10-Q 1 a2030385z10-q.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2000. [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to _________. Commission File Number 333-62077 Jones International Networks, Ltd. Exact name of registrant as specified in charter Colorado #84-1470911 State of organization I.R.S. employer I.D.# 9697 East Mineral Avenue, Colorado 80112 Address of principal executive office (303) 792-3111 Registrant's telephone number Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 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 / / JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES INDEX

~~PAGE~~Page ~~----~~ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Jones International Networks, Ltd.: Unaudited Consolidated Statements of Financial Position as of December 31, 1999 and ~~June~~September 30, 2000.......................... 2 Unaudited Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 1999 and 2000.......~~...~~ 3 Unaudited Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 1999 and 2000.................~~...~~ 4 Notes to Unaudited Consolidated Financial Statements.................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......................... 15 PART II. OTHER INFORMATION Item 3. Quantitative and Qualitative Disclosures About Market Risk........... 26 Item 5. Other Materially Important Events.................................... 26 Item 6. Exhibits and Reports on Form 8-K..................................... 26

JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

~~DECEMBER~~December 31, ~~JUNE~~September 30, 1999 2000 ------------- ------------- CURRENT ASSETS: Cash and cash equivalents ......................................................~~................~~ $ 13,270,784 $ 11,~~395~~770,~~580~~176 Available for sale securities ..................................................~~................~~ 6,888,741 53,~~213~~118,~~405~~104 Accounts receivable, net of allowance for doubtful accounts of $1,192,818 and $12,~~773~~252,~~529~~587, respectively .....................................~~................~~ 14,049,008 14,~~457~~442,~~877~~097 Accounts receivable - -Jones International, Ltd. .................................~~...............~~ 382,221 -- Receivables from affiliates ....................................................~~................~~ 473,759 -- Prepaid expenses ...............................................................~~................~~ 284,863 ~~551~~518,~~656~~613 Other current assets ...........................................................~~................~~ 693,218 ~~862~~852,~~857~~180 ------------- ------------- Total current assets ......................................................~~................~~ 36,042,594 3230,~~481~~701,~~375~~170 ------------- ------------- Property and equipment, net ....................................................~~................~~ 22,959,104 21,~~369~~009,~~404~~339 Intangible assets, net .........................................................~~................~~ 63,642,270 63,~~857~~072,~~341~~268 Investment in affiliates .......................................................~~................~~ 309,117 33,000 Debt offering costs, net of accumulated amortization of $960,077 and $1,~~361~~548,~~669~~549, respectively .................................... 4,138,699 3,~~737~~550,~~107~~227 Deferred equity offering costs (Note 4) ........................................~~................~~ 240,859 ~~789,078~~-- Other non-current assets .......................................................~~................~~ 1,128,902 1,~~484~~586,~~340~~563 ------------- ------------- Total assets ..............................................................~~................~~ $ 128,461,545 $ ~~123~~119,~~751~~952,~~645~~567 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable--trade ........................................................~~................~~ $ 4,738,526 $ 45,~~798~~268,~~269~~348 Producers' fees payable ........................................................~~................~~ 5,307,947 5,~~068~~683,~~295~~332 Cable programming distribution payments payable ................................~~................~~ 3,236,996 1,~~352~~494,~~632~~276 Accrued liabilities and other current liabilities ..............................~~................~~ 2,328,858 23,~~335~~081,~~169~~200 Accounts payable--Jones International, Ltd. ....................................~~................~~ -- ~~367~~340,~~137~~118 Interest payable ...............................................................~~................~~ 5,875,000 52,~~875~~937,~~000~~500 Deferred revenues ..............................................................~~................~~ 1,309,155 1,~~898~~323,~~964~~832 ------------- ------------- Total current liabilities .................................................~~................~~ 22,796,482 2120,~~695~~128,~~466~~606 ------------- ------------- LONG-TERM LIABILITIES: Customer deposits and deferred revenues ........................................~~................~~ 581,700 ~~631~~613,~~799~~507 Other long-term liabilities ....................................................~~................~~ 602,791 ~~896~~1,~~610~~022,523 Senior secured notes ...........................................................~~................~~ 100,000,000 100,000,000 ------------- ------------- Total long-term liabilities ...............................................~~................~~ 101,184,491 101,~~528~~636,~~409~~030 ------------- ------------- MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES ...................................................~~................~~ 565,149 1,~~153~~224,~~567~~324 ------------- ------------- COMMITMENTS AND CONTINGENCIES (NOTE 5) COMMON STOCK SUBJECT TO PUT, Class A Common Stock, $.01 par value: 126,405 shares issued and outstanding, respectively ................................................... 1,213,488 1,213,488 ------------- ------------- SHAREHOLDERS' EQUITY (DEFICIT): Series A Preferred Stock, $.01 par value authorized, 1,918,000 shares authorized, issued and outstanding .....................................................~~.....~~ 23,975,000 23,975,000 Class A Common Stock, $.01 par value: 100,000,000 shares authorized; 5,268,521 and 5,313,312 shares issued and outstanding, respectively ......................~~...~~ 52,685 53,133 Class B Common Stock, $.01 par value: 2,231,400 shares authorized, issued and outstanding .........................................~~.................~~ 22,314 22,314 Additional paid-in capital .....................................................~~................~~ 27,588,370 28,259,787 Accumulated other comprehensive loss ...........................................~~................~~ (25,652) (136,~~078~~273) Accumulated deficit ............................................................~~................~~ (48,910,782) (5456,~~136~~553,~~441~~842) ------------- ------------- Total shareholders' equity (deficit) ......................................~~................~~ 2,701,935 (14,~~839~~249,~~285~~881) ------------- ------------- Total liabilities and shareholders' equity (deficit) ......................~~................~~ $ 128,461,545 $ ~~123~~119,~~751~~952,~~645~~567 ============= =============

The accompany notes to these unaudited consolidated financial statements are an integral part of these consolidated financial statements. 2 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

~~THREE~~Three ~~MONTHS~~Months ~~ENDED~~Ended ~~SIX~~Nine ~~MONTHS~~Months ~~ENDED~~Ended ~~JUNE~~September 30, ~~JUNE~~September 30, 1999 2000 1999 2000 ------------ ------------ ------------ ------------ Revenues, including revenues from affiliated entities of $1782,~~402~~211,~~086,~~ $~~813~~812,~~246~~324, $23,~~963~~745,~~658~~869 and $12,~~944~~756,~~041~~365, respectively (Note 2) .........................~~....~~ $ 1516,~~236~~862,~~612~~085 $ 2021,~~494~~679,~~341~~248 $ 2744,~~741~~604,~~949~~034 $ 4062,~~661~~340,~~243~~491 Operating expenses, including charges from affiliated entities of $1,~~802~~668,~~033~~900, $1,~~532~~633,~~783~~911, $45,~~016~~685,~~138~~038 and $34,~~222~~856,~~431~~342, respectively (Note 2): Operations ....................................~~................~~ 10,~~279~~925,~~121~~535 13,~~446~~813,~~124~~344 1930,~~808~~733,~~214~~749 2640,~~673~~487,~~922~~266 Selling and marketing .........................~~................~~ 1,~~274~~725,~~816~~932 2,~~673~~601,~~148~~114 24,~~627~~353,~~204~~136 57,~~021~~622,~~195~~309 General and administrative ....................~~................~~ ~~382~~299,~~695~~890 ~~352~~431,~~319~~120 ~~730~~1,~~942~~030,832 ~~896~~1,~~624~~327,744 Depreciation and amortization .................~~................~~ 12,~~980~~528,~~963~~424 3,~~587~~617,~~083~~242 36,~~970~~499,~~707~~131 610,~~980~~597,~~171~~413 ------------ ------------ ------------ ------------ Total operating expenses ....................~~................~~ 1315,~~917~~479,~~595~~781 20,~~058~~462,~~674~~820 2742,~~137~~616,~~067~~848 3960,~~571~~034,~~912~~732 ------------ ------------ ------------ ------------ OPERATING INCOME ................................~~................~~ 1,~~319~~382,~~017~~304 ~~435~~1,~~667 604~~216,~~882~~428 1,~~089~~987,~~331~~186 2,305,759 ------------ ------------ ------------ ------------ OTHER (INCOME) EXPENSE: Interest expense (Note 2) .....................~~................~~ 3,~~124~~325,~~380~~536 3,~~143~~124,~~338~~881 69,~~281~~606,~~030~~566 69,~~286~~411,~~677~~558 Interest income ...............................~~................~~ (~~245~~202,~~759~~473) (~~247~~239,~~801~~328) (~~523~~725,~~234~~707) (~~474~~713,~~176~~504) Equity in loss (income) of subsidiaries .......~~................~~ (5129,~~816~~444) ~~31,097~~-- (5685,~~002~~446) (2,225) ~~Other~~Write-off ~~expense~~of ~~(income)~~equity offering costs ............ -- 725,128 -- 725,128 Other expense (income) ........................~~....~~ 5440,~~320~~845 (~~118~~51,~~188~~219) 5899,~~500~~345 (~~128~~179,~~451~~670) ------------ ------------ ------------ ------------ Total other expense, net ....................~~................~~ 23,~~881~~134,~~125~~464 23,~~808~~559,~~446~~462 58,~~760~~894,~~294~~758 59,~~681~~241,~~825~~287 ------------ ------------ ------------ ------------ LOSS BEFORE INCOME TAXES AND MINORITY INTEREST .........................~~................~~ (1,~~562~~752,~~108~~160) (2,~~372~~343,~~779~~034) (56,~~155~~907,~~412~~572) (46,~~592~~935,~~494~~528) Income tax provision ..........................~~................~~ ~~460~~391,618 123,~~247~~610 19411,~~923~~541 4448,~~747~~357 ------------ ------------ ------------ ------------ LOSS BEFORE MINORITY INTEREST ...................~~................~~ (12,~~562~~143,~~568~~778) (2,~~385~~346,~~026~~644) (57,~~175~~319,~~335~~113) (46,~~637~~983,~~241~~885) Minority interest in net income (loss) of consolidated subsidiaries ................~~................~~ ~~395~~165,~~398~~001 ~~262~~70,~~053~~757 ~~445~~610,751 ~~588~~659,~~418~~175 ------------ ------------ ------------ ------------ NET LOSS ........................................~~................~~ $ (12,~~957~~308,~~966~~779) $ (2,~~647~~417,~~079~~401) $ (57,~~621~~929,~~086~~864) $ (57,~~225~~643,~~659~~060) ============ ============ ============ ============ ADJUSTMENTS TO ARRIVE AT COMPREHENSIVE INCOME (LOSS) ..................................~~...............~~ (254,~~186~~495) ~~10,824~~ (306,~~858~~805) 1226,~~574~~363 (19,379) ------------ ------------ ------------ ------------ COMPREHENSIVE ~~INCOME~~LOSS (~~LOSS~~INCOME) .....................~~................~~ $ (12,~~983~~304,~~152~~284) $ (2,~~636~~410,~~255~~596) $ (57,~~651~~956,~~944~~227) $ (57,~~213~~623,~~085~~681) ============ ============ ============ ============ NET LOSS PER COMMON SHARE: Basic .........................................~~................~~ $ (0.2630) $ (0.3532) $ (01.7404) $ (01.6800) ============ ============ ============ ============ Fully diluted .................................~~................~~ $ (0.2630) $ (0.3532) $ (01.7504) $ (01.6900) ============ ============ ============ ============ WEIGHTED AVERAGE COMMON SHARES: Basic .........................................~~................~~ 7,~~620~~625,~~204~~149 7,671,117 7,~~615~~618,~~258~~555 7,~~656~~661,~~187~~163 ============ ============ ============ ============ Fully diluted .................................~~................~~ 7,~~580~~586,~~549~~498 7,630,531 7,~~575~~592,~~603~~788 7,~~615~~620,~~601~~577 ============ ============ ============ ============

The accompany notes to these unaudited consolidated financial statements are an integral part of these consolidated financial statements. 3 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~FOR~~For ~~THE~~the ~~SIX~~Nine ~~MONTHS~~Months ~~ENDED~~Ended ~~JUNE~~September 30, 1999 2000 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss .................................................................~~....~~ $ (57,~~621~~929,~~086~~864) $ (57,~~225~~643,~~659~~060) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation and amortization ..........................................~~....~~ 36,~~970~~499,~~707~~131 610,~~980~~597,~~171~~413 Amortization of debt offering costs ....................................~~....~~ ~~368~~555,~~484~~365 ~~401~~588,~~592~~472 Distributions received .................................................~~....~~ -- 405,992 Equity in income of subsidiaries .......................................~~....~~ (5685,~~002~~446) (2,225) Gain on distributions from affiliates ..................................~~....~~ -- (142,650) Write-off of ~~software~~deferred equity offering costs ............................ -- 725,128 Write-off of software .................................................. -- 65,380 Minority interest in net income of consolidated subsidiaries ...........~~....~~ ~~445~~610,751 ~~588~~659,~~418~~175 Net change in assets and liabilities: Decrease (increase) in receivables ....................................~~....~~ 271,~~196~~425,349 (~~408~~393,~~869~~089) Decrease (increase) in receivables from affiliates ....................~~....~~ (~~227~~332,~~255~~841) 473,759 ~~Increase~~Decrease (increase) in prepaid expenses and other current assets ......~~...............~~ ~~(927)~~104,604 (~~548~~461,~~026~~002) Decrease in tax benefit receivable from Jones International, Ltd. .....~~....~~ 1,338,402 -- Increase in other assets ..............................................~~....~~ (~~320~~358,~~195~~894) (1837,~~315~~929) Increase (decrease) in accounts payable ...............................~~....~~ 1,797,194 (~~144~~295,~~288~~362) ~~59,743~~Increase ~~Decrease~~(decrease) in producers' fees payable ........................~~...............~~ (~~395~~582,~~985~~472) ~~(239~~375,~~652)~~385 Increase (decrease) in accounts payable to Jones International, Ltd. ..~~....~~ (~~557~~1,~~607~~070,143) ~~749~~722,~~358~~339 ~~Increase~~Decrease in interest payable ..........................................~~....~~ ~~293~~(2,643,750) --(2,937,500) Increase in deferred revenues .........................................~~....~~ ~~458~~784,~~929~~796 ~~589~~14,~~809~~677 ~~Decrease~~Increase (decrease) in accrued and other liabilities ..................~~...............~~ (~~162~~939,~~371~~302) ~~(226~~752,~~289)~~342 Increase in customer deposits .........................................~~....~~ 1349,~~722~~910 5031,~~099~~807 ------------ ------------ Net cash provided by (used in) operating activities ..................~~....~~ (~~568~~777,~~775~~210) 3,~~552~~499,~~636~~052 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment .......................................~~....~~ (~~441~~587,~~905~~612) (12,~~221~~226,~~080~~400) ~~Purchase~~Proceeds from/ purchase of available for sale securities .................~~...................~~ (31,~~197~~673,~~232~~837) --3,790,016 ~~Proceeds~~Cable ~~from~~programming ~~the~~distribution ~~sale~~agreements ofpayments ~~available for sale securities~~ ....................... --(3,760,873) 1(5,~~687~~281,~~910~~109) ~~Cable~~Purchases ~~programming~~of ~~distribution~~intangible ~~agreements~~assets ~~payments~~and programming ........................... (2430,~~143,281~~154) (4812,~~850,267~~898) ~~Purchases~~Distributions of ~~intangible~~capital ~~assets~~from ~~and~~affiliates ~~programming~~ ................................. ~~(352,432)~~-- ~~(743~~15,~~784)~~000 ~~Distributions~~Purchase of ~~capital~~Broadcast ~~from~~Programming ~~affiliates~~ ........................................ (20,860,131) -- ~~15,000~~ ------------ ------------ Net cash used in investing activities ................................~~.....~~ (627,~~134~~312,~~850~~607) (54,~~112~~515,~~221~~391) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of Series A Preferred Equity ...................... 20,100,000 -- Payments for equity offering costs .......................................~~....~~ -- (~~315~~484,~~619~~269) ------------ ------------ Net cash provided by (used in) financing activities ..................~~...................~~ --20,100,000 (~~315~~484,~~619~~269) ------------ ------------ DECREASE IN CASH AND CASH EQUIVALENTS ......................................~~....~~ (67,~~703~~989,~~625~~817) (1,~~875~~500,~~204~~608) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .............................~~....~~ 20,654,013 13,270,784 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD ...................................~~....~~ $ 1312,~~950~~664,~~388~~196 $ 11,~~395~~770,~~580~~176 ------------ ------------ SUPPLEMENTAL CASH FLOW DISCLOSURES: Class A Common Stock issued for GAC equity agreement ..................... $ 142,428 $ -- ============ ============ ~~SUPPLEMENTAL CASH FLOW DISCLOSURES:~~ Class A Common Stock issued for radio programs ...........................~~....~~ $ -- $ 671,865 ============ ============ Interest paid ............................................................~~....~~ $ 511,~~590~~456,~~986~~250 $ 511,~~875~~750,000 ============ ============ Income tax paid ..........................................................~~....~~ $ 19411,~~923~~541 $ 4448,~~747~~357 ============ ============

The accompany notes to these unaudited consolidated financial statements are an integral part of these consolidated financial statements. 4 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This Form 10-Q is being filed by Jones International Networks, Ltd. and its subsidiaries (the "Company"). The accompanying consolidated statements of financial position as of December 31, 1999 and September 30, 2000, the consolidated statements of operations for the three and nine months ended September 30, 1999 and 2000, and the statements of cash flows for the nine months ended September 30, 1999 and 2000, are unaudited. This Form 10-Q is being filed in conformity with the SEC requirements for unaudited financial statements and does not contain all of the necessary footnote disclosures required for a complete presentation of the consolidated statements of financial position, consolidated statements of operations and consolidated statements of cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, these statements include all adjustments, consisting of normal recurring accruals, necessary for the fair presentation of results for these interim periods. The results of operations for the nine months ended September 30, 2000 are not necessarily indicative of results to be expected for the entire year, or for any other interim period. COMPREHENSIVE LOSS (INCOME)--Adjustments to comprehensive loss (income) represent the net change in unrealized losses (gains) on available for sale securities. USE OF ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS--Certain prior period amounts have been reclassified to conform to the current presentation. (2) TRANSACTIONS WITH AFFILIATED ENTITIES The Company is a subsidiary of Jones International, Ltd. ("Jones International"), a holding company with ownership in several companies involved in various industries. Jones International is wholly owned by the Company's Chairman, Glenn R. Jones, who is Chairman and Chief Executive Officer of Jones International and various of its subsidiaries. Certain officers or directors of the Company are also officers or directors of these affiliated entities and, from time to time, the Company may have transactions with these entities. Certain expenses are paid by affiliated entities on behalf of the Company and are allocated at cost based on specific identification or other methods which management believes are reasonable. Principal recurring transactions with affiliates, excluding Galactic/Tempo, d/b/a Superaudio ("Superaudio") and Jones Capstar Programming, LLC ("Jones/Capstar"), are described below. REVENUES--The Company earns up to a three percent commission on the sale of airtime for informational programming on an affiliated network. As a result of the related party ceasing its distribution efforts in the last quarter of 1999, this service was terminated in September 1999. For the three and nine months ended September 30, 1999, the Company received approximately $33,000 and $121,000, respectively, for this service. The Company distributes its Great American Country network programming to certain cable television systems owned or managed by Jones Intercable, Inc. ("Jones Intercable"). Since April 7, 1999, Jones Intercable has not been an affiliate of the Company due to the sale of Mr. Jones' interest in Jones Intercable. Jones Intercable, through its new parent, has continued to pay the Company programming license fees subsequent to the sale of Mr. Jones' interest in Jones Intercable. For the three and nine months ended in September 30, 1999, Jones Intercable and it's affiliated partnerships paid total license fees to the Company of approximately $0 and $322,000, respectively, for this programming service. Jones Earth Segment, Inc. ("Earth Segment"), a wholly owned subsidiary of the Company, provides playback, editing, duplication, trafficking and uplinking services to its cable programming network affiliates, to an affiliated entity and to third parties. This affiliated entity terminated its use of certain earth station services provided by Earth Segment in March 2000. Earth Segment charges affiliates for its services using rates which are calculated to achieve a specified rate of return on its investment to Earth Segment. For the three months ended September 30, 1999 and 2000, Jones International and its affiliates paid satellite delivery and production support fees to the Company of approximately $381,000 and $427,000, respectively, for these services. 5 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) For the nine months ended September 30, 1999 and 2000, Jones International and its affiliates paid satellite delivery and production support fees to the Company of approximately $2,197,000 and $1,601,000, respectively, for these services. In addition, Jones Space Holdings, Inc. ("Space Holdings"), a subsidiary of the Company, subleases a non-preemptible satellite transponder to an affiliate of International. For the three months ended September 30, 1999 and 2000, the Company received satellite transponder lease revenues of approximately $368,000 and $385,000, respectively, for this service. For the nine months ended September 30, 1999 and 2000, the Company received satellite transponder lease revenues of approximately $1,106,000 and $1,155,000, respectively, for this service. OPERATING EXPENSES--The Product Information Network Venture, ("PIN Venture") pays out a significant portion of the revenues generated by its infomercial programming in the form of system rebates to cable systems which enter into agreements to air such programming. The PIN Venture has continued to pay rebates to Jones Intercable (and its affiliated partnerships) subsequent to the change in the ownership described above. For the three months ended September 30, 1999, the PIN Venture paid Jones Intercable (and its affiliated partnerships) and Cox Communications rebates of approximately $714,000. For the nine months ended September 30, 1999, the PIN Venture paid rebates to Jones Intercable (and its affiliated partnerships) and Cox Communications of approximately $2,654,000. For the three months ended September 30, 2000, the PIN Venture paid rebates to Cox Communications of approximately $937,000. For the nine months ended September 30, 2000, the PIN Venture paid rebates to Cox Communications of approximately $2,777,000. Jones Network Sales ("JNS"), a wholly owned subsidiary of Jones International, provided certain affiliate sales and marketing services to the Company. As a result of an affiliated entity ceasing operations, such affiliate sales and marketing functions have been incorporated into the operations of the Company starting in January 2000. For the three and nine months ended September 30, 1999, the Company paid JNS approximately $318,000 and $1,020,000, respectively, for these services. Galactic Radio, Inc. ("Galactic Radio"), a wholly owned subsidiary of the Company, had a transponder lease agreement with Jones Satellite Holdings, Inc. ("Satellite Holdings"), an affiliate of Jones International, for the use of the sub-carriers on a non-preemptible satellite transponder. This agreement allowed Galactic Radio to use a portion of the transponder to distribute its audio programming. Galactic Radio terminated this agreement on January 31, 2000. For the three months ended September 30, 1999, the Company paid Satellite Holdings approximately $174,000 for this service. For the nine months ended September 30, 1999 and 2000, the company paid Satellite Holdings approximately $522,000 and $58,000, respectively, for this service. The Company leases and subleases office space in Englewood, Colorado from affiliates of Jones International. For the three months ended September 30, 1999 and 2000, the Company paid these affiliates approximately $74,000 and $134,000, respectively, for rent and associated expenses. For the nine months ended September 30, 1999 and 2000, the Company paid $144,000 and $373,000, respectively, for rent and associated expenses. An affiliate of Jones International charged the Company approximately $11,000 during the nine months ended September 30, 2000 for the allocated costs of its airplane which was used by the Company in connection with a proposed equity offering. An affiliate of Jones International provides computer hardware and software support services to the Company. For the three months ended September 30, 1999 and 2000, the Company paid the affiliate approximately $165,000 and $335,000, respectively, for such services. For the nine months ended September 30, 1999 and 2000, the Company paid approximately $575,000 and $1,025,000, respectively, for such services. The Company and its consolidated subsidiaries reimburse Jones International and its affiliates for certain allocated administrative expenses. These expenses generally consist of salaries, related benefits and other related costs. Allocations of personnel costs are generally based on actual time spent by affiliated associates with respect to the Company. For the three months ended September 30, 1999 and 2000, the Company reimbursed Jones International and its affiliates approximately $224,000 and $228,000, respectively. For the nine months ended September 30, 1999 and 2000, the Company reimbursed Jones International and its affiliates approximately $770,000 and $612,000, respectively. 6 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) To assist funding its operating and investing activities in the past, the Company had borrowed funds from Jones International. Jones International's interest rate was calculated using the published prime rate plus two percent. Jones International charged interest on its advances to the Company at rates of approximately 10 percent per annum for the nine months ended September 30, 1999. For the three and nine months ended September 30, 1999, the Company paid Jones International interest of approximately $0 and $38,000, respectively. In the first quarter of 1999, Jones International elected to repay the income tax benefit receivable of approximately $1,335,000 through a reduction of the intercompany balance between the Company and Jones International. The remaining intercompany balance of approximately $255,000 was repaid in April 1999. In the normal course of business, Jones International (1) remits funds on behalf of the Company to third parties and affiliates in payment of products and services purchased by the Company, and (2) receives funds on behalf of the Company in payment for products and services provided by the Company. Starting in April 1999, these amounts are generally reimbursed from or to Jones International on a monthly basis. Outstanding payable to Jones International and related parties at September 30, 2000 was $340,000. (3) NET LOSS PER COMMON SHARE Basic earnings per share ("EPS") is computed by dividing the net earnings applicable to common shares by the weighted average of common shares outstanding during the period. Diluted EPS adjusts the basic weighted average of common shares outstanding by the assumed conversion of shares subject to put in the periods in which such effect would have been dilutive. Prior period amounts have been adjusted to reflect the effect of the 5-for-4 stock split which was effective on January 28, 2000. The table below presents a reconciliation of weighted average shares used in the calculation of basic and diluted EPS:

For the Three Months For the ~~Six~~Nine Months Ended ~~June~~September 30, Ended ~~June~~September 30, ------------------------~~-------~~ ------------------------~~---------~~ 1999 2000 1999 2000 ---------~~-----~~ ---------~~---~~ ---------~~----~~ ---------~~-------~~ Weighted average shares for basic EPS ....... 7,~~620~~625,~~204~~149 7,671,117 7,~~615~~618,~~258~~555 7,~~656~~661,~~187~~163 Less: shares subject to put ................. 3938,~~655~~651 40,586 3925,~~655~~767 40,586 ---------~~-----~~ ---------~~---~~ ---------~~----~~ ---------~~------~~ Weighted average shares for diluted EPS ..... 7,~~580~~586,~~549~~498 7,630,531 7,~~575~~592,~~603~~788 7,~~615~~620,~~601~~577 =========~~=====~~ =========~~===~~ =========~~====~~ =========~~======~~

(4) DEFERRED EQUITY OFFERING COSTS The Company incurred approximately $0.7 million in deferred equity offering costs relating to an attempted initial public offering commenced by the Company in late 1999. Deferred equity offering costs consist primarily of financial printing, legal counsel, independent public accountants, regulatory and stock exchange registration fees, and other various costs associated with the offering. As a result of the Company's withdraw of this proposed equity offering, the Company has expensed all deferred equity offering costs relating to this equity offering. All of such costs were expensed in the third quarter of 2000. (5) COMMITMENTS AND CONTINGENCIES EQUITY AGREEMENT--In the first quarter of 1998, Great American Country and the Company entered into an equity affiliate agreement with a multiple cable system operator ("MSO"). Pursuant to the terms of such agreement, the Company agreed to issue shares of Class A Common Stock to the MSO in return for the MSO providing Great American Country's programming to no less than 500,000 of its subscribers by December 31, 1998. Because of a put option granted to the MSO, the shares issued to that MSO are presented separate from the Shareholders' Deficit section of the Statements of Financial Position. The amount of accretion from the value of the shares issued to the put option at the exercise date is not significant. The MSO was granted a put option on the stock issued, whereby, if as of December 31, 2001, the Company or its successor has not completed a public offering of its securities, the MSO would have the option within 60 days of such date to require the Company to buy back its Class A Common Stock at a price equal to all or a portion of the license fees that would have been paid during the period between the date of the agreement and the exercise date of the put option. The purchase price would be based on the total number of MSO subscribers receiving the Great American Country service as of December 31, 1998. Based on the cumulative amount of license fees received for the Great American Country service from the inception of the agreement, the 7 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) estimated purchase price of the Class A Common Stock in the event the put option is exercised would be approximately $1,030,000. (6) UNAUDITED CONDENSED CONSOLIDATING FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS In 1998, the Company issued $100 million of Senior Secured Notes (the "Notes"). The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the following wholly-owned subsidiaries of the Company: JPN, Inc., Jones Direct, Ltd., Jones Space Holdings, Inc., Jones Earth Segment, Inc., Jones Infomercial Networks, Inc., Jones Radio Holdings, Inc., Great American Country, Inc., Jones Galactic Radio, Inc., Jones Infomercial Network Ventures, Inc., Jones Galactic Radio Partners, Inc., Jones Radio Network, Inc., Jones Audio Services, Inc., Jones Radio Network Ventures, Inc., MediaAmerica, Inc., Jones Broadcast Programming, Inc., MAI Radio, Inc., Jones MatchMedia, Inc., and Jones/Owens Radio Programming LLC (collectively, the "Subsidiary Guarantors"). The only existing subsidiary of the Company that did not guarantee the Notes is the PIN Venture (the "Non-Guarantor Subsidiary"). Superaudio and Jones/Capstar were subsidiaries of the Company that did not guarantee the Notes. Superaudio ceased distributing its programming and all other operating activities on January 31, 2000. Jones Radio Network, Inc. purchased all Jones/Capstar assets on April 1, 2000 and now produces and distributes its programming. Assets and liabilities that were transferred to Jones Radio Network, Inc. are now reported under the "Subsidiary Guarantors." The Company has not provided separate complete financial statements and other disclosures of the respective Subsidiary Guarantors because management has determined that such information is not material to investors. There are no significant contractual restrictions on distributions from each of the Subsidiary Guarantors to the Company. Investments in subsidiaries are required to be accounted for by investors using the equity method for purposes of the supplemental condensed consolidating financial statement presentation. Under this method, investments are recorded at cost and adjusted for the investor company's ownership share of the subsidiaries' cumulative results of operations. In addition, investments increase by the amount of contributions to subsidiaries and decrease by the amount of distributions from subsidiaries. The elimination entries eliminate the equity method accounting for the investment in subsidiaries and the equity in earnings of subsidiaries, intercompany payables and receivables and other transactions between subsidiaries including contributions and distributions. Sections 13 and 15(d) of the Securities Exchange Act of 1934 require presentation of the following supplemental condensed consolidating financial statements. Presented below is unaudited condensed consolidating financial information for the Company and its subsidiaries as of and for the nine months ended September 30, 1999 and 2000. 8 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999: (IN THOUSANDS)

~~NON~~Non- ~~THE~~The ~~SUBSIDIARY~~Subsidiary ~~GUARANTOR~~Guarantor ~~ELIMINATION~~Elimination ~~COMPANY~~Company ~~GUARANTORS~~Guarantors ~~SUBSIDIARIES~~Subsidiaries ~~ENTRIES~~Entries ~~REPORTED~~Reported --------~~----~~ ------------ ------------ ------------ --------~~----~~ Revenues .............................................. $ -- $ 1829,~~023~~959 $ 1015,~~485~~819 $ (~~766~~1,174) $ 2744,~~742~~604 Operating expenses: Operations ....................................... -- 1117,~~433~~892 914,~~141~~016 (~~766~~1,174) 1930,~~808~~734 Selling and marketing ............................ -- 23,~~287~~901 ~~340~~452 -- 24,~~627~~353 General and administrative ....................... ~~731~~1,031 -- -- -- ~~731~~1,031 Depreciation and amortization .................... 35 36,~~916~~428 5266 -- 36,~~971~~499 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total operating expenses .................... ~~734~~1,036 1728,~~636~~221 914,~~533~~534 (~~766~~1,174) 2742,~~137~~617 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ OPERATING INCOME (LOSS) .......................... (~~734~~1,036) ~~387~~1,738 ~~952~~1,285 -- ~~605~~1,987 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ OTHER EXPENSE (INCOME): Interest expense ................................. 69,~~281~~607 -- -- -- 69,~~281~~607 Interest income .................................. (~~428~~568) (4167) (5491) -- (~~523~~726) Equity share of loss (income) of subsidiaries .... (12,~~018~~239) ~~1,630~~865 (5685) ~~(612)~~1,374 (5685) Other expense (income), net ...................... 5294 53 12 -- 5899 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total other expense (income) ................ 46,~~887~~894 ~~1,594~~801 (~~109~~174) ~~(612)~~1,374 58,~~760~~895 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Income (loss) before income taxes and minority interest .........................~~...~~ (57,~~621~~930) (937 1,~~207)~~459 (1,~~061~~374) ~~612~~ (56,~~155~~908) Income tax provision ............................. -- 19411 1-- -- 20411 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Income (loss) before minority interest ........... (57,~~621~~930) (526 1,~~226)~~459 (1,~~060~~374) ~~612~~ (57,~~175~~319) Minority interest in net loss of consolidated subsidiaries ..................... -- --(3) -- ~~446~~614 ~~446~~611 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ NET INCOME (LOSS) ..................................... $ (57,~~621~~930) $ ~~(1,226)~~529 $ 1,~~060~~459 $ ~~166~~(1,988) $ (57,~~621~~930) ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~

UNAUDITED CONDENSED CONSOLIDATING CASH FLOWS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999: (IN THOUSANDS)

9 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF FINANCIAL POSITION - AS OF SEPTEMBER 30, 2000: (IN THOUSANDS)

~~NON~~Non- ~~THE~~The ~~SUBSIDIARY~~Subsidiary ~~GUARANTOR~~Guarantor ~~ELIMINATION~~Elimination ~~COMPANY~~Company ~~GUARANTORS~~Guarantors ~~SUBSIDIARIES~~Subsidiaries ~~ENTRIES~~Entries ~~REPORTED~~Reported --------~~----~~ ------------ ------------ ------------ --------~~----~~ ASSETS: Cash and cash equivalents ........................ $ 63,~~358~~604 $ ~~984~~4,601 $ 43,~~054~~565 $ -- $ 11,~~396~~770 Available for sale securities .................... 42,~~310~~216 -- ~~903~~902 -- 53,~~213~~118 Accounts receivable, net ......................... -- 14,~~099~~333 ~~359~~109 -- 14,~~458~~442 Other current assets ............................. 5679 1,~~252~~164 ~~107~~128 -- 1,~~415~~371 ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Total current assets ................... 105,~~724~~899 1620,~~335~~098 54,~~423~~704 -- 3230,~~482~~701 ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Property and equipment ........................... 1132 20,~~992~~592 ~~366~~385 -- 21,~~369~~009 Intangible assets ................................ 3,~~747~~560 6059,~~109~~510 1 -- 63,~~857~~071 Other long-term assets ........................... 3234,~~977~~050 (2527,~~488~~347) -- (1,~~445~~532) 65,~~044~~171 ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Total assets ........................... $ 4743,~~459~~541 $ 7172,~~948~~853 $ 5,~~790~~090 $ (1,~~445~~532) $ ~~123~~119,~~752~~952 =========~~===~~ =========~~===~~ =========~~===~~ =========~~===~~ =========~~===~~ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT): Accounts payable ................................. $ ~~773~~555 $ 23,~~559~~189 $ 1,~~466~~524 $ -- $ 45,~~798~~268 Producers' fees payable .......................... -- 5,~~068~~684 -- -- 5,~~068~~684 Accrued liabilities .............................. 63,~~239~~361 34,~~252~~373 7292 -- 97,~~563~~826 Other current liabilities ........................ (5958,~~824~~360) 6058,~~418~~974 ~~1,673~~737 -- 21,~~267~~351 ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Total current liabilities .............. (5254,~~812~~444) 7172,~~297~~220 32,~~211~~353 -- 2120,~~696~~129 ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Senior secured notes ............................. 100,000 -- -- -- 100,000 Other long-term liabilities ...................... ~~897~~1,022 ~~631~~614 -- -- 1,~~528~~636 ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Total long-term liabilities ............ ~~100~~101,~~897~~022 ~~631~~614 -- -- 101,~~528~~636 ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Minority interest ................................ -- -- -- 1,~~154~~224 1,~~154~~224 Class A Common Stock subject to put .............. 1,213 -- -- -- 1,213 Shareholders' equity (deficit): Series A Preferred Stock .................... 23,975 -- -- -- 23,975 Class A Common Stock ........................ 53 -- -- -- 53 Class B Common Stock ........................ 22 -- -- -- 22 General Partners' Contributions ............. -- -- 350 (350) -- Additional paid-in capital .................. 28,260 -- -- -- 28,260 Accumulated other comprehensive income ...... (136) -- -- -- (136) Retained earnings (deficit) ................. (5456,~~136~~554) 2019 2,~~229~~387 (2,~~249~~406) (5456,~~136~~554) ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Total shareholders' ~~investment~~equity (deficit) ............. (14,~~839~~250) 2019 2,~~579~~737 (2,~~599~~756) (14,~~839~~250) ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Total liabilities and shareholders' equity (deficit) .................... $ 4743,~~459~~541 $ 7172,~~948~~853 $ 5,~~790~~090 $ (1,~~445~~532) $ ~~123~~119,~~752~~952 =========~~===~~ =========~~===~~ =========~~===~~ =========~~===~~ =========~~===~~

10 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000: (IN THOUSANDS)

~~NON~~Non- ~~THE~~The ~~SUBSIDIARY~~Subsidiary ~~GUARANTOR~~Guarantor ~~ELIMINATION~~Elimination ~~COMPANY~~Company ~~GUARANTORS~~Guarantors ~~SUBSIDIARIES~~Subsidiaries ~~ENTRIES~~Entries ~~REPORTED~~Reported --------~~----~~ ------------ ------------ ------------ --------~~----~~ Revenues .............................................. $ -- $ 2844,~~463~~691 $ 1318,~~068~~954 $ (~~870~~1,305) $ 4062,~~661~~340 Operating expenses: Operations ....................................... -- 1624,~~274~~974 1116,~~270~~819 (~~870~~1,305) 2640,~~674~~488 Selling and marketing ............................ -- 46,~~569~~959 ~~452~~663 -- 57,~~021~~622 General and administrative ....................... ~~897~~1,328 -- -- -- ~~897~~1,328 Depreciation and amortization .................... 48 610,~~910~~485 66104 -- 610,~~980~~597 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total operating expenses .................... ~~901~~1,336 2742,~~753~~418 1117,~~788~~586 (~~870~~1,305) 3960,~~572~~035 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ OPERATING INCOME (LOSS) .......................... (~~901~~1,336) ~~710~~2,273 1,~~280~~368 -- 12,~~089~~305 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ OTHER EXPENSE (INCOME): Interest expense ................................. 69,~~286~~410 --2 -- -- 69,~~286~~412 Interest income .................................. (~~300~~428) (76118) (98168) -- (~~474~~714) Equity share of loss (income) of subsidiaries .... (13,~~672~~411) 24,~~397~~223 -- (~~727~~814) (2) Other expense (income), net ...................... 11736 (~~201~~253) 62 -- ~~(128)~~545 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total other expense (income) ................ 46,~~325~~307 23,~~120~~854 (36106) (~~727~~814) 59,~~682~~241 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Income (loss) before income taxes and minority interest .............................. (57,~~226~~643) (1,~~410~~581) 1,~~316~~474 ~~727~~814 (46,~~593~~936) Income tax provision ............................. -- 4447 1 -- 4548 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Income (loss) before minority interest ........... (57,~~226~~643) (1,~~454~~628) 1,~~315~~473 ~~727~~814 (46,~~638~~984) Minority interest in net loss of consolidated subsidiaries ...................... -- -- -- ~~588~~659 ~~588~~659 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ NET INCOME (LOSS) ..................................... $ (57,~~226~~643) $ (1,~~454~~628) $ 1,~~315~~473 $ ~~139~~155 $ (57,~~226~~643) ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~

UNAUDITED CONDENSED CONSOLIDATING CASH FLOWS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000: (IN THOUSANDS)

11 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (7) REPORTABLE SEGMENTS The Company has six reportable segments: radio programming syndication, cable television programming, Internet programming content, Internet advertising sales services, satellite services and general and administrative. The Company's reportable segments have been determined in accordance with the Company's internal management structure. The Company evaluates performance based on many factors; one of the primary measures is EBITDA. EBITDA represents operating income (loss) plus depreciation and amortization minus the EBITDA attributable to the minority interest in the PIN Venture, a consolidated 55.3%-owned subsidiary. The following tables set forth the Company's financial results by business segments. The presentation of reportable segments has been changed from that presented in prior periods to (1) reflect the Internet programming content segment and Internet advertising sales services segment and (2) combine radio programming and radio advertising sales services segments into the radio programming syndication segment. The Company has also added the presentation of segment EBITDA. Management believes that this presentation provides a more meaningful analysis of the Company's business segments. EBITDA of the cable television programming segment excludes EBITDA attributable to the minority interest in the PIN Venture. The prior year's results have been reclassified to conform to the new presentation.

Three Months Ended ~~Six~~Nine Months Ended ~~June~~September 30, ~~June~~September 30, Revenues: 1999 2000 1999 2000 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ (in thousands) ~~Programming~~Radio ~~content:~~programming ~~Radio~~syndication ............~~.......................~~ $ 38,~~906~~085 $ 810,~~232~~609 $ 618,~~865~~808 $ 1531,~~648~~216 Cable television ......................... 6,~~846~~587 7,~~902~~850 1219,~~642~~229 1624,~~141~~839 Internet programming content .............~~...................~~ -- 1839 -- 4382 ~~Programming~~Internet ~~support~~advertising ~~services: Advertising~~ sales services ......~~........~~ ~~2,282~~-- 31,~~031~~505 ~~3,858~~-- 51,~~808~~506 Satellite services ....................... 2,~~203~~190 1,~~311~~676 46,~~377~~567 34,~~021~~697 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total revenues ......................... $ 1516,~~237~~862 $ 2021,~~494~~679 $ 2744,~~742~~604 $ 4062,~~661~~340 ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~ EBITDA: ~~Programming~~Radio ~~content:~~programming ~~Radio~~syndication ............~~.......................~~ $ ~~657~~2,056 $ 2,~~456~~483 $ ~~387~~2,690 $ 47,~~437~~931 Cable television ......................... ~~771~~468 788 1,~~100~~446 ~~978 2~~3,~~216~~131 Internet programming content .............~~...................~~ --(175) (~~641~~600) --(175) (1,~~104~~704) ~~Programming~~Internet ~~support~~advertising ~~services: Advertising~~ sales services ......~~........~~ ~~412~~-- ~~273~~1,065 ~~247~~-- ~~757~~684 Satellite services ....................... 1,~~842~~861 1,~~188~~528 35,~~695~~556 24,~~660~~188 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Segment EBITDA ........................... ~~3,682~~ 4,~~376~~210 5,~~307~~264 89,~~966~~517 14,230 Reconciliation to operating income ~~(loss)~~: General and administrative - Corporate ...~~................~~ ~~382~~(300) ~~353~~(430) ~~731~~(1,031) ~~897~~(1,328) Depreciation and amortization ............~~....~~ 1(2,~~981~~528) (3,~~587~~617) 3(6,~~971~~499) 6(10,~~980~~597) --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total operating income ~~(loss)~~ ................ $ 1,~~319~~382 $ ~~436~~1,217 $ ~~605~~1,987 $ 12,~~089~~305 ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~

12 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Three Months Ended ~~Six~~Nine Months Ended ~~June~~September 30., ~~June~~September 30, 1999 2000 1999 2000 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ (in thousands) Reconciliation of segment EBITDA to total EBITDA: Segment total ...................................... $ 34,~~682~~210 $ 45,~~376~~264 $ 59,~~307~~517 $ 814,~~966~~230 General and administrative - Corporate .............~~..........~~ (~~382~~300) (~~353~~430) (~~731~~1,031) (~~897~~1,328) Less: EBITDA minority interest ..................... ~~404~~(162) ~~252~~(56) ~~462~~(624) ~~602~~(658) --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total EBITDA .................................... $ 23,~~896~~748 $ 34,~~771~~778 $ 47,~~114~~862 $ 712,~~467~~244 ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~ Depreciation and amortization: ~~Programming~~Radio ~~content:~~programming ~~Radio~~syndication ......................~~....................~~ $ ~~344~~957 $ 1,~~444~~672 $ ~~680~~2,112 $ 24,~~802~~970 Cable television ................................... ~~399~~580 ~~910~~955 ~~795~~ 1,~~707~~375 2,663 Internet programming content .......................~~................~~ -- 1726 -- 2248 ~~Programming~~Internet ~~support~~advertising ~~services: Advertising~~ sales services ................~~.....~~ ~~237~~-- ~~256~~8 ~~475~~-- ~~504~~15 Satellite services ................................. ~~999~~989 ~~957~~953 23,~~018~~007 12,~~940~~893 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Segment total ................................... 12,~~979~~526 3,~~584~~614 36,~~968~~494 610,~~975~~589 General and administrative - Corporate .............~~..........~~ 2 3 3 5 8 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total depreciation and amortization ............. $ 12,~~981~~528 $ 3,~~587~~617 $ 36,~~971~~499 $ 610,~~980~~597 ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~ Capital expenditures: ~~Programming~~Radio ~~content:~~programming ~~Radio~~syndication ......................~~....................~~ $ 9450 $ ~~380~~576 $ ~~153~~232 $ ~~611~~1,277 Cable television ................................... 1364 6863 ~~132~~196 ~~172~~235 Internet programming content .......................~~................~~ --4 9680 --4 ~~215~~295 ~~Programming~~Internet ~~support~~advertising ~~services: Advertising~~ sales services ................~~.....~~ 13-- ~~101~~16 29-- ~~171~~97 Satellite services ................................. 4816 43248 ~~128~~144 50298 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Segment total ................................... ~~168~~134 ~~688~~983 ~~442~~576 12,~~219~~202 General and administrative - Corporate .............~~...........................~~ --12 --23 --12 225 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total capital expenditures ...................... $ ~~168~~146 $ ~~688~~1,006 $ ~~442~~588 $ 12,~~221~~227 ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~

13 JONES INTERNATIONAL NETWORKS, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

As of ~~June~~September 30, 1999 2000 ---------~~---~~ ---------~~---~~ (in thousands) Total assets: ~~Programming~~Radio ~~content:~~programming ~~Radio~~syndication ............~~...................~~ $ 665,~~942~~654 $ 3673,~~439~~133 Cable television ......................... 1520,~~118~~070 24,~~257~~177 Internet programming content .............~~...............~~ --3 ~~242~~319 ~~Programming~~Internet ~~support~~advertising ~~services: Advertising~~ sales services ......~~....~~ ~~41,355~~-- ~~42,210~~669 Satellite services ....................... 2120,~~344~~289 1716,~~543~~895 ---------~~---~~ ---------~~---~~ Segment total ......................... 84106,~~759~~016 ~~120~~115,~~691~~193 General and administrative - Corporate ...~~..........................~~ 8944,~~970~~488 4743,~~459~~541 Elimination of inter-segment assets ...... (6925,~~608~~710) (4438,~~398~~782) ---------~~---~~ ---------~~---~~ Total assets .......................... $ ~~105~~124,~~121~~794 $ ~~123~~119,~~752~~952 =========~~===~~ =========~~===~~

Segment EBITDA excludes intersegment transactions between the satellite services and cable programming segments for the satellite services provided to the PIN Venture and Great American Country for $872,000, and $948,000, for the three months ended September 30, 1999 and 2000, respectively, and $2,609,000, and $2,845,000, for the nine months ended September 30, 1999 and 2000, respectively. In addition, segment EBITDA excludes intersegment transactions among radio programming syndication and Internet programming segments for the sale of radio airtime to Internet for approximately $48,000 and $586,000 for the three and nine months ended September 30, 2000, respectively. Segment EBITDA differs from operating income (loss) of each of the segments by the amount of depreciation and amortization expenses of each segment. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of results of the Company's financial condition and results of operations contains, in addition to historical information, forward-looking statements that are based upon certain assumptions and are subject to a number of risks and uncertainties. The Company's actual results may differ significantly from the results described in such forward-looking statements. RESULTS OF OPERATIONS The following table sets forth the amount of, and percentage relationship to total net revenues of, certain items included in the Company's historical unaudited consolidated statements of operations for the three and nine months ended September 30, 1999 and 2000:

Three Months Ended ~~June~~September 30, ~~Six~~Nine Months Ended ~~June~~September 30, 1999 2000 1999 2000 ------------------~~---~~ ------------------~~-----~~ ------------------~~---~~ ------------------~~----~~ (in thousands) Revenues: ~~Programming~~Radio ~~content:~~programming ~~Radio~~syndication .....~~...................~~ $ 38,~~906~~085 2648% $ 810,~~232~~609 4049% $ 618,~~865~~808 2542% $ 1531,~~648~~216 3850% Cable television .................. 6,~~846~~587 4539 7,~~902~~850 3936 1219,~~642~~229 4543 1624,~~141~~839 40 Internet programming content ......~~...............~~ -- -- 1839 -- -- -- 4382 -- ~~Programming~~Internet ~~support~~advertising ~~services: Advertising~~ sales services ....................... ~~2,282~~-- 15-- 31,~~031~~505 157 ~~3,858~~-- 14-- 51,~~808~~506 142 Satellite services ................ 2,~~203~~190 1413 1,~~311~~676 68 46,~~377~~567 1615 34,~~021~~697 8 -------- ---- --------- ---- --------- ---- --------- ---- Total revenues ................. 1516,~~237~~862 100 2021,~~494~~679 100 2744,~~742~~604 100 4062,~~661~~340 100 -------- ---- --------- ---- --------- ---- --------- ---- Operating expenses: ~~Programming~~Radio ~~content:~~programming ~~Radio~~syndication ..... 6,986 41 9,798 45 18,230 41 28,255 45 Cable television ................... 36,~~593~~699 2440 78,~~220~~017 3537 719,158 2643 1424,~~013~~371 3439 ~~Cable~~Internet ~~television~~programming content ......~~.......~~ ~~6,474~~175 421 ~~7,712~~665 383 ~~12,459~~175 45-- 151,~~632~~834 383 Internet advertising sales services ....................... -- -- ~~676~~448 32 -- -- 837 1~~,169~~ 3Satellite ~~Programming support~~ services: ~~Advertising sales services~~... ~~2,106 14 3,015 15 4,086 14 5,556 14 Satellite services~~............. 1,~~360~~318 98 1,~~080~~101 5 24,~~700~~018 109 23,~~301~~402 6 -------- ---- --------- ---- --------- ---- --------- ---- Segment total .................. 1315,~~533~~178 8990 1920,~~703~~029 9692 2641,~~403~~581 9593 3858,~~671~~699 9594 General and administrative ........ ~~385~~302 2 ~~355~~433 2 ~~734~~1,036 32 ~~901~~1,336 2 -------- ---- --------- ---- --------- ---- --------- ---- Total operating expenses ....... 1315,~~918~~480 9192 20,~~058~~462 9894 2742,~~137~~617 9895 3960,~~572~~035 9796 -------- ---- --------- ---- --------- -- -- -------- ---- Operating income ............... 1,~~319~~382 98 ~~436~~1,217 26 ~~605~~1,987 25 12,~~089~~305 34 -------- ---- --------- ---- --------- ---- --------- ---- Interest expense, net ................ 23,~~879~~123 19 2,~~896~~886 1413 58,~~758~~881 2120 58,~~813~~698 14 Other expense (income), net .......... 212 -- ~~(87)~~674 -3 214 -- ~~(131)~~543 -1 Income tax provision ~~(benefit)~~................. 1391 -2 123 -- 20411 -1 4548 -- Minority interest .................... ~~395~~165 ~~3 262~~ 1 ~~446~~71 1 ~~588~~611 2 659 1 -------- ---- --------- ---- --------- ---- --------- ---- Net loss ............................. $ (12,~~958~~309) (1314)% $ (2,~~647~~417) (1311)% $ (57,~~621~~930) (2018)% $ (57,~~226~~643) (1312)% ======== ==== ========= ==== ========= ==== ========= ====

15 The following table sets forth EBITDA for the three and nine months ended September 30, 1999 and 2000. EBITDA is unaudited and represents operating income (loss) plus depreciation and amortization minus EBITDA attributable to the minority interest in the PIN Venture, a consolidated 55.3%-owned subsidiary. Management acknowledges that EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles. However, EBITDA is a measure widely used by analysts and investors in the media industry to determine a company's operating performance and ability to service and incur debt. EBITDA should not be considered in isolation or as a substitute for net income (loss), cash flows from operating activities or other consolidated income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity.

For the Three Months Ended For the ~~Six~~Nine Months Ended ~~June~~September 30, ~~June~~September 30, 1999 2000 1999 2000 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ EBITDA: (in thousands) ~~Programming~~Radio ~~content:~~programming ~~Radio~~syndication ..........~~................~~ $ ~~657~~2,056 $ 2,~~456~~483 $ ~~387~~2,690 $ 47,~~437~~931 Cable television ....................... ~~771~~468 788 1,~~100~~446 ~~978 2~~3,~~216~~131 Internet programming content ...........~~............~~ --(175) (~~641~~600) --(175) (1,~~104~~704) ~~Programming~~Internet ~~support~~advertising ~~services: Advertising~~ sales services ..... ~~412~~-- ~~273~~1,065 ~~247~~-- ~~757~~684 Satellite services ..................... 1,~~842~~861 1,~~188~~528 35,~~695~~556 24,~~660~~188 --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Segment total ....................... ~~3,682~~ 4,~~376~~210 5,~~307~~264 89,~~966~~517 14,230 General and administrative ............. (~~382~~300) (~~353~~430) (~~731~~1,031) (~~897~~1,328) Less: EBITDA minority interest ......... ~~404~~(162) ~~252~~(56) ~~462~~(624) ~~602~~(658) --------~~----~~ --------~~----~~ --------~~----~~ --------~~----~~ Total EBITDA ........................ $ 23,~~896~~748 $ 34,~~771~~778 $ 47,~~114~~862 $ 712,~~467~~244 ========~~====~~ ========~~====~~ ========~~====~~ ========~~====~~

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2000 REVENUES Total revenues increased $4.8 million, or 29%, from $16.9 million for the three months ended September 30, 1999 to $21.7 million for the three months ended September 30, 2000. Total revenues adjusted for the acquisition on August 2, 1999 of Broadcast Programming would have been $17.7 million for the three months ended September 30, 1999. This increase was due to strong growth in our radio programming syndication, cable television programming operations, Internet advertising sales services, and an increase in radio programming syndication revenues resulting from the Broadcast Programming acquisition. OPERATING EXPENSES OPERATIONS. Operations expense increased $2.9 million, or 26%, from $10.9 million for the three months ended September 30, 1999 to $13.8 million for the three months ended September 30, 2000. Total operations expenses adjusted for the acquisition of Broadcast Programming would have been $11.4 million for the three months ended September 30, 1999. The increase is due primarily to an increase in operating expenses resulting from the Broadcast Programming acquisition, increased expenditures related to radio programming syndication, cable television and increased operating expenses to develop our Internet programming content and Internet advertising sales services businesses. As a percentage of total revenues, total operations expense decreased from 65% for the three months ended September 30, 1999 to 64% for the three months ended September 30, 2000. SELLING AND MARKETING. Selling and marketing expenses increased $0.9 million, or 51%, from $1.7 million for the three months ended September 30, 1999 to $2.6 million for the three months ended September 30, 2000. This increase is due primarily to increased expenditures to attract additional radio and cable television affiliates and an increase in selling and marketing expenditures resulting from the Broadcast Programming acquisition. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $0.1 million or 44%, from $0.3 million for the three months ended September 30, 1999 to $0.4 million for the three months ended September 30, 2000. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses increased $1.1 million, or 43% from $2.5 million for the three months ended September 30, 1999 to $3.6 million for the three months ended September 30, 2000. Depreciation and amortization expenses adjusted for the acquisition of Broadcast Programming would have been $2.9 million for the three months ended September 30, 1999. This increase is due primarily to an increase in amortization expenses related to the Broadcast 16 Programming acquisition and the amortization of payments made under certain cable programming distribution agreements. OPERATING INCOME Operating income decreased $0.2 million, or 12%, from an operating income of $1.4 million for the three months ended September 30, 1999 to operating income of $1.2 million for the three months ended September 30, 2000, as a result of the factors discussed herein. Operating loss adjusted for the acquisition of Broadcast Programming would have been $1.3 million for the three months ended September 30, 1999. EBITDA EBITDA increased $1.0 million, or 27%, from $3.7 million for the three months ended September 30, 1999, to $4.7 million for the three months ended September 30, 2000 as a result of the factors discussed herein. EBITDA adjusted for the acquisition of Broadcast Programming would have been $4.1 million for the three months ended September 30, 1999. OTHER EXPENSE Total other expense increased $0.5 million, or 14%, from $3.1 million for the three months ended September 30, 1999 to $3.6 million for the three months ended September 30, 2000. The increase is due primarily to: - a $0.7 million in expenses related to the write off of certain deferred equity offering costs. As a result of the withdraw of our proposed equity offering in October, we have expensed all deferred offering costs in the third Quarter of 2000; and - a $0.2 million decrease in interest expense. NET LOSS Net loss increased $0.1 million, or 5%, from $(2.3) million for the three months ended September 30, 1999 to $(2.4) million for the three months ended September 30, 2000 as a result of the factors discussed herein. RADIO PROGRAMMING SYNDICATION REVENUES. Radio programming syndication revenues increased $2.5 million, or 31%, from $8.1 million for the three months ended September 30, 1999 to $10.6 million for the three months ended September 30, 2000, due primarily to an increase in radio advertising revenue and the acquisition of the assets of Broadcast Programming. During the period from July 1, 2000 to August 2, 2000, Broadcast Programming generated radio programming syndication revenues of $1.2 million Separate from Broadcast Programming, advertising revenues increased $1.4 million due to an increase in rates charged for our advertising spots and an increase in the number of spots sold. There was a decrease of $0.1 million in radio license fees, reflecting our decision to focus our programming targeted at larger radio stations that generally are not charged license fees. Radio revenues adjusted for the acquisition of Broadcast Programming would have been $8.9 million for the three months ended September 30, 1999. EXPENSES. Radio programming expenses increased $2.8 million, or 40%, from $7.0 million for the three months ended September 30, 1999 to $9.8 million for the three months ended September 30, 2000. Radio expenses adjusted for the acquisition of Broadcast Programming would have been $7.9 million for the three months ended September 30, 1999. This increase was primarily due to: - a $1.0 million increase in operating expenses as a result of the Broadcast Programming acquisition, including depreciation and amortization expenses of $0.3 million; - a $0.7 million increase in radio programming and radio distribution expenses due to an increase in the number of radio programs we offered and an increase in the number of radio affiliates; - a $0.6 million increase in marketing expenses for trade shows and related marketing expenditures incurred to increase the number of radio stations receiving our programming; 17 - a $0.4 million increase in depreciation and amortization expenses related to new equipment purchased for the upgrades of certain radio programming studios, purchase of new satellite receivers, purchase of new computer hardware and software and amortization of intangibles mostly related to the acquisition of Broadcast Programming; and - a $0.1 million increase in fees paid to license certain radio programming. As a percentage of radio programming revenues, radio programming expenses increased from 86% for the three months ended September 30, 1999 to 92% for the three months ended September 30, 2000. OPERATING INCOME. Operating income from radio programming decreased $0.3 million, or 26%, from an operating income of $1.1 million for the three months ended September 30, 1999 to operating income of $0.8 million for the three months ended September 30, 2000 as a result of the factors stated herein. Operating income from radio programming adjusted for the acquisition of Broadcast Programming would have been approximately $1.0 million for the three months ended September 30, 1999. SEGMENT EBITDA. Segment EBITDA from radio programming increased $0.4 million, or 21%, from $2.1 million for the three months ended September 30, 1999 to $2.5 million for the three months ended September 30, 2000 as a result of the factors stated herein. Segment EBITDA from radio programming adjusted for the Broadcast Programming acquisition would have been $2.4 million for the three months ended September 30, 1999. CABLE TELEVISION PROGRAMMING We have two cable television networks, Great American Country ("GAC") and Product Information Network ("PIN"). PIN is owned by a venture which is 55.3% owned by us. REVENUES. Cable television programming revenues increased $1.3 million, or 19%, from $6.6 million for the three months ended September 30, 1999 to $7.9 million for the three months ended September 30, 2000. This increase was due to the following: - GAC's revenues increased $0.7 million, or 57%, as a result of a $0.6 million, or 63%, increase in advertising revenues and $0.1 million, or 44%, increase in license fees. Advertising revenues increased due to higher advertising rates charged for airtime based on a 25% increase in the number of subscribers receiving GAC, as well as an increase in the number of higher paying national advertisers; and - PIN's revenues increased $0.6 million, or 10%, primarily as a result of a 12% increase in FTRE's receiving PIN. FTREs represent the number of full-time revenue equivalent subscribers receiving PIN. EXPENSES. Cable television programming expenses rose $1.3 million, or 20%, from $6.7 million for the three months ended September 30, 1999 to $8.0 million for the three months ended September 30, 2000. This was primarily due to: - an increase of $0.7 million in rebates to cable systems receiving PIN, driven by an increase in PIN revenues from September 30, 1999 to September 30, 2000; - an increase of $0.4 million in amortization expenses for GAC distribution agreement payments, driven by GAC's growth in subscribers; - an increase of $0.4 million as a result of new associates hired to sell GAC traditional spot advertising and a national audience ratings services subscribed to by GAC beginning in January 2000; and - a decrease of $0.2 million in other cable television programming expenses. As part of our efforts to increase GAC subscriber distribution , GAC entered into a digital satellite distribution agreement with a third party which will enable GAC to broadcast its programming on a digital platform to cable systems who elect to carry GAC on their digital programming tiers. We estimate that expenses will increase approximately $50,000 per month starting in November 2000 as a result of this agreement . For the three months ended September 30, 1999 and 2000, PIN made rebates of approximately 76% and 81%, respectively, of 18 its net advertising revenues to cable television systems receiving its programming. As PIN's FTRE's continue to grow, total cable television programming expenses will continue to increase and PIN will have to pay out additional rebates to cable systems as PIN advertising revenues increase. As a percentage of cable television programming revenues, cable television programming expenses remained relatively flat at 102% for the three months ended September 30, 1999 and 2000. OPERATING INCOME. Operating income from cable television programming decreased $0.1 million from an operating loss of $(0.1) million for the three months ended September 30, 1999 to an operating loss of $(0.2) million for the three months ended September 30, 2000 as a result of the factors stated above. SEGMENT EBITDA. Segment EBITDA from cable television programming increased $0.3 million, or 68%, from $0.5 million for the three months ended September 30, 1999 to $0.8 million for the three months ended September 30, 2000 as a result of the factors stated above. INTERNET PROGRAMMING CONTENT Internet programming content expenses commenced in the fourth quarter of 1999 and have increased throughout 2000. We have not generated significant revenues from our Internet programming content business. Given the lack of meaningful revenues generated thus far, we are currently evaluating the future business strategy and prospects of the Internet programming content segment in order to determine how to generate substantially higher revenues while also reducing operating expenses. There can be no assurance that we will be successful in making this business segment profitable in the future or that the business segment will continue to operate in its current form. REVENUES. We did not generate significant Internet programming content revenues for the three months ended September 30, 2000. EXPENSES. Internet programming content expenses increased $0.5 million, or 280%, from $0.2 million for the three months ended September 30, 1999 to $0.7 million for the three months ended September 30, 2000. OPERATING LOSS. Operating loss from our Internet programming content activities increased $0.4 million from $(0.2) million for the three months ended September 30, 1999 to $(0.6) million for the three months ended September 30, 2000. SEGMENT EBITDA. Segment EBITDA deficit from our Internet programming content activities increased $0.4 million from $(0.2) million for the three months ended September 30, 1999 to $(0.6) million for the three months ended September 30, 2000. INTERNET ADVERTISING SALES SERVICES In the fourth quarter of 1999, we began developing an Internet advertising sales services business which sells national advertising for third parties. Currently, we are concentrating on providing these services to streaming media companies. Operating expenses for Internet advertising services increased beginning in the fourth quarter of 1999 and will continue to increase throughout 2000. We anticipate salary, selling and marketing and other associated expenses to increase as we continue to develop the Internet advertising services business. REVENUES. We generated Internet advertising sales services revenue of $1.5 million for the three months ended September 30, 2000. We negotiated an early termination to an agreement with a third party to sell Internet advertising time and provide other services. The termination of this agreement resulted in a one-time cash payment of $1.5 million, which we received in July 2000. The termination payment was recorded as Internet advertising sales services revenue during the third quarter of 2000. EXPENSES. We generated Internet advertising sales services expenses of $0.5 million for the three months ended September 30, 2000. OPERATING INCOME. We generated an operating income from Internet advertising sales services of $1.0 million for the three months ended September 30, 2000 as a result of factors discussed herein. SEGMENT EBITDA. We generated a segment EBITDA from Internet advertising sales services of $1.1 million for the three months ended September 30, 2000. 19 SATELLITE SERVICES REVENUES. Satellite services revenues decreased $0.5 million, or 23%, from $2.2 million for the three months ended September 30, 1999 to $1.7 million for the three months ended September 30, 2000. This decrease was primarily due to: - $0.5 million decrease in satellite services fees because an affiliated party ceased its network operations in March 2000; - the expiration in August 1999 of a third party satellite services agreement, which generated $0.3 million in satellite services revenues in the three months ended September 30, 1999; and - $0.3 million increase in satellite services revenues due to a three-month agreement to lease two satellite transponder channels as well as other uplinking and earth station services to a third party. This agreement commenced on July 15, 2000 and terminated on October 15, 2000. Historically we have provided satellite services to a related company. Because the related party began to decrease its programming expenditures in the second half of 1999 and ceased all programming efforts as of March 31, 2000, satellite services fees charged to affiliated parties decreased in the first half of 2000. For the balance of the year, these satellite service fees should remain at a level consistent with that of the second quarter of 2000. In April 2000, we entered into a three-month agreement to lease two satellite transponder channels as well as other uplinking and earth station services to a third party. This agreement commenced on July 15, 2000 and terminated on October 15, 2000. EXPENSES. Satellite services expenses decreased $0.2 million, or 16%, from $1.3 million for the three months ended September 30, 1999 to $1.1 million for three months ended September 30, 2000. This decrease is primarily due to cost savings realized as a result of the affiliated party ceasing all programming operations as of March 31, 2000 as discuss herein. As a percentage of satellite services revenues, satellite services expenses increased from 60% for the three months ended September 30, 1999 to 66% for the three months ended September 30, 2000. Due to the fixed nature of most of our satellite services expenses, the percentage of satellite services expenses in relation to the satellite services revenues will generally increase as our revenues decrease. OPERATING INCOME. Operating income from satellite services decreased $0.3 million, or 34%, from $0.9 million for the three months ended September 30, 1999 to $0.6 million for the three months ended September 30, 2000 as a result of the factors stated above. SEGMENT EBITDA. Segment EBITDA from satellite services decreased $0.3 million, or 18%, from $1.8 million for the three months ended September 30, 1999 to $1.5 million for the three months ended September 30, 2000 as a result of the factors stated above. NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2000 REVENUES Total revenues increased $17.7 million, or 40%, from $44.6 million for the nine months ended September 30, 1999 to $62.3 million for the nine months ended September 30, 2000. Total revenues adjusted for the acquisition of Broadcast Programming would have been $49.4 million for the nine months ended September 30, 1999. This increase was due to strong growth in our radio programming syndication and cable programming operations, an increase in radio revenues resulting from the Broadcast Programming acquisition, as well as Internet advertising sales services. OPERATING EXPENSES OPERATIONS. Operations expense increased $9.8 million, or 32%, from $30.7 million for the nine months ended September 30, 1999 to $40.5 million for the nine months ended September 30, 2000. Total operations expenses adjusted for the acquisition of Broadcast Programming would have been $33.5 million for the nine months ended September 30, 1999. The increase reflects increased operating expenses resulting from the Broadcast Programming acquisition, Internet programming content and the development of our Internet and cable television advertising sales businesses. As a percentage of total revenues, total operations expense decreased from 69% for the nine months ended September 30, 1999 to 65% for the nine months ended September 30, 2000. 20 SELLING AND MARKETING. Selling and marketing expenses increased $3.3 million, or 75%, from $4.3 million for the nine months ended September 30, 1999 to $7.6 million for the nine months ended September 30, 2000. Selling and marketing expenses adjusted for the acquisition of Broadcast Programming would have been $4.9 million for the nine months ended September 30, 1999. This increase is due primarily to increased expenditures to attract additional radio and cable television affiliates and an increase in selling and marketing expenditures resulting from the Broadcast Programming acquisition. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $0.3 million, or 29%, from $1.0 million for the nine months ended September 30, 1999 to $1.3 million for the nine months ended September 30, 2000. This increase is due primarily to an increase in computer software and hardware support services charged by an affiliate of Jones International and an increase in salary and related expenses as a result of new associates hired to perform accounting related functions. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses increased $4.1 million, or 63%, from $6.5 million for the nine months ended September 30, 1999 to $10.6 million for the nine months ended September 30, 2000. Depreciation and amortization expenses adjusted for the acquisition of Broadcast Programming would have been $9.1 million for the nine months ended September 30, 1999. This increase is due primarily to an increase in amortization expenses related to the Broadcast Programming acquisition and the amortization of cable programming distribution agreement payments. OPERATING INCOME Operating income increased $0.3 million, or 16%, from an operating income of $2.0 million for the nine months ended September 30, 1999 to operating income of $2.3 million for the nine months ended September 30, 2000, as a result of the factors discussed herein. Operating income adjusted for the acquisition of Broadcast Programming would have been $0.9 million for the nine months ended September 30, 1999. EBITDA EBITDA increased $4.3 million, or 56%, from $7.9 million for the nine months ended September 30, 1999, to $12.2 million for the nine months ended September 30, 2000 as a result of the factors discussed herein. EBITDA adjusted for the acquisition of Broadcast Programming would have been $9.4 million for the nine months ended September 30, 1999. OTHER EXPENSE Total other expense increased $0.3 million, or 4%, from $8.9 million for the nine months ended September 30, 1999 to $9.2 million for the nine months ended September 30, 2000. NET LOSS Net loss decreased $0.3 million, or 4%, from $(7.9) million for the nine months ended September 30, 1999 to $(7.6) million for the nine months ended September 30, 2000 as a result of the factors discussed herein. RADIO SYNDICATION PROGRAMMING REVENUES. Radio syndication programming revenues increased $12.4 million, or 66%, from $18.8 million for the nine months ended September 30, 1999 to $31.2 million for the nine months ended September 30, 2000, due primarily to an increase in radio advertising revenue and the acquisition of the assets of Broadcast Programming. Radio syndication programming revenues adjusted for the acquisition of Broadcast Programming would have been $23.6 million for the nine months ended September 30, 1999. Following the acquisition, Broadcast Programming generated advertising and programming license fee revenues of $7.6 million during the nine months ended September 30, 2000. Separate from Broadcast programming, advertising revenues increased $5.2 million due to an increase in the number of spots sold, an increase in the rates charged for our advertising spots and the number of radio programs we offered. This increase was offset by a decrease of $0.4 million in radio license fees, reflecting our decision to focus on programming targeted at larger market radio stations that generally are not charged license fees. EXPENSES. Radio syndication programming expenses increased $10.0 million, or 55%, from $18.2 million for the nine months ended September 30, 1999 to $28.2 million for the nine months ended September 30, 2000. Radio syndication expenses adjusted for the acquisition of Broadcast Programming would have been $24.2 million for the nine months ended September 30, 1999. This increase was primarily due to: 21 - a $6.5 million increase in operating expenses as a result of the Broadcast Programming acquisition, including depreciation and amortization expenses of $2.3 million; - a $1.2 million increase in radio programming and distribution expenses due to an increase in the number of radio programs we offered, as well as an increase in the number of radio affiliates; - a $1.1 million increase in marketing expenses incurred to increase the number of radio stations receiving our programming; - a $0.6 million increase in depreciation and amortization expenses related to new equipment purchased for the upgrades of certain radio programming studios, purchase of new satellite receivers, purchase of new computer hardware and software and amortization of intangibles mostly related to the acquisition of Broadcast Programming; - a $0.4 million increase in management and support costs; and - a $0.2 million increase in fees paid to license certain radio programming. As a percentage of radio syndication programming revenues, radio programming syndication expenses decreased from 97% for the nine months ended September 30, 1999 to 91% for the nine months ended September 30, 2000. Due to the fixed nature of most of our radio programming expenses, our radio syndication programming expenses as a percent of radio programming syndication revenues will generally decline as our radio programming revenues increase. OPERATING INCOME (LOSS). Operating income (loss) from radio syndication programming increased $2.4 million from an operating income of $0.6 million for the nine months ended September 30, 1999 to operating income of $3.0 million for the nine months ended September 30, 2000 as a result of the factors stated herein. Operating loss from radio syndication programming adjusted for the acquisition of Broadcast Programming would have been $(0.6) million for the nine months ended September 30, 1999. SEGMENT EBITDA. Segment EBITDA from radio syndication programming increased $5.2 million, or 195%, from $2.7 million for the nine months ended September 30, 1999 to $7.9 million for the nine months ended September 30, 2000 as a result of the factors stated herein. Segment EBITDA from radio programming adjusted for the Broadcast Programming acquisition would have been $4.2 million for the nine months ended September 30, 1999. CABLE TELEVISION PROGRAMMING REVENUES. Cable television programming revenues increased $5.6 million, or 29%, from $19.2 million for the nine months ended September 30, 1999 to $24.8 million for the nine months ended September 30, 2000. This increase was due to the following: - GAC's revenues increased $2.5 million, or 73%, as a result of a $2.1 million, or 91%, increase in advertising revenues and $0.4 million, or 35%, increase in affiliate license fees. Advertising revenues increased due to higher advertising rates charged for airtime driven by a 25% increase in the number of subscribers receiving GAC and an increase the number of higher paying national advertisers; and - PIN's revenues increased $3.1 million, or 20%, primarily as a result of an 12% increase in FTRE's receiving PIN. FTREs represent the number of full-time revenue equivalent subscribers receiving PIN. EXPENSES. Cable television programming expenses rose $5.2 million, or 27%, from $19.2 million for the nine months ended September 30, 1999 to $24.4 million for the nine months ended September 30, 2000. This was primarily due to: - increases of $2.7 million in rebates to cable systems receiving PIN, which was driven by an increase in PIN revenues of $3.1 million from September 30, 1999 to September 30, 2000; - an increase of $1.3 million in amortization expenses for GAC cable programming distribution agreement payments; - an increase of $1.1 million as a result of new associates hired to sell GAC traditional spot advertising and a national audience ratings services subscribed to by GAC beginning in January 2000; 22 - an increase of $0.5 million in cable television programming expenses resulting from an increase in GAC affiliate sales and other promotional expenses; and - a decrease of $0.4 million in GAC's management and other expenses. As part of our efforts to increase GAC subscriber distribution , GAC entered into a digital satellite distribution agreement with a third party which will enable GAC to broadcast its programming on a digital platform to cable systems who elect to carry GAC on their digital programming tiers. We estimate that expenses will increase approximately $50,000 per month starting in November 2000 as a result of this agreement . For the nine months ended September 30, 1999 and 2000, PIN made rebates of approximately 75% and 77%, respectively, of its advertising revenues to systems receiving its programming. Rebates paid to cable systems receiving PIN programming, as a percent of revenue, have remained relatively constant over the comparable periods on a per FTRE basis. However, as FTRE's and PIN advertising revenues grow, total cable television programming expenses will increase as PIN will have to pay out additional rebates to cable systems. As a percentage of cable television programming revenues, cable television programming expenses decreased from 100% for the nine months ended September 30, 1999 to 98% for the nine months ended September 30, 2000. OPERATING INCOME. Operating income from cable television programming increased $0.4 million, or 559%, from operating income of $0.1 million for the nine months ended September 30, 1999 to operating income of $0.5 million for the nine months ended September 30, 2000 as a result of the factors stated above. SEGMENT EBITDA. Segment EBITDA from cable television programming increased $1.7 million, or 117%, from $1.4 million for the nine months ended September 30, 1999 to $3.1 million for the nine months ended September 30, 2000 as a result of the factors stated above. INTERNET PROGRAMMING CONTENT Internet programming content expenses commenced in the fourth quarter of 1999 and have increased throughout 2000. We have not generated significant revenues from our Internet programming content business. Given the lack of meaningful revenues generated thus far, we are currently evaluating the future business strategy and prospects of the Internet programming content segment in order to determine how to generate substantially higher revenues while also reducing operating expenses. There can be no assurance that we will be successful in making this business segment profitable in the future or that the business segment will continue to operate in its current form. REVENUES. We generated Internet programming content revenues of $0.1 million for the nine months ended September 30, 2000. EXPENSES. Internet programming content expenses increased $1.6 million from $0.2 million for the nine months ended September 30, 1999 to $1.8 million for the nine months ended September 30, 2000. OPERATING LOSS. Operating loss from our Internet programming content activities increased $1.6 million from an operating loss of $(0.2) million for the nine months ended September 30, 1999 to an operating loss of $(1.8) million for the nine months ended September 30, 2000. SEGMENT EBITDA. Segment EBITDA from our Internet programming content activities decreased $1.5 million from a deficit of $(0.2) million for the nine months ended September 30, 1999 to a deficit of $(1.7) million for the nine months ended September 30, 2000. INTERNET ADVERTISING SALES SERVICES In the fourth quarter of 1999, we began developing an Internet advertising sales services business which sells national advertising for third parties. Currently, we are concentrating on providing these services to streaming media companies. Operating expenses for Internet advertising services increased beginning in the fourth quarter of 1999 and will continue to increase throughout 2000. We anticipate salary, selling and marketing and other associated expenses to increase as we continue to develop the Internet advertising services business. REVENUES. We generated Internet advertising sales services revenues of $1.5 million for the nine months ended September 30, 2000. 23 We negotiated an early termination to an agreement with a third party to sell Internet advertising time and provide other services. The termination of this agreement resulted in a one-time cash payment of $1.5 million, which we received in July 2000. The termination payment was recorded as Internet advertising sales services revenue during the third quarter of 2000. EXPENSES. We incurred Internet advertising sales services expenses of $0.8 million for the nine months ended September 30, 2000. OPERATING INCOME (LOSS). We generated operating income from our Internet advertising sales services of $0.7 million for the nine months ended September 30, 2000. SEGMENT EBITDA. We generated a segment EBITDA from Internet advertising sales services of $0.7 million for the nine months ended September 30, 2000. SATELLITE SERVICES REVENUES. Satellite services revenues decreased $1.9 million, or 28%, from $6.6 million for the nine months ended September 30, 1999 to $4.7 million for the nine months ended September 30, 2000. This decrease was primarily due to: - the expiration in August 1999 of a third party satellite services agreement, which generated $1.2 million in satellite services revenues in the nine months of 1999; - $1.0 million decrease in satellite services fees charged to an affiliated party because of reduced service levels required by the affiliate when it ceased network operations at the end of the first quarter of 2000; and - $0.3 million increase in satellite services revenues due to a three-month agreement to lease two satellite transponder channels as well as other uplinking and earth station services to a third party. This agreement commenced on July 15, 2000 and terminated on October 15, 2000. Historically we have provided satellite services to a related company. Because the related party began to decrease its programming expenditures in the second half of 1999 and ceased all programming efforts as of March 31, 2000, satellite services fees charged to affiliated parties decreased in the first half of 2000. For the balance of the year, these satellite service fees should remain at levels consistent with the second quarter of 2000. In April 2000, we entered into a three-month agreement to lease two satellite transponder channels as well as other uplinking and earth station services to a third party. This agreement commenced on July 15, 2000 and terminated on October 15, 2000. EXPENSES. Satellite services expenses decreased $0.6 million, or 15%, from $4.0 million for the nine months ended September 30, 1999 to $3.4 million for three months ended September 30, 2000. This decrease is primarily due to cost savings realized as a result of the related party ceasing all programming operations as of March 31, 2000 as discussed herein. As a percentage of satellite services revenues, satellite services expenses increased from 61% for the nine months ended September 30, 1999 to 72% for the nine months ended September 30, 2000. Due to fixed nature of most of our satellite services expenses, our satellite services expenses as a percentage of satellite services revenues will generally increase as our satellite services revenues decrease. OPERATING INCOME. Operating income from satellite services decreased $1.2 million, or 49%, from $2.5 million for the nine months ended September 30, 1999 to $1.3 million for the nine months ended September 30, 2000 as a result of the factors stated above. SEGMENT EBITDA. Segment EBITDA from satellite services decreased $1.4 million, or 25%, from $5.6 million for the nine months ended September 30, 1999 to $4.2 million for the nine months ended September 30, 2000. LIQUIDITY AND CAPITAL RESOURCES Since our inception, we have incurred net losses, primarily as a result of expenses associated with developing and launching our programming networks and financing costs. For the nine months ended September 30, 1999 and 2000, we incurred net losses of $(7.9) million and $(7.6) million, respectively. Net cash provided by (used in) operating activities for the nine months ended September 30, 1999 and 2000 was $(0.8) million and $3.5 million, respectively. The implementation of our growth strategies depends on a number of factors, including the availability of cash generated from 24 operations and available cash balances, and may require additional equity and/or debt financings, particularly to make significant acquisitions. Our indenture currently permits secured borrowings of up to $20.0 million. Currently, we do not have a credit facility in place which would make available such borrowings. We had cash and cash equivalents and available for sale securities of $14.9 million as of September 30, 2000. We believe that our cash balances, available for sale securities and operating cash flow, including the cash flows of and dividends and distributions from our subsidiaries, will fund our cash flow requirements through 2001. In October 2000, we withdrew our registration for an initial public offering due to unfavorable market conditions. At such time market conditions improve, we will reconsider an initial public offering of our Class A Common Stock. We are considering a number of financing alternatives to provide us with additional liquidity to implement our growth strategies. However, current equity market conditions for media companies are unfavorable and it is unlikely we would raise additional equity capital until market conditions improve. There can be no assurance we will be successful in these efforts or that cash financings will be available on terms we view as acceptable. We will continue to depend significantly upon the earnings and cash flows of, and dividends and distributions from, our subsidiaries to pay our expenses, meet our obligations and pay interest and principal on our Senior Notes and our other indebtedness as it may exist from time-to-time. While the terms of our joint ventures (including the PIN Venture) generally require the mutual consent of ourselves and our joint venture partners to distribute or advance funds to ourselves, there are no significant contractual restrictions on distributions from our subsidiaries. INVESTING ACTIVITIES For the nine months ended September 30, 1999 and 2000, net cash used in investing activities was $(27.3) million and $(4.5) million, respectively. Our investing activities for the nine months ended September 30, 2000 consisted primarily of the following: - $3.8 million proceeds from the sale of available for sale securities; - $(5.3) million in cable programming distribution agreement payments for GAC; - $(0.8) million to purchase certain radio programs and other intangible assets; and - $(2.2) million for the purchase of property and equipment. Total capital expenditures for the balance of 2000 are estimated to be approximately $0.8 million, which will be used primarily to upgrade certain cable television and radio related earth station equipment and to purchase computer hardware and software for the Internet segment. Total cable programming distribution agreement payments for GAC for the balance of 2000 are estimated to be approximately $1.8 million. FINANCING ACTIVITIES In July 1999, we entered into a $20.0 million credit facility with a commercial bank to finance the purchase of Broadcast Programming. In order to allow us to obtain more favorable terms, Jones International guaranteed the loan and provided certain collateral as security for the guaranty. The credit facility bore interest either at the commercial bank's prime rate minus 2% or a fixed rate (which is approximately equal to LIBOR) plus 0.5%. The interest rate was 6.65 percent per annum at June 30, 2000. This credit facility expired on June 30, 2000. Net cash used in financing activities for the nine months ended September 30, 2000 was $(0.5) million. Net cash used in financing activities consisted of costs related to an attempted initial public offering of our Class A Common Stock. Such costs included financial printing, legal counsel, independent public accountants, regulatory and stock exchange registration fees, and other various costs associated with the offering. As a result of our withdraw of this proposed equity offering, we have expensed all deferred offering costs relating to this equity offering. All of such costs were expensed in the third quarter of 2000. 25 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss that may impact our financial position, results of operations, or cash flows due to adverse changes in financial market prices. We are exposed to market risk through interest rates. This exposure is directly related to our normal funding and investing activities. As of September 30, 2000, none of our current liabilities was subject to changes in interest rates. ITEM 5: OTHER MATERIALLY IMPORTANT EVENTS Item 6. Exhibits and Reports on Form 8-K a) Exhibits None b) Reports on Form 8-K None 26 SIGNATURES 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. JONES INTERNATIONAL NETWORKS, LTD. By: /s/ Jeffery C. Wayne ------------------------------- Jeffery C. Wayne President Dated: November 10, 2000 By: /s/ Jay B. Lewis ------------------------------- Jay B. Lewis Group Vice President/Finance (Principal Financial Officer) Dated: November 10, 2000

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