       Six Months Ended
                                                      December 31,            December 31,
                                                  --------------------    --------------------
                                                    2000        1999        2000        1999
                                                  --------    --------    --------    --------
<S>                                               <C>         <C>         <C>         <C>
Costs and expenses:
  Depreciation and Amortization                   $    145    $     --    $    224    $     --
  Impairment on technology-related
    businesses                                       8,665          --       8,665          --
  General and administrative                         2,422         908       3,613       1,587
                                                  --------    --------    --------    --------
     Totals                                         11,232         908      12,502       1,587
                                                  --------    --------    --------    --------

Operating loss from continuing operations           11,232         908      12,502       1,587
                                                  --------    --------    --------    --------
Other income (expense):
  Net fee from terminated merger                        --         116          --      11,116
  Equity in income (loss) in technology-related
    businesses                                      (3,017)         --      (4,803)         --
  Gain on sale of short-term investments                --       2,345          --       2,361
  Interest and other income                          1,107         485       2,040         936
  Interest expense                                  (1,668)         --      (2,912)         --
                                                  --------    --------    --------    --------
     Totals                                         (3,578)      2,946      (5,675)     14,413
                                                  --------    --------    --------    --------
Income (loss) from continuing operations
  before provision (benefit) for income tax        (14,810)      2,038     (18,177)     12,826

Provision (benefit) for Federal income tax          (4,732)        655      (5,532)      4,006
                                                  --------    --------    --------    --------

Net income (loss) from continuing operations       (10,078)      1,383     (12,645)      8,820

Loss from discontinued operations,
  net of tax of $261 and $335                           --        (506)         --        (650)
Gain on sale of discontinued operations,
  net of operating results during the
  period of $382 and $250, net of tax               12,507          --      12,639          --
                                                  --------    --------    --------    --------

Net income (loss)                                 $  2,429    $    877    $     (6)   $  8,170
                                                  ========    ========    ========    ========
Basic earnings (loss) per share:
Income (loss) from continuing operations          $  (1.12)   $    .16    $  (1.41)   $   1.02
Income (loss) from discontinued operations            1.39        (.06)       1.41        (.07)
                                                  --------    --------    --------    --------
                                                  $    .27    $    .10    $     --    $    .95
                                                  ========    ========    ========    ========
Diluted earnings (loss) per share:
Income (loss) from continuing operations          $  (1.12)   $    .16    $  (1.41)   $   1.02
Income (loss) from discontinued operations            1.39        (.06)       1.41        (.07)
                                                  --------    --------    --------    --------
                                                  $    .27    $    .10    $     --    $    .95
                                                  ========    ========    ========    ========
</TABLE>


See Notes to Condensed Consolidated Financial Statements.


                                      -5-
<PAGE>



                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                       SIX MONTHS ENDED DECEMBER 31, 2000
                        (Dollars and shares in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                            Accumulated
                                           Common Stock      Additional                Treasury Stock          Other
                                         ----------------     Paid-In     Retained   -------------------   Comprehensive
                                         Shares    Amount     Capital     Earnings   Shares      Amount        Income       Totals
                                         -------   ------   -----------   --------   ------    ---------   --------------  --------
<S>                                       <C>      <C>      <C>           <C>        <C>       <C>             <C>         <C>
Balance July 1, 2000                      10,233   $  102   $    73,875   $ 27,710   (1,259)   $ (13,777)      $    -      $ 87,910

Comprehensive loss:
  Net loss from
    continuing operations                                                  (12,645)                                         (12,645)
  Gain on sale of discontinued
    operations, net of tax                                                  12,639                                           12,639
  Other comprehensive
    loss:
Repurchase of common stock                                                              (80)        (405)                      (405)
Amount allocated to additional
  paid-in capital in connection
  with the issuance of the 8%
  convertible subordinated
  notes (See Note 2)                                              1,375                                                       1,375
                                          ------   ------   -----------   --------   ------    ---------       ------      --------
Balance December 31, 2000                 10,233   $  102   $    75,250   $ 27,704   (1,339)   $ (14,182)      $    -      $ 88,874
                                          ======   ======   ===========   ========   ======    =========       ======      ========


Disclosure of reclassification amount:
  Unrealized loss for the three months
    ended September 30, 2000                       $ (235)
Less reclassification adjustment for
    loss included in net loss
    for the three months ended
    December 31, 2000                                 235
                                                   ------
Comprehensive loss as of
  December 31, 2000                                $    -
                                                   ======
</TABLE>


See Notes to Condensed Consolidated Financial Statements.


                                      -6-
<PAGE>



                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        2000        1999
                                                                      --------    --------
<S>                                                                   <C>         <C>
Operating activities:
Net income (loss)                                                     $     (6)   $  8,170
Adjustments to reconcile net income (loss) to net
  cash used in operating activities:
    Equity in loss of technology-related businesses                      4,803          --
    Impairment on technology-related investments                         8,665          --
    (Gain) loss from discontinued operations, net of taxes
      of $6,940 and $(335)                                             (12,639)        650
    Net fee from terminated merger                                          --     (11,116)
    Depreciation and amortization                                          224          --
    Amortization of original issue debt discount                         2,034          --
    Deferred Federal income tax asset                                   (3,137)         (4)
    Gain on sale of short-term investments                                  --      (2,361)
    Increase (decrease) from changes in:
      Prepaid expenses and other current assets                           (450)        165
      Notes receivable from related parties and current receivables        (47)          8
      Other non-current assets                                            (286)         --
      Accounts payable and other current liabilities                       892       2,223
      Current tax liabilities and assets, net of taxes related to
        discontinued operations                                         (2,616)         --
                                                                      --------    --------
          Net cash used in operating activities                         (2,563)     (2,265)
                                                                      --------    --------
Investing activities:
  Investments in technology-related businesses                         (29,847)         --
  Investment in notes receivable                                       (12,446)
  Investments in marketable securities                                 (15,444)         --
  Break-up fee from terminated merger                                       --      13,500
  Proceeds from sale of short-term investments                              --       8,488
  Net proceeds from discontinued operations                             35,906       4,505
  Purchases of property and equipment                                   (1,401)         --
    Increase in lease acquisition costs and other intangible
      and non-current assets                                                --      (1,655)
                                                                      --------    --------
          Net cash provided by (used in) investing activities          (23,232)     24,838

Financing activities:
  Proceeds from convertible subordinated notes                          12,250          --
  Purchases of treasury stock                                             (405)         (1)
                                                                      --------    --------
          Net cash provided by (used in) financing activities           11,845          (1)
                                                                      --------    --------

Net increase (decrease) in cash and cash equivalents                   (13,950)     22,572
Cash and cash equivalents at beginning of period                        60,090      47,637
                                                                      --------    --------
Cash and cash equivalents at end of period                            $ 46,140    $ 70,209
                                                                      ========    ========

Supplemental disclosures of cash flow data:
  Cash paid during the period for:
    Federal income tax                                                $     --    $     --
    Interest                                                          $    968          --

Non-cash investing and financial activities:
  Debt discount on convertible subordinated notes                     $  1,375    $     --
  Note receivable - related parties                                   $    250    $     --
</TABLE>


See Notes to Condensed Consolidated Financial Statements.



                                      -7-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Significant accounting policies and business:
     Business:
       On March 8, 2000, J Net Enterprises, Inc. (formerly known as "Jackpot
       Enterprises, Inc." and referred to hereinafter as "J Net" or the
       "Company") announced a series of actions to transform the Company from a
       gaming entity into a technology fund manager and investor in technology
       content and infrastructure businesses (the "Technology-Related
       Businesses"). In addition, the Board of Directors unanimously adopted a
       resolution to change the name of the Company from Jackpot Enterprises,
       Inc. to J Net Enterprises, Inc. The change was subject to the approval of
       the Company's stockholders. Such change was approved at the annual
       stockholders' meeting on December 6, 2000.

       The Company invests directly in Technology-Related Businesses or through
       J Net Ventures I, LLC ("Venture I"), a fund managed by J Net Venture
       Partners, LLC (the "Manager"), an affiliate of the Company. Allan R.
       Tessler, the Company's Chief Executive Officer, is the Chairman of the
       Manager and Keith Meister and Todd Meister are Co-Presidents of the
       Manager. As of December 31, 2000, the Company owned 100% of Venture I.
       Venture I will make investments primarily in early stage ventures (first
       and second round financing) exhibiting reasonable risk adjusted
       valuations. Venture I may also make later stage investments based on the
       merits of the transaction, the quality of the investment and the
       company's ability to go public or have the investment monetized through
       some other clearly defined exit strategy. Additionally, Venture I may
       make investments in the securities of public companies when an
       opportunity exists for value creation. This might occur in the case of
       companies with existing products, services and customer base that have
       been affected by the decline in the interest in funding by capital
       markets (referred to herein as "fallen angels"). Investments generally
       will range in size from $1 million to $10 million. Venture I intends to
       play a role in helping to advise and assist its partner/portfolio
       companies in meeting and exceeding their objectives. Venture I expects
       the average investment holding period to be three years. Venture I will
       seek to make investments in the following: (1) B2B infrastructure and
       solutions for legacy businesses with valuable branding, (2) Restructuring
       of B2B and B2C fallen angels and (3) Technology and infrastructure
       investments. As of December 31, 2000, the Company had invested
       approximately $68 million in Technology-Related Businesses and notes
       receivable discussed in Note 3 and Note 4 to the condensed consolidated
       financial statements. Of the $68 million, the Company invested
       approximately $32 million on behalf of Venture I.

     Business segments:
       The Company operates in a single business segment, its Technology-Related
       Business segment. During the quarter ended December 31, 2000, the Company
       completed the sale of its gaming machine route operations ("Route
       Operations") segment. Activities of the Route Operations up to the
       effective date of the sale are reported as discontinued operations. For
       additional information on the Route Operations, please refer to Note 9 in
       the condensed consolidated financial statements and disclosures included
       in the Company's Annual Report to the Securities and Exchange Commission
       on Form 10-K for the fiscal year ended June 30, 2000 (the "2000 Form
       10-K").


                                      -8-
<PAGE>

                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Significant accounting policies and business (continued):

     Basis of presentation:
       The accompanying unaudited condensed consolidated financial statements
       included herein have been prepared by the Company pursuant to the rules
       and regulations of the Securities and Exchange Commission. Certain
       information and footnote disclosures normally included in financial
       statements prepared in accordance with accounting principles generally
       accepted in the United States of America have been condensed or omitted
       pursuant to such rules and regulations, although management believes that
       the disclosures are adequate to make the information presented not
       misleading.

       In the opinion of management, the accompanying unaudited condensed
       consolidated financial statements reflect all adjustments, consisting of
       normal recurring accruals, necessary to present fairly the Company's
       financial position as of December 31, 2000, the results of its operations
       for the three and six months ended December 31, 2000 and 1999 and its
       cash flows for the six months ended December 31, 2000 and 1999. The
       results for the six months ended December 31, 2000 and 1999 are not
       necessarily indicative of results for a full year. Information included
       in the condensed consolidated balance sheet as of June 30, 2000 has been
       derived from the 2000 Form 10-K. These unaudited condensed consolidated
       financial statements should be read in conjunction with the consolidated
       financial statements and disclosures included in the 2000 Form 10-K.

     Investments in Technology-Related Businesses:
       The various interests that the Company acquires in Technology-Related
       Businesses are accounted for under one of three methods: consolidation,
       equity or cost. The applicable accounting method is generally determined
       based on the Company's voting interest and its ability to influence or
       control the Technology-Related Business. For investments accounted for
       under the equity method, the excess of the cost of the investment over
       the Company's equity in the underlying net assets of such investment is
       amortized on a straight-line basis over 5 years. Such amortization is
       included in the line captioned equity in loss of Technology-Related
       Businesses in the accompanying condensed consolidated statements of
       operations.

       The Company periodically assesses the investment value and/or
       recoverability of its Technology-Related Business investments in
       accordance with Statement of Financial Accounting Standards No. 121,
       "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
       Assets to be Disposed Of" ("SFAS No. 121") and Accounting Principles
       Board Opinion No. 17, "Intangible Assets" ("APB No. 17").

       During the six months ended December 31, 2000, the Company determined the
       value of certain investments had been permanently impaired. Such
       assessments were based on internal evaluations of the ongoing business
       models presented by the investees, discounted cash flow models and
       projections, or by dilutive transactions caused by the Company's election
       not to participate in additional financings. Such impairments totaled
       $8.7 million for the three and six months ended December 31,


                                      -9-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Significant accounting policies and business (continued):


     Basis of presentation (concluded):
       2000. No such impairments were incurred during the three and six months
       ended December 31, 1999.

     Investments in debt and equity securities:
       The Company accounts for investments in debt and equity securities in
       accordance with Statement of Financial Accounting Standards No. 115,
       "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
       115"). This statement addresses the accounting and reporting for
       investments in equity securities that have readily determinable fair
       values and for all investments in debt securities, and requires such
       securities be classified as either held to maturity, trading, or
       available-for-sale. Management determines the appropriate classification
       of its investments in securities at the time of purchase and reevaluates
       such classification at each balance sheet date. SFAS 115 requires that
       available-for-sale securities be carried at fair value with unrealized
       gains and losses, net of tax, reported as a separate component of
       stockholders' equity. Unrealized gains and losses for available-for-sale
       securities are recorded as comprehensive income and are excluded from
       earnings. There were no realized or unrealized gains or losses for the
       three and six months ended December 31, 2000. Realized gains from the
       sale of securities for the three and six months ended December 31, 1999
       were $2,345,000 and $2,361,000, respectively.

     Marketable securities:
       In October and November 2000, the Company invested a total of $15 million
       in Mariner Partners, L.P. (the "Partnership"), a private investment fund
       which primarily trades in a variety of hedged investment strategies.
       Mariner GP, L.P., a Delaware limited partnership, is the general partner
       of the Partnership. According to the Partnership, its primary focus is on
       hedged arbitrage trading utilizing a variety of trading strategies. The
       strategies include arbitrage trading in the following instruments: U.S.
       Treasury securities and related futures, U.S. and foreign convertible
       bonds and preferred stock and their related common stocks, European
       government securities and related futures contracts, mortgage-backed
       securities, corporate bonds, bank debt and common stocks in global equity
       markets. However, the General Partner has the discretion to cause the
       Partnership to invest in all forms of securities, swaps, commodity
       futures products and related derivative instruments, including equities,
       equity related securities, bonds and other fixed income securities,
       options, repurchase agreements, futures and forward contracts and
       currencies, in both domestic and foreign markets and in any instrument or
       product commodity traded as a medium of investment. The Partnership is
       permitted to engage in a highly diverse range of investment and trading
       strategies, including those involving derivative and hybrid instruments.
       Generally, at the end of each fiscal quarter of the Partnership and upon
       45 days' prior written notice, J Net has the right to withdraw any
       portion of its capital account (but at least $100,000) or to withdraw
       from the Partnership. Earnings from the investment are reflected as
       interest income on the condensed consolidated financial statements. In
       January 2001, the Company invested an additional $10 million in the
       Partnership.


                                      -10-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Significant accounting policies and business (continued):
     Leasehold improvements and other equipment:
       Leasehold improvements and other equipment are recorded at cost and are
       depreciated on a straight line basis over the estimated useful lives of
       the assets, as follows: 3 to 7 years for equipment; and 10 to 40 years
       for leasehold improvements. Property sold or retired is eliminated from
       the accounts in the year of disposition.

     Recently adopted accounting standards:
       In June 1998, the Financial Accounting Standards Board (the "FASB")
       issued Statement of Financial Accounting Standards No. 133, "Accounting
       for Derivative Instruments and Hedging Activities" ("SFAS 133"), as
       amended, which is effective for fiscal years beginning after June 15,
       2000. SFAS 133 establishes additional accounting and reporting standards
       for derivative instruments and hedging activities. SFAS 133 requires that
       an entity recognize all derivatives as either assets or liabilities in
       the statement of financial position. This statement also defines and
       allows companies to apply hedge accounting to its designated derivatives
       under certain instances. It also requires that all derivatives be marked
       to market on an ongoing basis. This applies whether the derivatives are
       stand-alone instruments, such as warrants or interest rate swaps, or
       embedded derivatives, such as call options contained in convertible debt
       investments. Along with the derivatives, in the case of qualifying
       hedges, the underlying hedged items are also to be marked to market.
       These market value adjustments are to be included either in the income
       statement or other comprehensive income, depending on the nature of the
       hedged transaction. The fair value of financial instruments is generally
       determined by reference to market values resulting from trading on a
       national securities exchange or in an over the counter market. In cases
       where derivatives relate to financial instruments of non public
       companies, or where quoted market prices are otherwise not available,
       such as for derivative financial instruments, fair value is based on
       estimates using present value or other valuation techniques. Based on
       management's review, the Company has determined that the warrant
       purchased by the Company in connection with the Company's purchase of an
       interest in Series B Preferred Stock of TechTrader, Inc. in fiscal 2000
       is a derivative as defined in SFAS 133. On July 1, 2000, the Company
       adopted SFAS 133 and recorded the Tech Trader derivatives at fair market
       value. The cumulative effect of the change in accounting principle for
       the six months ended December 31, 2000 was not significant.

       In March 2000, the FASB issued FASB Interpretation 44 "Accounting for
       Certain Transactions involving Stock Compensation" ("FIN 44"), which
       provides clarification on the application of Accounting Principles Board
       Opinion No. 25 "Accounting for Stock Issued to Employees". The Company
       adopted the provisions of FIN 44 on July 1, 2000. Such adoption had no
       effect on the Company's results of operations.

     Recently issued accounting standards:
       In December 1999, the Securities and Exchange Commission issued Staff
       Accounting Bulletin No. 101, "Revenue Recognition in Financial
       Statements" ("SAB 101"). SAB 101 clarifies existing accounting principles
       related to revenue recognition in financial statements. The Company is
       required to comply with the provisions of


                                      -11-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Significant accounting policies and business (concluded):
     Recently issued accounting standards (concluded):
       SAB 101 in its three months ended June 30, 2001. Based upon the current
       nature of the Company's continuing operations, management does not
       believe that SAB 101 will have a significant impact on the Company's
       results of operations.

Note 2 - Convertible subordinated notes:
       On October 2, 2000, the Company completed its offering of approximately
       $28 million of unregistered 8% convertible subordinated notes (the
       "Notes") to a small group of investors. Certain of the investors include
       officers and directors of the Company or entities controlled by such
       directors and the Co-Presidents of the Manager. As of December 31, 2000,
       the Company had raised $27,750,000 from the issuance of the Notes.
       Issuance of a portion of the Notes pursuant to rules of the New York
       Stock Exchange was approved by the stockholders at the Annual
       Stockholders' meeting on December 6, 2000.

       For financial statement purposes, as of June 30, 2000, $15,250,000 of the
       Notes were deemed to have been beneficially converted as the conversion
       feature was in-the-money at the commitment date. The Company has
       calculated the beneficial conversion feature as the difference between
       the fair value of the common stock at the commitment date and the initial
       conversion price, multiplied by the number of shares into which the debt
       is convertible. Approximately $2,500,000 of the proceeds from issuance of
       the Notes, equal to the intrinsic value, was recorded as debt discount
       and allocated to additional paid-in capital as of June 30, 2000. From
       July 1, 2000 through October 2, 2000, the Company raised an additional
       $12,500,000 through the issuance of the Notes. A substantial portion of
       these Notes was also deemed to have been beneficially converted as
       described above. As a result, an additional $1,375,000 of the proceeds
       was recorded as debt discount and allocated to paid-in capital. The terms
       of this issuance were identical to the Notes issued in June 2000. The
       earliest date in which the Notes are convertible is June 1, 2001. As a
       result of the June 1, 2001 date, the debt discount is being amortized to
       interest expense from the date of issuance of the Note through June 1,
       2001 using the interest method.

       As of December 31, 2000, three directors of J Net or entities controlled
       by such directors, the adult children of certain directors or entities
       controlled by such children, Meister Brothers Holdings, LLC, and one
       officer of the Company have invested $3 million, $4 million, $3 million,
       and $.5 million, respectively, in the Notes. In connection with the
       issuance of the Notes, the Company loaned $1 million and $250,000 to
       Meister Brothers Holdings, LLC and the officer, respectively. Interest on
       the loans accrues at 8% per annum. The principal amount and accrued
       interest is payable on June 30, 2002. Both obligations are full recourse
       in nature but also secured by the right, title and interest in and to the
       Notes purchased by such persons.

       Mark W. Hobbs, President and Chief Operating Officer of the Company
       entered into an agreement with Mariner GP, an unaffiliated entity, with
       respect to Mr. Hobbs' participation in the ownership of $2 million of the
       $4 million Notes. Pursuant to the


                                      -12-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Convertible subordinated notes (concluded):
       arrangement, Mr. Hobbs obtains the full economic benefit with respect to
       $1 million of the Notes including the interest thereon and the potential
       upside upon conversion to common stock and the sale thereof. With respect
       to an additional $1 million, Mr. Hobbs obtained the potential upside upon
       conversion to common stock and the sale thereof. Mr. Hobbs is at risk in
       the event of default on the two million dollar original purchase price
       and has pledged his limited partnership interests in Mariner GP, L.P. as
       collateral against such default. Mariner GP, L.P., a Delaware limited
       partnership is the general partner of Mariner Partners, L.P. In
       connection with such transaction, Mr. Hobbs waived his right under his
       employment agreement to receive up to a $1 million loan from the Company
       to purchase up to $2 million of the Notes. For information regarding
       Jackpot's investment in Mariner Partners, L.P., see Note 1, Marketable
       securities.

       For the six months ended December 31, 2000, interest expense related to
       the Notes was $2,912,000. Of such amount, approximately $2,034,000 was
       from the amortization of the debt discount and the remaining $878,000
       represented interest payable to the Note holders at 8% on the principal
       amount. For further information concerning the Notes, see Note 2 of Notes
       to Consolidated Financial statements in the 2000 Form 10-K.

Note 3 - Investments in Technology-Related Businesses:
       As of December 31, 2000, all of the Company's investments in
       Technology-Related Businesses under the applicable accounting methods are
       summarized as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                      December 31, 2000       June 30, 2000
                                      -----------------       -------------
<S>                                       <C>                    <C>
                Consolidation             $  1,126               $  2,540
                Equity method               25,872                 13,544
                Cost method                 12,085                  8,052
                                          --------               ---------
                    Total                 $ 39,083               $ 24,136
                                          ========               ========
</TABLE>

       During the three months ended September 30, 2000, the Company, on behalf
       of Venture I, acquired interests in Jasmine Networks, Inc., Estara, Inc.
       and Tellme Networks, Inc. for $5 million, $2.7 million and $2 million,
       respectively. Such companies are non public development stage companies.
       The Company accounts for these investments under the cost method.

       On October 12, 2000, J Net and InterWorld Corporation ("InterWorld")
       entered into a definitive Securities Purchase Agreement (the "Securities
       Purchase Agreement"). Pursuant to the terms of the Securities Purchase
       Agreement, J Net purchased $20 million in aggregate principal amount of
       Series A Preferred Stock of InterWorld (the "Series A Preferred Stock")
       on November 10, 2000. Each share of Series A Preferred Stock is initially
       convertible into shares of Common Stock of InterWorld (the "Common
       Stock") at a conversion price of $6.25 per share (the "Conversion
       Price"), subject to adjustment on the six month anniversary of the date
       of issue, to 90% of the average daily closing price of Common Stock for
       such six-month period,



                                      -13-
<PAGE>

                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 3 - Investments in Technology-Related Businesses (continued):
       but in no event less than $2.00 per share. Furthermore, on April 12,
       2001, J Net, at its sole discretion, shall have the option to require
       InterWorld to redeem the Series A Preferred Stock for cash at 150% of the
       purchase price plus accrued dividends; provided that such right will
       expire if InterWorld consummates a change of control transaction with J
       Net on or prior to such date.

       In connection with the issuance of the Series A Preferred Stock,
       InterWorld issued to J Net warrants to purchase shares of Common Stock at
       an exercise price of $7.25 per share, subject to adjustment, exercisable
       at any time until October 12, 2005, equal to 19.999% of the current
       outstanding shares of Common Stock less the amount of shares issuable
       upon the conversion of the Series A Preferred Stock. The Company has
       determined these warrants are a derivative as defined by SFAS 133.
       Because there is no public market for these warrants, the value of the
       warrants has been determined using the Black-Scholes methodology.

       Pursuant to the Securities Purchase Agreement, J Net appointed two of its
       board members to InterWorld's Board of Directors. Based on the Company's
       voting nature of the investments, its representation on the Board of
       Directors and the Company's ability to otherwise influence direction of
       InterWorld's activities, the Company uses the equity method to account
       for its investment in InterWorld.

       On January 25, 2001, J Net and InterWorld entered into a Stock Purchase
       Agreement and a Stand-By Purchase Agreement (collectively, the
       "Agreements"). Pursuant to the Agreements, J Net will exchange all of its
       InterWorld Series A Preferred Stock and the related warrants for
       46,153,846 newly-issued shares of InterWorld Common Stock. In connection
       with such exchange, J Net agreed to suspend its option to require
       InterWorld to redeem its Series A Preferred Stock for cash at 150% of the
       purchase price plus accrued dividends, provided such exchange is approved
       by InterWorld's shareholders. In addition, pursuant to the Agreements,
       InterWorld has agreed to offer for sale to all holders of InterWorld
       Common Stock up to $20 million of newly-issued InterWorld Common Stock at
       a price per share of $.65. If such holders do not purchase all of the new
       issuance, the Company has agreed to purchase the difference between $20
       million and the amount purchased by other InterWorld shareholders (the
       "Stand-By Commitment"). The Agreements also provide J Net with the option
       to purchase an additional $20 million of InterWorld Common Stock (the
       "Over Allotment Option"). A portion of the Over Allotment Option will be
       exercisable at a price per share of $.65 and a portion will be
       exercisable at a price per share equal to 90% of the volume-weighted
       average trading price of InterWorld Common Stock for the 10 trading day
       period prior to the time of exercise. The portions exercisable at each
       price will depend on the number of shares purchased pursuant to the
       Stand-By Commitment, as described in the Agreements. Assuming
       consummation of the transactions described in the Agreements, J Net would
       own a majority of the issued and outstanding InterWorld Common Stock. The
       transactions described in the Agreements are subject to numerous
       conditions, including obtaining various InterWorld shareholder
       approvals and the making of various regulatory filings, as
       described in the Agreements.


                                      -14-
<PAGE>

                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Investments in Technology-Related Businesses (concluded):
       On February 7, 2001, Mark Hobbs, J Net's President and Chief Operating
       Officer was appointed to InterWorld's Board of Directors upon execution
       of the Agreements. J Net shall maintain the right to designate up to 4
       nominees to InterWorld's Board of Directors (subject to certain
       percentage ownership thresholds) after the closing of the Stand-By
       Commitment and Over Allotment Option.

       For the companies in which J Net uses the equity accounting method, the
       percentages owned vary from approximately 10% to 42%. For the three and
       six months ended December 31, 2000, the Company's equity in losses from
       the investments, excluding impairments of such investments, were
       $3,017,000 and $4,803,000, respectively. The amounts consist of the
       Company's proportioned losses in InterWorld, Alistia, Inc., TechTrader,
       Inc. and Digital Boardwalk LLC.

       Summarized financial information for those partially owned equity
       affiliates for the three and six months ended December 31, 2000 are as
       follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                        Three Months
                                                   Ended December 31, 2000
                                                   -----------------------
<S>                                                      <C>
          Income statement information:
              Revenues                                   $   6,516
              Operating loss                             $ (17,269)
              Net loss                                   $ (16,826)
</TABLE>


<TABLE>
<CAPTION>
                                                          Six Months
                                                   Ended December 31, 2000
                                                   -----------------------
<S>                                                      <C>
          Income statement information:
              Revenues                                   $   8,537
              Operating loss                               (20,517)
               Net loss                                    (20,000)

          Financial position information:
              Current assets                             $  41,030
              Noncurrent assets                             12,201
              Current liabilities                          (21,311)
              Noncurrent liabilities                       (23,211)
                                                         ---------
               Net assets                                $   8,709
                                                         =========
</TABLE>


                                      -15-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 4 - Notes receivable:

       On October 12, 2000 J Net, on behalf of Venture I, entered into a Loan
       Assumption and Forbearance Agreement with Michael Donahue, Chairman of
       InterWorld, pursuant to which J Net purchased from Salomon Smith Barney
       ("SSB") a loan from SSB to Mr. Donahue in the amount of $12,445,500. The
       loan is secured by 4,270,406 shares of InterWorld Common Stock and other
       assets owned by Mr. Donahue. The loan is due in October 2003, subject to
       a reduction to October 2001 if InterWorld does not effect a merger
       transaction with J Net, and bears interest payable at 8% per annum. In
       connection therewith, J Net entered into a Call/Participation Agreement
       with Mr. Donahue whereby he agreed that J Net would share in the profit
       on a portion of the stock securing the loan once certain conditions,
       including the repayment of the loan, were met. Mr. Donahue has sole
       power to vote and dispose of the shares, although he is required to
       vote the shares in favor of a merger of InterWorld and J Net and consult
       with J Net on other matters put before InterWorld's shareholders for a
       vote thereon. The loan agreement contains certain events of default
       beyond non-payment, the most significant of which include failure by
       Mr. Donahue to vote the stock in favor of a merger between InterWorld
       and J Net and any time that the closing price of the stock pledged as
       collateral falls below $2.00 per share for more than 10 days. J Net
       has notified Mr. Donahue of such closing price default but has elected
       not to enforce its rights relating to such closing price default
       as of the date hereof.

Note 5 - Federal income taxes:
       The effective tax rate for the three and six month period ended December
       31, 2000 is approximately 31%, which differs from the statutory rate due
       to differences in recognition of expenses between the tax accounting
       regulations and financial statements prepared in accordance with
       generally accepted accounting principles in the United States of America.

       The Company has a deferred tax asset of $3.1 million as of December 31,
       2000. No allowance has been provided against such deferred tax asset.
       Management believes that it is more likely than not that existing
       operating losses can be carried forward and back against the recognized
       gains from asset and securities sales for prior fiscal years and
       anticipated gains in future years, thus realizing the benefit.

Note 6 - Earnings (loss) per share:
       Basic earnings (loss) per share from continuing operations for the three
       and six months ended December 31, 2000 and 1999 and diluted loss per
       share from continuing operations for the three and six months ended
       December 31, 2000 are computed by dividing net income (loss) from
       continuing operations by the weighted average number of common shares
       outstanding for the respective period. Diluted earnings per share from
       continuing operations for the six months ended December 31, 1999 is
       computed by dividing net income by the weighted average number of common
       and common equivalent shares outstanding. Options and warrants to
       purchase common stock, whose exercise price was greater than the average
       market price for the three and six months ended December 31, 1999, have
       been excluded from the computation of diluted earnings per share from
       continuing operations. Such antidilutive options and warrants were
       1,615,766 and 1,645,378, respectively. Because the six months ended
       December 31, 2000 had a loss from continuing operations, no potential
       common shares from the assumed exercise of stock options, the put
       options and the assumed conversion of the 8% convertible subordinated
       notes have been included in the diluted loss per share from continuing
       operations



                                      -16-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Note 6 - Earnings (loss) per share (concluded):
       computation pursuant to accounting principles generally accepted in the
       United States of America. The following is the amount of income (loss)
       and the number of shares used in the basic and diluted earnings (loss)
       per share computations for continuing operations (dollars and shares in
       thousands, except per share data):

<TABLE>
<CAPTION>
                                        Three Months Ended      Six Months Ended
                                           December 31,           December 31,
                                       --------------------    ------------------
                                         2000        1999        2000        1999
                                       --------    --------    --------    --------
<S>                                    <C>         <C>         <C>         <C>
Basic earnings per share:
  Earnings:
    Income (loss) available to
      common stockholders              $(10,078)   $  1,383    $(12,645)   $  8,820
                                       ========    ========    ========    ========
  Shares:
    Weighted average number of
      common shares outstanding           8,974       8,614       8,974       8,615
                                       ========    ========    ========    ========

Basic earnings (loss) per share
  from continuing operations           $  (1.12)   $    .16    $  (1.41)   $   1.02
                                       ========    ========    ========    ========

Diluted earnings (loss) per share
  from continuing operations:
    Earnings (loss):
      Income (loss) available to
        common stockholders            $(10,078)   $  1,383    $(12,645)   $  8,820
      Effect of dilutive securities          --          --          --          --
                                       --------    --------    --------    --------
    Income (loss), as adjusted         $(10,078)   $  1,383    $(12,645)   $  8,820
                                       ========    ========    ========    ========
    Shares:
      Weighted average number of
        common shares outstanding         8,974       8,614       8,974       8,615
      Common shares issuable upon
        assumed exercise of dilutive
        stock options                        --           1          --          12
      Less common shares assumed
        to be repurchased by
        application of the treasury
        stock method to the
        proceeds using the average
        market price for the period          --          (1)         --         (12)
      Common shares issuable upon
        assumed conversion of the
        8% convertible subordinated
        notes                                --          --          --          --
      Common shares issuable upon
        assumed exercise of the put
        option                               --          --          --          --
                                       --------    --------    --------    --------
      Weighted average number of
        common shares and
        common share equivalents
        outstanding                       8,974       8,614       8,974       8,615
                                       ========    ========    ========    ========

Diluted earnings (loss) per share
  from continuing operations           $  (1.12)   $    .16    $  (1.41)   $   1.02
                                       ========    ========    ========    ========
</TABLE>




                                      -17-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - The 1992 Incentive and Non-qualified Stock Option Plan:
       On September 29, 2000, the exercise price of the June 30, 2000 grant of
       nonqualified stock options to purchase an aggregate of 110,000 shares of
       common stock (27,500 each to four directors) was vested at $9.50 per
       share, the fair market value of the stock on that date, pursuant to the
       terms of the 1992 Incentive and Non- qualified Stock Option Plan (the
       "1992 Plan"). See Note 6 of Notes to Consolidated Financial Statements in
       the 2000 Form 10-K for further information regarding the 1992 Plan and
       option grants. On November 22, 2000, 23,936 stock options were issued to
       former officers under termination provisions in employment agreements
       associated with the sale of the Route Operations. Such options are vested
       at $6.63 per share, the fair market value of the stock on that date and
       expire 24 months after the date of issue.

Note 8 - Commitments and contingencies:
     Employment agreements:
       J Net entered into employment agreements with Mark W. Hobbs, President
       and Chief Operating Officer, and Steven L. Korby, Executive Vice
       President and Chief Financial Officer on October 1, 2000. Such agreements
       expire on June 21, 2003. The aggregate commitment for future salaries at
       December 31, 2000, excluding bonuses, under the employment agreements is
       approximately $1.4 million.

       During the three months ended December 31, 2000, severance payments
       totaling $1,140,000 were paid to former officers of the Company pursuant
       to terms of employment agreements. Such expenses are included in general
       and administrative expenses in the condensed consolidated statements of
       operations for the three and six months ended December 31, 2000.

Note 9 - Discontinued operations:
     Definitive agreement and conditional modification agreement:
       The Company completed the sale of its Route Operations on November 22,
       2000 pursuant to a definitive agreement dated July 8, 2000 and a
       conditional modification agreement dated October 30, 2000. Total cash
       received was approximately $44,000,000 representing $38,000,000 of
       proceeds related to the subsidiaries sold and $6,000,000 of working
       capital and prorated expense reimbursements. The gain from the sale of
       the Route Operations, net of estimated income taxes of $6,940,000 and
       estimated selling expenses of $1,005,000 was $12,889,000.

       In accordance with accounting principles applicable to discontinued
       operations, the results of operations up to the effective date of the
       sale and previously reported financial statements have been reclassified
       to reflect the Route Operations as discontinued.

     Settlement with Rite Aid Corporation:
       On March 27, 2000, J Net entered into amendments to its two license
       agreements with Rite Aid Corporation ("Rite Aid"). As a result of the
       subsequent receipt of certain administrative approvals from the Nevada
       State Gaming Control Board ("Nevada Board") for 31 Rite Aid locations,
       such amendments became effective October 9, 2000. Pursuant to the terms
       of the amendments, license fees payable to Rite Aid were reduced by
       approximately $2.5 million annually over the remaining term of the


                                      -18-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 9 - Discontinued operations (concluded):
       amended agreements. Such reductions were effective March1, 2000. All
       disputes between the parties, including J Net's lawsuit against Rite Aid
       have been resolved or settled as a result of the filing by the parties of
       the Stipulation for Dismissal on October 16, 2000.

       For the fiscal year ended June 30, 2000, the Company incurred an
       operating loss of approximately $3.4 million at the Rite Aid locations.
       As a result of the reduction in license fees described above, the
       Company's operating loss at the Rite Aid locations for the period up to
       the sale of the Route Operations was reduced substantially.

       The following are the summary operating results of the discontinued
       operations (dollars in thousands):

<TABLE>
<CAPTION>
                                              July 1, 2000 to        Six Months Ended
                                             November 22, 2000       December 31, 1999
                                             -----------------       -----------------
<S>                                              <C>                     <C>
Revenues                                         $ 28,002                $ 45,244
Costs and expenses                                (28,387)                (46,257)
                                                 --------                --------
Operating income (loss)                              (385)                 (1,013)
Other income                                            7                      28
                                                 --------                --------
Income (loss) before provision
  (benefit) for income tax                           (378)                   (985)
Provision (benefit) for income tax                   (128)                   (335)
                                                 --------                --------
Income (loss) from discontinued
  operations, net of tax                         $   (250)               $   (650)
                                                 ========                ========
</TABLE>

The following are the net assets of the discontinued operations sold on November
22, 2000 (dollars in thousands):

<TABLE>
<CAPTION>
                                         As of November 22, 2000      June 30, 2000
                                         -----------------------      -------------
<S>                                              <C>                     <C>
Assets:
   Cash                                          $  3,500                $  3,500
   Prepaid expenses                                   819                   1,209
   Other current assets                             2,223                   1,020
   Deferred income tax                                 --                     384
   Property and equipment
     at cost, net                                  10,803                  11,907
   Lease acquisition costs and
     other intangible assets, net                   5,279                   5,190
                                                  -------                --------
        Total assets                             $ 22,624                $ 23,210
                                                 ========                ========

Liabilities:
   Accounts payable and
     other current liabilities                   $  1,490                $  2,516
   Deferred rent                                    3,945                   4,049
                                                 --------                --------
        Total liabilities                           5,435                   6,565
                                                 --------                --------
   Net assets of discontinued
     operations                                  $ 17,189                $ 16,645
                                                 ========                ========
</TABLE>


                                      -19-
<PAGE>


                    J NET ENTERPRISES, INC. AND SUBSIDIARIES
              NO TES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Subsequent events:
       On January 4, 2001, the Board of Directors authorized the repurchase of
       up to 1 million shares of common stock. For the six months ended December
       31, 2000, the Company purchased 80,000 shares under a previously approved
       program. A total of 25,601 shares have been purchased under the program
       initiated on January 4, 2001 through February 9, 2001.

       On January 25, 2001, J Net and InterWorld entered into a Stock Purchase
       Agreement and a Stand-By Purchase Agreement (collectively, the
       "Agreements") Pursuant to the Agreements, J Net will exchange all of its
       InterWorld Series A Preferred Stock and the related warrants for
       46,153,846 newly-issued shares of InterWorld Common Stock. In addition,
       pursuant to the Agreements, InterWorld has agreed to offer for sale to
       all holders of InterWorld Common Stock up to $20 million of newly-issued
       InterWorld Common Stock at a price per share of $.65. If such holders do
       not purchase all of the new issuance, the Company has agreed to purchase
       the difference between $20 million and the amount purchased by other
       InterWorld shareholders (the "Stand-By Commitment"). The Agreements also
       provide J Net with the option to purchase an additional $20 million of
       InterWorld Common Stock (the "Over Allotment Option"). A portion of the
       Over Allotment Option will be exercisable at a price per share of $.65
       and a portion will be exercisable at a price per share equal to 90% of
       the volume-weighted average trading price of InterWorld Common Stock for
       the 10 trading day period prior to the time of exercise. The portions
       exercisable at each price will depend on the number of shares purchased
       pursuant to the Stand-By Commitment, as described in the Agreements.
       Assuming consummation of the transactions described in the Agreements, J
       Net would own a majority of the issued and outstanding InterWorld Common
       Stock. The transactions described in the Agreements are subject to
       numerous conditions, including obtaining various InterWorld shareholder
       approvals and the making of various regulatory filings, as described in
       the Agreements.

       On February 7, 2001, Mark Hobbs, J Net's President and Chief Operating
       Officer was appointed to InterWorld's Board of Directors upon execution
       of the Agreements. J Net shall maintain the right to designate up to 4
       nominees to InterWorld's Board of Directors (subject to certain
       percentage ownership thresholds) after the closing of the Stand-By
       Commitment and Over Allotment Option.



                                      -20-
<PAGE>



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

FORWARD-LOOKING STATEMENTS; RISKS AND UNCERTAINTIES

       Certain information included in this Form 10-Q and other materials filed
or to be filed by the Company with the Securities and Exchange Commission
contains statements that may be considered forward-looking. All statements other
than statements of historical information provided herein may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes", "anticipates", "plans", "expects", "should" and similar expressions
are intended to identify forward-looking statements. In addition, from time to
time, the Company may release or publish forward-looking statements relating to
such matters as anticipated financial performance, business prospects,
technological developments and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the Company
notes that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements.

       The risks and uncertainties that may affect the operations, performance,
development and results of the Company's Technology-Related Businesses include,
but are not limited to, the ability of the Company to identify and negotiate on
terms acceptable to the Company an acquisition of a systems development or other
technology infrastructure company and the ability to successfully integrate and
grow such business if acquired, the success of those entities in which the
Company has invested, the ability of those entities, in which the Company has
existing minority investments, to raise additional capital on terms that such
entities find attractive to themselves and to the Company or to otherwise
monetize their securities, and the ability of the Company to raise additional
outside capital for J Net Ventures I, LLC or for any future funds to be
established.

       Readers are cautioned not to place undue reliance on any forward-looking
statements, which speak only as of the date thereof. The Company assumes no
obligation to update or supplement forward-looking statements as a result of new
circumstances or subsequent events.

OVERVIEW

       On March 8, 2000, J Net Enterprises, Inc. (formerly "Jackpot" and
hereinafter referred to as "J Net" or the "Company"), which operated as one
business segment since it was organized in 1980, announced a series of actions
designed to transform the Company from a gaming entity into a high growth,
technology infrastructure provider and fund manager ("Technology-Related
Businesses"). On March 10, 2000, the Company formed J Net Ventures I, LLC
("Venture I"), an entity that will invest primarily in Technology-Related
Businesses. As of December 31, 2000, the Company owned 100% of Venture I.
Venture I is managed by J Net Venture Partners, LLC (the "Manager"). Allan R.
Tessler, the Company's Chief Executive Officer is the Chairman of the Manager
and Keith Meister and Todd Meister are Co- Presidents of the Manager. The
Company will at all times own at least 51% of the Manager.




                                      -21-
<PAGE>



       Venture I will be an approximately $75 million fund. Of the $75 million,
the Company has committed $55 million and entities associated with Gilbert
Global Equity, a private equity partnership, have committed $15 million. The
remaining $5 million will be funded by certain other investors, subject to the
completion of the agreement between such investors and Venture I. A portion of
the $55 million was derived from the sale of 8% convertible subordinated notes
(the "Notes"). The investors in such Notes include officers and directors of the
Company or entities controlled by such directors and the Co-Presidents of the
Manager. Through December 31, 2000, the Company has raised approximately $28
million through the issuance of the Notes. For financial statement purposes,
certain of the Notes were deemed to have been beneficially converted as the
conversion feature was in-the- money at the commitment date. Approximately $3.9
million of the proceeds from the issuance of the Notes, equal to the intrinsic
value, has been recorded as debt discount and allocated to additional paid-in
capital. Of the $3.9 million, $2.5 million was recorded on June 28, 2000, and
the remaining $1.4 million was recorded in the six months ended December 31,
2000. Because the debt is not convertible until June 1, 2001 (the earliest
possible date in which the debt is convertible), the debt discount is amortized
to interest expense from the date of issuance of the Notes through June 1, 2001
using the interest method. As a result of the issuance of the Notes, interest
expense for the year ending June 30, 2001 will increase substantially. For
further information concerning the Notes, see Note 2 of Notes to Condensed
Consolidated Financial Statements.

       Venture I will make investments primarily in early stage ventures (first
and second round financing) exhibiting reasonable risk adjusted valuations.
Venture I may also make later stage investments based on the merits of the
transaction, the quality of the investment and the company's ability to go
public or have the investment monetized through some other clearly defined exit
strategy. Additionally, Venture I may make investments in the securities of
public companies when an opportunity exists for value creation. This might occur
in the case of companies with existing products, services and customer base that
have been affected by the decline in the interest in funding by capital markets
(referred to herein as "fallen angels"). Investments generally will range in
size from $1 million to $10 million. Venture I intends to play a role in helping
to advise and assist its partner/portfolio companies in meeting and exceeding
their objectives. Venture I expects the average investment holding period to be
three years. Venture I will seek to make investments in the following: (1) B2B
infrastructure and solutions for legacy businesses with valuable branding, (2)
Restructuring of B2B and B2C fallen angels" and (3) Technology and
infrastructure investments. As of December 31, 2000, the Company had invested
approximately $68 million in Technology- Related Businesses and notes receivable
discussed in Note 4 to the condensed consolidated financial statements. Of the
$68 million, the Company invested approximately $32 million on behalf of Venture
I.

       Prior to the Company's change in business strategy, the Company had been
actively engaged, through its subsidiaries, in the gaming industry for over 30
years. The Company was one of the largest gaming machine route operators in the
State of Nevada. In connection with its change in business strategy, the Company
retained the investment banking firm of Koffler & Company to advise the Company
on the disposition of its gaming business segment. During the three months ended
June 30, 2000, management formalized its plan to sell the Route Operations and
commenced activities to dispose of such operations. On July 8, 2000, the Company
entered into a definitive agreement to sell its Route Operations for $45 million
in cash. As a result of management's plan to dispose of the Route Operations and
of the sale, which was subject to closing conditions and regulatory and other
approvals, the financial position and results of operations of the Route
Operations have been reported as discontinued



                                      -22-
<PAGE>

operations. In accordance with accounting principles generally accepted in the
United States of America applicable to discontinued operations, previously
reported financial statements have been reclassified to reflect the Route
Operations as discontinued. On October 30, 2000, the Company agreed to a
conditional modification of the agreement due to issues relating to the
purchaser's financing, and the purchase price and certain revenue and cost
sharing terms were revised. On November 22, 2000, the sale, under the revised
terms, was completed.

       At various times during the past several years, the Company engaged in
the active consideration of potential acquisitions and expansion opportunities
in both the gaming and nongaming markets, including most recently in 1999 in
connection with the potential acquisition of Players International, Inc.
("Players") and CRC Holdings, Inc. d/b/a Carnival Resorts & Casinos ("CRC"), a
privately owned company. The Company devoted significant management and other
resources to these efforts and incurred substantial expenses in connection with
such activities. The discussion that follows is based on giving retroactive
effect to the discontinued operations. Since the Route Operations was the
Company's only business segment from its inception through February 2000, the
following discussion focuses primarily on J Net's continuing operations, which
consisted primarily of general and administrative activities of the parent
company and since March 2000, J Net's Technology- Related Businesses segment.

RESULTS OF OPERATIONS

       Revenues:

       The Company had no revenues from continuing operations for the three and
six months ended December 31, 2000 (the "2000 three months" and the "2000 six
months") and 1999 (the "1999 three months" and the "1999 six months").

       Costs and expenses:

       Costs and expenses for J Net consisted primarily of general and
administrative activities and impairment of certain Technology-Related Business
investments. For the 2000 six months, general and administrative costs increased
$2.0 million from the 1999 six months. The increase is due primarily to
severance costs related to the sale of the Route Operations and higher payroll
costs for additional personnel in connection with the development of the
Technology-Related Business segment. Impairments of the Technology- Related
Business assets were $8.7 million for the six months ended December 31, 2000.
There were no impairments in the prior years since the Company did not own any
such investments.

       Other income (expense):

       Other income (expense) for the six months ended December 31, 2000 was an
expense of $5.7 million compared to other income $14.4 million for the same
period ended December 31, 1999. The expense for the 2000 six months is comprised
of equity losses from the Company's Technology-Related Businesses of $4.8
million and interest expenses of $2.9 million offset by the interest income of
$2.0 million. The income amounts for the 1999 six months included a nonrecurring
$11.1 million fee received and $2.4 million gain from the sale of securities.
Both the fee and security sales gains were related to a terminated merger
agreement with Players International, Inc. Such proposed merger was terminated
on August 16, 1999. There were no activities for Technology-Related Businesses
in the 1999 six months.



                                      -23-
<PAGE>

For additional information related to the Players International, Inc. terminated
merger, please refer to the Company's 2000 Form 10-K.

       For the 2000 three months, other income (expense) was an expense of $3.6
million compared with income of $2.9 million for the 1999 three months. The
expenses in the 2000 three months are due to equity losses in Technology-Related
Businesses ($3.0 million) and interest expenses ($1.7 million), offset partially
by interest income of $1.1 million. The income in the 1999 three months is due
primarily to the previously discussed gain on the sale of securities of Players
International, Inc.

       Income (loss) from continuing operations before provision (benefit) for
income tax:

       Income (loss) from continuing operations before provision for income tax
was a loss of $18.2 million for the 2000 six months compared with income of
$12.8 million for the 1999 six months. For the 2000 three months and 1999 three
months, the pretax results were a loss of $14.8 million compared with income of
$2.0 million, respectively. The variances for both of the 2000 periods are due
mostly to the impairments on certain Technology-Related Business investments,
higher general and administrative expenses and the items in other income
(expenses) previously discussed.

       Net income (loss):

       Net income (loss) for the 2000 six months was a loss of $6 thousand
compared with net income of $8.2 million for the 1999 six months. For the 2000
six months, the results reflect the asset impairment provisions and higher
administrative and interest costs. These losses, net of associated tax benefit,
were almost entirely offset by the after tax gain from the sale of the gaming
machine route operations. For the 1999 six months, the $8.8 million after tax
gains associated with the Player's International, Inc. transactions represent
the majority of net income.

       For the three months ended December 31, 2000 and 1999, net income was
$2.4 million and $.9 million, respectively. The variance is due primarily to the
gain from the sale of discontinued operations, offset by asset impairments and
higher costs from continuing operations.

CAPITAL RESOURCES AND LIQUIDITY

       Liquidity:

       Cash and cash equivalents at December 31, 2000 were $46.1 million and
marketable securities were $15.4 million, providing the Company with $61.5
million of liquidity to support operations and continue its investment strategy.

       On October 29, 1996, J Net's Board of Directors authorized management to
repurchase up to 500,000 shares of J Net's common stock at prevailing market
prices. Subsequently, on January 22, 1998, such authorization was increased from
500,000 to 1,000,000 shares. From October 29, 1996 through December 31, 2000,
at total of 880,437 shares were repurchased.

       On January 4, 2001, the Board of Directors authorized the repurchase of
up to 1,000,000



                                      -24-
<PAGE>

shares of common stock under a new program.

       On October 12, 2000, J Net and InterWorld Corporation ("InterWorld")
entered into a definitive Securities Purchase Agreement (the "Purchase
Agreement"). Pursuant to the terms of the Purchase Agreement, J Net purchased
$20 million in aggregate principal amount of Series A Preferred Stock of
InterWorld (the "Series A Preferred Stock") on November 10, 2000. In addition,
on October 12, 2000, J Net, on behalf of Venture I, entered into a Loan
Assumption and Forbearance Agreement with Michael Donahue, Chairman of
InterWorld, pursuant to which J Net purchased from Salomon Smith Barney ("SSB")
a loan from SSB to Mr. Donahue in the amount of approximately $12,445,500. The
loan is secured by 4,270,406 shares of InterWorld common stock and other assets
of Mr. Donahue.

       As described previously, the Company has recently raised approximately
$28 million through the issuance of the Notes. As a result of the successful
completion of such financing, management believes the Company's working capital
will be sufficient to enable J Net to fund its $55 million commitment to Venture
I, and to meet its operating and other cash requirements for the year ending
June 30, 2001. With respect to the Company's $55 million commitment to Venture
I, the Company has invested approximately $32 million on behalf of Venture I as
of December 31, 2000.

       Cash Flows:

       J Net's principle sources of cash for the 2000 six months consisted of
the proceeds of $12.2 million received from the issuance of the Notes, its
available cash and cash equivalents and marketable securities which, at December
31, 2000, was $61.6 million. Net cash used in investing activities was $23.2
million for the 2000 six months, and consisted primarily of cash used of $42.3
million for investments in Technology-Related Businesses and notes receivable
offset by $35.9 million received from the sale of the route operations and $15.4
million invested in marketable securities.

       Recently Issued Accounting Standards:

       In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 clarifies existing accounting principles related to revenue
recognition in financial statements. The Company is required to comply with the
provisions of SAB 101 in its six months ending June 30, 2001. Based upon the
current nature of the Company's continuing operations, management does not
believe that SAB 101 will have a significant impact on the Company's results of
operations.

FACTORS WHICH MAY AFFECT FUTURE RESULTS

       With its change in business strategy, the Company will be operating in a
significantly different environment that involves a number of risks and
uncertainties. Some factors including, but not limited to the following, may
affect the Company's future results of operations: (1) the Company's ability to
successfully execute its new business model; (2) the development of the internet
and the infrastructure that supports it; (3) the Company's success may depend
greatly on increased use of the internet by businesses and individuals; (4) the
ability of the Company's investees to compete against direct and indirect
competitors; (5) the Company's ability to acquire interests in additional
Technology-Related Businesses; (6) the ability of the Company's



                                      -25-
<PAGE>

investees to raise additional capital; and (7) changes in the market for
securities of Technology-Related Businesses in general and for initial public
offerings of internet companies in particular.

       By their very nature, the entities in which the Company has and will be
investing capital will be in an earlier stage of development and maturity, and
therefore a different level of risk and reward. Except for the proposed
transactions with InterWorld Corporation (See Note 3 of Notes to Condensed
Consolidated Financial Statements), all of the Company's investments in
Technology-Related Businesses are in non public companies. Substantially all
such companies are development stage companies and are presently incurring
operating losses. There can be no assurance that such companies will generate
operating income in the future.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

       The Company is generally exposed to market risk from adverse changes in
interest rates. The Company's interest income is affected by changes in the
general level of U.S. interest rates. Changes in U.S. interest rates could
affect interest earned on the Company's cash equivalents, debt instruments and
money market funds. A majority of the interest earning instruments earn a fixed
rate of interest over short periods (7-35 days). Based upon the invested
balances at December 31, 2000, a 10% drop in interest rates would reduce pretax
interest income by approximately $360,000 per year. Therefore, the Company does
not anticipate that exposure to interest rate market risk will have a material
impact on the Company due to the nature of the Company's investments.

       From June 2000 through October 2, 2000, the Company raised approximately
$28 million from the issuance of unregistered 8% convertible subordinated notes
("the Notes"). The principal amount of the Notes is payable on March 31, 2007
and bears interest at 8% per annum, payable on a quarterly basis. For financial
statement purposes, certain of the Notes were deemed to have been beneficially
converted as the conversion feature was in-the-money at the commitment date.
The Company has calculated the beneficial conversion feature as the difference
between the fair value of the common stock at the commitment date and the
initial conversion price, multiplied by the number of shares into which the debt
is convertible. Approximately $3.9 million of the proceeds from issuance of the
Notes, equal to the intrinsic value, has been recorded as debt discount and
allocated to additional paid-in capital. Management believes that the carrying
value of the Notes approximates fair value as of December 31, 2000.

       On July 1, 2000, the Company adopted SFAS 133. As of December 31, 2000,
the Company has two derivative instruments in the form of warrants to purchase
common stock in a non public company and a public company. There is currently no
public market for these warrants. However, a 10% change in the value of the
warrants based upon the Company's valuation of the warrants using Black Scholes
valuation techniques would affect earnings by $185,000.



                                      -26-
<PAGE>

                           PART II. OTHER INFORMATION
                                    -----------------

Item 6.  Exhibits and Reports on Form 8-K

     (a) Exhibits:

         10.31      Stock Purchase Agreement by and between InterWorld
                    Corporation and J Net Enterprises, Inc. dated January 25,
                    2001. (A)

         10.32      Stand-By Purchase Agreement dated January 25, 2001. (A)

                    (A)     Incorporated by reference to the Registrants
                            Form 8-K filed February 2, 2001.

     (b) Reports on Form 8-K:

         During the three months ended December 31, 2000, J Net filed two
         reports on Form 8-K, dated December 1, 2000 and December 7, 2000,
         respectively. Prior to the issuance of this Form 10-Q, the Company
         filed a Form 8-K on January 18, 2001 and February 2, 2001. The Form
         filed on December 1, 2000 reported on Item 2 - Acquisition or
         Disposition of Assets regarding the definitive agreement to dispose of
         the Route Operations and the conditional modification of the agreement.
         The Form filed on December 6, 2000 reported on Item 5 - Other Events,
         the continued efforts of the Company to acquire InterWorld Corporation,
         the approval by the shareholders to change the name of the Company to J
         Net Enterprises, Inc. and the acquisition of shares by the Chief
         Executive Officer. The Form filed on January 18, 2001 reported on Item
         5, the Company's Board approval of a common stock buyback. The February
         2, 2001 form included the Stock Purchase Agreements and Stand-By
         Purchase Agreement pursuant to proposed transactions with InterWorld
         Corporation. The Agreements included on the February 2, 2001 Form 8-K
         are subject to approval by InterWorld's shareholders.

                                    SIGNATURE

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

                                         J NET ENTERPRISES, INC.
                                              (Registrant)

                                        By: /s/ Steven L. Korby
                                        ------------------------------
                                        STEVEN L. KORBY
                                        Executive Vice President and
                                        Chief Financial Officer

Date:  February 20, 2001


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