GEMSTAR TV GUIDE INTERNATIONAL INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM 10-Q

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

For the quarterly period ended September 30, 2002

or

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

Commission file number 0-24218

GEMSTAR-TV GUIDE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware 95-4782077
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

135 North Los Robles Avenue, Suite 800, Pasadena, California 91101
(Address of principal executive offices including zip code)

(626) 792-5700
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [_] No [X]

As of November 4, 2002, there were outstanding 408,155,584 shares of the
registrant's Common Stock, par value $0.01 per share.

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EXPLANATORY NOTE

This Quarterly Report on Form 10-Q for Gemstar-TV Guide International, Inc.
(the "Company") for the quarter ended September 30, 2002, includes an amendment
and restatement of the items described below contained in the Company's
Quarterly Report on Form 10-Q originally filed with the Securities and Exchange
Commission ("SEC") on November 14, 2001. Such items were amended and restated
by Amendment No. 2 to Form 10-K/A as filed by the Company on November 14, 2002
to amend and restate certain items contained in the Company's Annual Report on
Form 10-K originally filed with the SEC on April 1, 2002, and as amended by
Amendment No. 1 on Form 10-K/A originally filed with the SEC on April 30, 2002.

This Quarterly Report on Form 10-Q includes restatements of prior year
information:

. To restate the Company's Unaudited Condensed Consolidated Financial
Statements for the periods ended September 30, 2001, to correct the
accounting for the acquisition of certain intellectual property acquired
in 2001, to reclassify multi-platform advertising revenues between
sectors, to reverse revenue recognized under an expired license
agreement and to make certain other adjustments, as more fully described
in Note 2 to the Company's unaudited condensed consolidated financial
statements (the "Unaudited Condensed Consolidated Financial Statements")
included in Part I, Item 1, Financial Statements. The restated Unaudited
Condensed Consolidated Financial Statements included in this Quarterly
Report on Form 10-Q have not been audited or reviewed by an independent
accounting firm and, therefore, should not be relied upon.

. To amend Part I, Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations, to take into account the
effects of the restatement on prior year periods.

Rule 10-01(d) of Regulation S-X requires interim financial statements
included in quarterly reports on Form 10-Q be reviewed by an independent public
accountant using professional standards and procedures for conducting such
reviews, as established by generally accepted auditing standards, as may be
modified or supplemented by the SEC. The accompanying financial statements, as
of September 30, 2002 and for the three-month and nine-month periods ended
September 30, 2002 and 2001, have not been reviewed by an independent public
accountant in accordance with Statement of Auditing Standards No. 71, Review of
Interim Financial Information ("SAS 71"), and, therefore, should not be relied
upon. Accordingly, the Unaudited Condensed Consolidated Financial Statements
included in this Quarterly Report on Form 10-Q are deficient and do not comply
with the requirements of the Securities Exchange Act of 1934, as amended, and
the regulations promulgated thereunder. As a result, the Company's new Chief
Executive Officer and Acting Chief Financial Officer, who were appointed on
November 7, 2002, are unable to make the certifications required by Section 906
of the Sarbanes-Oxley Act of 2002.

The Company recently engaged a new independent accounting firm to audit its
consolidated financial statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements discussed in this report.
In connection with such review, the Company will be reviewing its accounting
policies to ensure compliance with accounting principles generally accepted in
the United States of America. Specifically the Company will be focusing on the
accounting for licensing and advertising revenues, including but not limited
to, revenues from strategic customers and multi-platform advertisers. The
Company intends to file an amendment to this Quarterly Report on Form 10-Q to
include such reviewed Condensed Consolidated Financial Statements as promptly
as practicable after such review has been completed.However, there can be no
assurance as to when such review will be completed. The Company believes that
it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of the policies to various types of transactions, the Company will
further restate these Unaudited Condensed Consolidated Financial Statements
presented herein in an amendment to the Quarterly Report on Form 10-Q for the
period ended September 30, 2002. Such restatements may be material.
Accordingly, the information presented in or derived from the Unaudited
Condensed Consolidated Financial Statements contained in this report should not
be relied upon.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

INDEX

Page
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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets--Unaudited................... 1

Condensed Consolidated Statements of Operations--Unaudited......... 2

Condensed Consolidated Statements of Stockholders'
Equity--Unaudited.................................................. 3

Condensed Consolidated Statements of Cash Flows--Unaudited......... 4

Notes to Condensed Consolidated Financial Statements--Unaudited.... 5

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 32

Item 3. Quantitative and Qualitative Disclosures About Market Risk......... 68

Item 4. Controls and Procedures............................................ 68

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.................................................. 70

Item 6. Exhibits and Reports on Form 8-K................................... 70

Signature.................................................................. 72

Items 2, 3, 4 and 5 of PART II are not applicable and have been omitted.

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS--UNAUDITED
(In thousands, except per share data)

September 30, December 31,
2002 2001(1)
------------- ------------
Restated
------------

ASSETS
Current assets:
Cash and cash equivalents........................................ $ 354,865 $ 349,250
Marketable securities............................................ 30,646 42,212
Receivables, net................................................. 159,256 285,076
Deferred tax asset, net.......................................... 19,506 14,957
Other current assets............................................. 38,356 38,391
----------- ----------
Total current assets.......................................... 602,629 729,886
Property and equipment, net.......................................... 68,533 87,950
Goodwill............................................................. 346,372 5,485,807
Indefinite-lived intangible assets................................... 568,414 893,425
Finite-lived intangible assets, net.................................. 722,490 2,242,503
Marketable securities and other investments.......................... 69,772 107,569
Other assets......................................................... 23,969 25,888
----------- ----------
$ 2,402,179 $9,573,028
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................ $ 186,020 $ 285,761
Current portion of long-term debt and capital lease obligation... 84,810 62,201
Current portion of deferred revenue.............................. 209,363 261,420
----------- ----------
Total current liabilities..................................... 480,193 609,382
Deferred tax liability............................................... 424,549 1,086,724
Long-term debt and capital lease obligation, less current portion.... 186,918 271,029
Deferred revenue, less current portion............................... 93,645 109,507
Other liabilities.................................................... 5,519 6,286

Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, par value $.01 per share........................ -- --
Common stock, par value $.01 per share........................... 4,182 4,179
Additional paid-in capital....................................... 8,363,207 8,360,289
Accumulated deficit.............................................. (7,069,555) (838,638)
Accumulated other comprehensive income, net of tax............... 16,428 24,101
Unearned compensation............................................ (4,641) (24,988)
Treasury stock, at cost.......................................... (98,266) (34,843)
----------- ----------
Total stockholders' equity.................................... 1,211,355 7,490,100
----------- ----------
$ 2,402,179 $9,573,028
=========== ==========

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.
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(1) Restated in Second Amendment to Form 10-K/A filed on November 14, 2002.

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The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

1

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS--UNAUDITED
(In thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------------
2002 2001 2002 2001
-------- --------- ----------- ----------
Restated Restated
--------- ----------

Revenues................................................. $253,350 $ 299,863 $ 815,454 $ 917,498
Operating expenses:
Operating expenses, excluding stock compensation,
depreciation and amortization, write-down and
impairment charges.................................. 190,836 208,213 597,692 642,956
Stock compensation.................................... 1,318 6,534 19,612 23,691
Depreciation and amortization......................... 76,558 235,199 313,834 709,062
Write-down of capitalized patent litigation costs..... -- -- 44,424 --
Impairment of intangible assets....................... -- -- 1,259,147 --
-------- --------- ----------- ----------
268,712 449,946 2,234,709 1,375,709
-------- --------- ----------- ----------
Operating loss........................................... (15,362) (150,083) (1,419,255) (458,211)
Interest expense......................................... (2,277) (4,880) (7,798) (23,982)
Other expense, net....................................... (6,431) (7,840) (23,811) (6,786)
-------- --------- ----------- ----------
Loss before income taxes, extraordinary loss on debt
extinguishment and cumulative effect of an accounting
change................................................. (24,070) (162,803) (1,450,864) (488,979)
Income tax benefit....................................... (6,764) (22,552) (523,228) (67,572)
-------- --------- ----------- ----------
Loss before extraordinary loss on debt extinguishment and
cumulative effect of an accounting change.............. (17,306) (140,251) (927,636) (421,407)
Extraordinary loss on debt extinguishment, net of tax.... -- -- -- (2,100)
Cumulative effect of an accounting change, net of tax.... -- -- (5,303,281) --
-------- --------- ----------- ----------
Net loss................................................. $(17,306) $(140,251) $(6,230,917) $ (423,507)
======== ========= =========== ==========
Basic and diluted loss per share:
Loss before extraordinary loss on debt extinguishment
and cumulative effect of an accounting change....... $ (0.04) $ (0.34) $ (2.25) $ (1.02)
Extraordinary loss on debt extinguishment, net of
tax................................................. -- -- -- (0.01)
Cumulative effect of an accounting change, net of
tax................................................. -- -- (12.89) --
-------- --------- ----------- ----------
Net loss.............................................. $ (0.04) $ (0.34) $ (15.14) $ (1.03)
======== ========= =========== ==========
Weighted average shares outstanding...................... 408,151 412,361 411,428 411,673
Weighted average shares outstanding, assuming dilution... 408,151 412,361 411,428 411,673

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

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The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

2

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--UNAUDITED
(In thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ----------- ----------
Restated Restated
---------- ----------

Balance at beginning of period........................... $1,232,739 $7,763,782 $ 7,490,100 $8,025,240
Net loss................................................. (17,306) (140,251) (6,230,917) (423,507)
Other comprehensive loss, net of taxes................... (5,398) (9,665) (7,673) (20,795)
---------- ---------- ----------- ----------
Comprehensive loss....................................... (22,704) (149,916) (6,238,590) (444,302)
---------- ---------- ----------- ----------
Issuance of common stock for acquisitions................ -- 27,851 -- 27,851
Purchases of treasury stock.............................. -- -- (63,423) --
Other, principally shares issued pursuant to stock option
plans, including tax benefit, and amortization of
unearned compensation.................................. 1,320 22,673 23,268 55,601
---------- ---------- ----------- ----------
Balance at end of period................................. $1,211,355 $7,664,390 $ 1,211,355 $7,664,390
========== ========== =========== ==========

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

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The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

3

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--UNAUDITED
(In thousands)

Nine Months Ended
September 30,
----------------------
2002 2001
----------- ---------
Restated
---------

Cash flows from operating activities:
Net loss.............................................................................. $(6,230,917) $(423,507)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Cumulative effect of an accounting change, net of tax.............................. 5,303,281 --
Depreciation and amortization...................................................... 313,834 709,062
Deferred income taxes.............................................................. (553,693) (103,232)
Tax benefit associated with stock options.......................................... 1,651 18,173
Stock compensation expense......................................................... 19,612 23,691
Write-down of capitalized patent litigation costs.................................. 44,424 --
Impairment of intangible assets.................................................... 1,259,147 --
Investment write-down.............................................................. 12,216 6,000
Loss on asset dispositions......................................................... 580 390
Changes in operating assets and liabilities:
Receivables..................................................................... 124,596 24,436
Other assets.................................................................... 1,720 8,943
Accounts payable, accrued expenses and other liabilities........................ (78,196) (38,958)
Deferred revenue................................................................ (67,387) (69,528)
----------- ---------
Net cash provided by operating activities.................................... 150,868 155,470
----------- ---------
Cash flows from investing activities:
Investments and acquisitions.......................................................... (3,617) (30,908)
Purchases of marketable securities.................................................... (45,677) (85,363)
Sales and maturities of marketable securities......................................... 72,582 85,730
Sales of assets....................................................................... 3 107,011
Additions to property and equipment................................................... (6,368) (15,575)
Additions to intangible assets........................................................ (25,131) (34,593)
----------- ---------
Net cash (used in) provided by investing activities.......................... (8,208) 26,302
----------- ---------
Cash flows from financing activities:
Repayments of borrowings under bank credit facilities and capital lease obligations... (61,503) (206,940)
Repayment of senior subordinated notes................................................ -- (71,134)
Purchases of treasury stock........................................................... (63,423) --
Proceeds from exercise of stock options............................................... 1,270 13,737
Distributions to minority interests................................................... (14,069) (15,191)
----------- ---------
Net cash used in financing activities........................................ (137,725) (279,528)
----------- ---------
Effect of exchange rate changes on cash and cash equivalents.............................. 680 (276)
----------- ---------
Net increase (decrease) in cash and cash equivalents......................... 5,615 (98,032)
Cash and cash equivalents at beginning of period.......................................... 349,250 488,046
----------- ---------
Cash and cash equivalents at end of period................................................ $ 354,865 $ 390,014
=========== =========
Supplemental disclosures of cash flow information:
Cash paid for income taxes............................................................ $ 55,527 $ 69,967
Cash paid for interest................................................................ 8,001 27,194

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

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The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

4

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED
SEPTEMBER 30, 2002

(1) Organization and Basis of Presentation

Gemstar-TV Guide International, Inc., a Delaware corporation ("Gemstar" or
together with its consolidated subsidiaries, the "Company"), is a leading
global technology and media company focused on consumer entertainment.

The accompanying Unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with the accounting policies described in the
Company's 2001 Annual Report on Form 10-K, as amended, and the interim period
reporting requirements of Form 10-Q. Accordingly, certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
These Unaudited Condensed Consolidated Financial Statements should be read in
conjunction with the Company's Annual Report on Form 10-K, as amended, for the
year ended December 31, 2001.

The accompanying Unaudited Condensed Consolidated Financial Statements have
not been reviewed by an independent public accountant in accordance with
Statement of Auditing Standards No. 71, Review of Interim Financial Information
("SAS 71"), and, therefore, should not be relied upon.

The Company's unaudited condensed consolidated statements of operations and
cash flows for the three and nine months ended September 30, 2001 and its
unaudited condensed consolidated balance sheet as of December 31, 2001 have
been restated (see Note 2). All related dollar and per share amounts have been
adjusted throughout the notes to the Unaudited Condensed Consolidated Financial
Statements.

Certain financial statement items for prior periods have been reclassified
to conform with the 2002 presentation. See Note 5.

(2) Restatement

Following the recommendation of the Audit Committee of the Company's Board
of Directors, the Company made a determination to restate its previously filed
consolidated financial statements for the year ended December 31, 2001,
including the interim periods within that year, and the periods ended March 31,
2002 and June 30, 2002, related to the following transactions:

(a) The Company entered into a transaction comprised of a series of
agreements beginning in the first quarter of 2001 and completed in the second
quarter of 2001, in which the Company (1) acquired the intellectual property of
a private company in exchange for $750,000 cash and advertising with a fair
value of $20 million, and (2) paid $2 million in exchange for an option to
purchase certain assets of the private company at a price of

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

5

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

$3 million (the "Option"). The sellers of the intellectual property have the
right to require the exercise of the Option if certain performance criteria are
met. Additionally, the Company was conditionally obligated to pay $250,000 upon
the successful transfer of certain patents to the Company. The $250,000 was
paid in the third quarter of 2002.

Initially, the Company recorded the intellectual property purchased at an
amount equal to the $750,000 cash paid to the sellers in 2001 plus advertising
with a fair value of $20 million granted to the sellers. In addition, the
Option and related legal costs were recorded as an investment of $2.5 million.
During 2001, the Company recognized $20 million of advertising revenue as it
was used by the sellers and fully amortized the $20.75 million of intellectual
property.

Notwithstanding the contractual terms of the transaction, the Company did
not find sufficient contemporaneous evidence to justify the $20.75 million
valuation for the intellectual property received. The intellectual property was
not appraised at the time of the transaction. Given the substance of the
negotiations considered as a whole, the Company concluded that the most
reliable evidence of the valuation of the intellectual property was the cash
component of the transaction negotiated and agreed upon by the parties.
Consequently, the Company determined that the best evidence of the fair value
of the intellectual property was $6 million, which was the total amount of cash
consideration that the sellers had requested and could receive under the terms
of the transaction. To date, the Company has paid $3 million to the sellers in
connection with this transaction.

Accordingly, the Company determined that the transaction should be recorded
in 2001 as the acquisition of intellectual property for cash and related
expenses totaling $3.4 million. Consequently, the Company reversed $20 million
of advertising revenue as well as $20.75 million of amortization expense. The
$3.4 million recorded as intellectual property is being amortized over its
estimated useful life of eight years, commencing with the third quarter of 2001.

The effect of the restatement adjustment on the three and nine months ended
September 30, 2001 was to reduce revenues by $7.0 million and $12.9 million,
respectively, and to reduce amortization expense by $5.2 million and
$10.2 million, respectively. This restatement reduced revenues of the
Interactive Platform Sector by approximately 24% and 20% for the three and nine
months ended September 30, 2001, respectively, as calculated before restatement.

(b) The Company has reclassified approximately $2.7 million of
multi-platform advertising revenue recorded during the third and fourth
quarters of 2001 from the Interactive Platform Sector to the Media and Services
Sector. The basis for the Company's decision to reclassify this revenue is as
follows:

In the third and fourth quarters of 2001, customers of the Company who had
committed to purchase advertising on Company platforms other than the
interactive program guide ("IPG") (primarily the TV Guide Magazine) were
offered an opportunity to advertise on the IPG platform in amounts
approximately equal in value

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

6

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

with their existing commitments to advertise on the print or channel platforms.
Customers who accepted this offer were charged for the IPG advertising and were
provided with advertising of an approximate equal value on the print or channel
platforms at no additional cost. All of the revenue associated with these
transactions was recorded as IPG revenue. In the third and fourth quarters of
2001, the amount of the IPG revenue stemming from these transactions totaled
approximately $5.5 million, most of which was recorded in the fourth quarter.

In the fourth quarter of 2001, the Securities and Exchange Commission
provided additional guidance regarding multiple-element transactions in Staff
Accounting Bulletin No. 101, Revenue Recognition In Financial Statements ("SAB
101"), Frequently Asked Questions and Answers, Question 4. This guidance
directed that revenue in multiple-element transactions should be allocated
based upon the relative fair value of the elements involved in the transaction,
provided that each element represents a separate earnings process. The
Company's decision to reclassify $2.7 million in advertising revenue applies
this guidance, in that the $5.5 million in total advertising value provided to
multi-platform purchasers during the third and fourth quarters of 2001 was
evenly split between IPG and print advertising. The Company, in consultation
with its recently engaged independent accounting firm, is continuing to review
the applicability of the referenced guidance to the multi-platform advertising
transactions and, as a result, may determine that additional revenue should be
reclassified from the Interactive Platform Sector to the Media and Services
Sector.
.

In addition, the Company restated its previously filed Condensed
Consolidated Financial Statements for the periods ended June 30, 2002 and March
31, 2002, the year ended December 31, 2001, including the interim periods
within that year, the nine months ended December 31, 2000 and the year ended
March 31, 2000 for the following:

(c) The Company recognized $113.5 million in licensing revenues from January
1, 2000 through March 31, 2002 under an expired license agreement with
Scientific-Atlanta, Inc. ("Scientific-Atlanta"). Such revenue had been
recognized under SAB 101, as the Company believed there was persuasive evidence
that an arrangement existed, delivery occurred or services had been provided, a
portion of the license fees under the agreement was determinable, and the
amount recognized was deemed to be collectible.

In consultation with its recently engaged independent accounting firm, the
Company determined that it had misapplied the collectibility criteria of SAB
101, there was insufficient contemporaneous evidence of Scientific-Atlanta's
intent to pay. Accordingly, the Company has restated its previously filed
financial statements for the periods ended June 30, 2002 and March 31, 2002,
the year ended December 31, 2001, the nine months ended December 31, 2000 and
the year ended March 31, 2000 for the reversal of licensing revenues related to
Scientific-Atlanta. The restatement adjustment reduced revenues by
$12.6 million and $51.7 million for the three and nine months ended
September 30, 2001, respectively, and by $5.8 million for the nine months ended
September 30, 2002.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

7

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

(d) The Company discovered that a clerical error had been made in the
calculation of the value of warrants that were received in connection with a
licensing transaction in the second quarter of 2001. The effect of correcting
the error was to reduce the value of the warrants and related deferred revenue
by $11.8 million at the date of the transaction. In addition, deferred revenue
accreted into earnings over an 18-year period was reduced in 2001 by $338,000
as a result of the corrected warrant valuation. During the fourth quarter of
2001, the write-down of the fair value of the investment in the warrants
decreased from $10.4 million as originally recorded to $5.2 million as adjusted.

(e) The Company determined that one of its equity affiliates incorrectly
accounted for warrants of one of its investees. Specifically, the equity
affiliate incorrectly accounted for these warrants under Statement of Financial
Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in
Debt and Equity Securities, instead of under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, in the three months ended
December 31, 2001. The impact of the restatement is to record an adjustment of
$9.1 million that was previously recorded as other comprehensive income within
stockholders' equity as a charge to other income (expense) during the fourth
quarter of 2001. The effect of the adjustment as of December 31, 2001 increased
accumulated deficit and increased accumulated other comprehensive income by
$9.1 million. This restatement did not impact consolidated results of
operations for the three and nine months ended September 30, 2001.

In recording the above-mentioned restatements, the Company also recorded the
applicable income tax effects.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

8

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

The Unaudited Condensed Consolidated Financial Statements as of December 31,
2001 and for the three and nine months ended September 30, 2001 have been
restated to include the effects of the corrections described above. These
Unaudited Condensed Consolidated Financial Statements have not been audited or
reviewed by an independent accounting firm and should not be relied upon. The
following financial statement line items were impacted:

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2001
----------------------
Reported Restated
---------- ----------

Receivables, net....................................... $ 392,717 $ 285,076
Total current assets................................... 837,527 729,886
Finite-lived intangible assets, net.................... 2,239,312 2,242,503
Marketable securities and other investments............ 116,732 107,569
Total assets........................................... 9,686,641 9,573,028
Accounts payable and accrued expenses.................. 285,642 285,761
Current portion of deferred revenue.................... 261,082 261,420
Total current liabilities.............................. 608,925 609,382
Deferred tax liability................................. 1,127,933 1,086,724
Deferred revenue, less current portion................. 121,330 109,507
Accumulated deficit.................................... (771,879) (838,638)
Accumulated other comprehensive income, net of tax..... 18,380 24,101
Total stockholders' equity............................. 7,551,138 7,490,100
Total liabilities and stockholders' equity............. 9,686,641 9,573,028

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
-------------------- ----------------------
Reported Restated Reported Restated
--------- --------- ---------- ----------

Revenues.......................................... $ 318,936 $ 299,863 $ 981,633 $ 917,498
Depreciation and amortization..................... 240,350 235,199 719,213 709,062
Total operating expenses.......................... 455,097 449,946 1,385,860 1,375,709
Operating loss.................................... (136,161) (150,083) (404,227) (458,211)
Loss before income taxes and extraordinary item... (148,881) (162,803) (434,995) (488,979)
Income tax benefit................................ (17,408) (22,552) (47,625) (67,572)
Loss before extraordinary item.................... (131,473) (140,251) (387,370) (421,407)
Net loss.......................................... (131,473) (140,251) (389,470) (423,507)
Basic and diluted loss per share:
Loss before extraordinary item................. $ (0.32) $ (0.34) $ (0.94) $ (1.02)
Net loss....................................... $ (0.32) $ (0.34) $ (0.95) $ (1.03)

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

9

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
---------------------- ----------------------
Reported Restated Reported Restated
---------- ---------- ---------- ----------

Balance at beginning of period..... $7,819,764 $7,763,782 $8,055,963 $8,025,240
Net loss........................... (131,473) (140,251) (389,470) (423,507)
Comprehensive loss................. (141,138) (149,916) (410,265) (444,302)
Balance at end of period........... 7,729,150 7,664,390 7,729,150 7,664,390

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended
September 30, 2001
--------------------
Reported Restated
--------- ---------

Net loss.................................................... $(389,470) $(423,507)
Depreciation and amortization............................... 719,213 709,062
Deferred income taxes....................................... (84,118) (103,232)
Receivables................................................. (26,603) 24,436
Other assets................................................ 15,159 8,943
Accounts payable, accrued expenses and other liabilities.... (38,126) (38,958)
Deferred revenue............................................ (82,449) (69,528)
Investments and acquisitions................................ (33,308) (30,908)
Additions to intangible assets.............................. (32,193) (34,593)

(3) Accounting Change--Goodwill and Intangible Assets

The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
142, Goodwill and Other Intangible Assets ("Statement 142"), effective January
1, 2002. Under Statement 142, goodwill and certain other intangible assets are
no longer systematically amortized but instead are reviewed for impairment at
least annually and any excess in carrying value over the estimated fair value
is charged to results of operations. The previous method for determining
impairment utilized an undiscounted cash flow approach for the initial
impairment assessment, while Statement 142 utilizes a fair value approach. The
indefinite-lived intangible asset and goodwill impairment charges discussed
below are the result of the change in the accounting method for determining the
impairment of goodwill and certain intangible assets.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

10

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

The Company, primarily through the acquisition of TV Guide on July 12, 2000,
has a significant amount of goodwill and indefinite-lived intangible assets,
consisting of trademark and publishing rights.

In connection with the adoption of Statement 142, the Company determined
that the Company's trademark, trade name and publishing rights have indefinite
useful lives. Pursuant to the transitional rules of Statement 142, the Company
performed an impairment test of these assets, which resulted in an impairment
charge of $297.8 million ($187.8 million, net of tax) as of January 1, 2002.
The impairment charge represents the excess of the carrying amount of a
trademark over its estimated fair value as determined by the Company, with the
assistance of a third party valuation expert, utilizing the relief from royalty
valuation method. This method estimates the benefit to the Company resulting
from owning rather than licensing the trademark. The pre-tax charge impacted
the Company's segments as follows: Technology and Licensing, $133.9 million;
Interactive Platform, $129.8 million; and Media and Services, $34.1 million.

Also in connection with the adoption of Statement 142, the Company completed
the transitional goodwill impairment test during the second quarter of 2002 and
recorded an impairment charge of $5,115.5 million as of January 1, 2002. A
third party valuation expert, considering both income and market approaches,
estimated the enterprise values of certain reporting units. The impaired
goodwill is not deductible for tax purposes, and as a result, no tax benefit
was recorded in relation to the impairment charge. The charge impacted the
Company's segments as follows: Technology and Licensing, $1,821.3 million;
Interactive Platform, $2,890.2 million; and Media and Services, $404.0 million.

In total, the charges to goodwill and indefinite-lived intangible assets
have been recorded as the cumulative effect of an accounting change in the
amount of $5,303.3 million, net of tax as of January 1, 2002 in the
accompanying unaudited condensed consolidated statements of operations.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

11

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

Prior to the adoption of Statement 142, the Company amortized goodwill and
indefinite-lived intangible assets over their estimated useful lives ranging
from 5 to 40 years. Had the Company not amortized goodwill and indefinite-lived
intangible assets consistent with the provisions of Statement 142 in prior
periods, the Company's net loss would have been affected as follows (in
thousands, except per share data):

Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
2002 2001 2002 2001
-------- ---------- --------- ----------
(Restated) (Restated)

Reported loss before cumulative effect of an accounting
change......................................................... $(17,306) $(140,251) $(927,636) $(423,507)
Add back: Goodwill amortization.................................. -- 109,786 -- 333,029
Add back: Indefinite-lived intangible assets amortization, net of
tax............................................................ -- 5,482 -- 17,194
-------- --------- --------- ---------
Adjusted loss before cumulative effect of an accounting
change......................................................... $(17,306) $ (24,983) $(927,636) $ (73,284)
======== ========= ========= =========
Basic and diluted loss per share before cumulative effect of an
accounting change:
Reported...................................................... $ (0.04) $ (0.34) $ (2.25) $ (1.03)
Add back: Goodwill amortization............................... -- 0.27 -- 0.81
Add back: Indefinite-lived intangible assets amortization,
net of tax.................................................. -- 0.01 -- 0.04
-------- --------- --------- ---------
Adjusted basic and diluted loss per share before
cumulative effect of an accounting change................... $ (0.04) $ (0.06) $ (2.25) $ (0.18)
======== ========= ========= =========

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

12

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

Changes in the carrying amount of goodwill and intangible assets with
indefinite lives for the nine months ended September 30, 2002 and 2001 are as
follows (in thousands):

2002 2001
---------------------------------- -------------------------------
Trademark Trademark
and Trade Publishing and Trade Publishing
Goodwill Name Rights Goodwill Name Rights
----------- --------- ---------- ---------- --------- ----------

Balance at December 31,........... $ 5,485,807 $ 653,018 $240,407 $5,901,967 $662,613 $259,398
Current period additions and
adjustments to purchase price
allocation...................... (1,088) (3,200) -- 50,143 7,821 --
Amortization expense.............. -- -- -- (333,029) (12,721) (14,549)
Transitional impairment charge.... (5,115,514) (297,807) -- -- -- --
Interim impairment charge (Note 4) (22,833) (24,004) -- -- -- --
----------- --------- -------- ---------- -------- --------
Balance at September 30,.......... $ 346,372 $ 328,007 $240,407 $5,619,081 $657,713 $244,849
=========== ========= ======== ========== ======== ========

In conjunction with the adoption of Statement 142, the Company reassessed
the useful lives and residual values of its finite-lived intangible assets
acquired in purchase business combinations and determined that no revisions
were necessary. Intangible assets with finite lives at September 30, 2002 and
December 31, 2001 are as follows (in thousands):

Impairment Amortization
Accumulated Charge/Write Period
Cost Amortization Down Net Balance (Years)
---------- ------------ ------------ ----------- ------------

September 30, 2002
Intangible assets with finite lives:
Contracts (Note 4)........................... $1,932,000 $(392,477) $(1,210,799) $ 328,724 5-10
Customer lists............................... 722,781 (478,669) -- 244,112 3-5
Patents (Note 8)............................. 246,496 (52,187) (45,122) 149,187 5-15
Other........................................ 2,112 (832) (813) 467 5
---------- --------- ----------- ----------
Total finite-lived intangible assets..... $2,903,389 $(924,165) $(1,256,734) $ 722,490
========== ========= =========== ==========
December 31, 2001--Restated
Intangible assets with finite lives:
Contracts.................................... $1,932,000 $(284,742) $ -- $1,647,258 5-10
Customer lists............................... 722,781 (315,004) -- 407,777 3-5
Patents...................................... 221,364 (35,348) -- 186,016 5-15
Other........................................ 2,041 (589) -- 1,452 5
---------- --------- ----------- ----------
Total finite-lived intangible assets..... $2,878,186 $(635,683) $ -- $2,242,503
========== ========= =========== ==========

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

13

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

Amortization expense was $288.6 million and $681.5 million (restated) for
the nine months ended September 30, 2002 and 2001, respectively. Estimated
amortization expense for the remainder of 2002 and the succeeding five years is
expected to be as follows: $69.1 million--2002 (remainder); $191.3
million--2003; $94.7 million--2004; $76.2 million--2005; $55.1 million--2006;
and $54.1 million--2007.

(4) Impairment Charges

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets ("Statement 144"), the Company records impairment losses
on long-lived assets used in operations when events and circumstances indicate
that long-lived assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying amounts of
those assets. During the second quarter of 2002, an unfavorable ruling in a
proceeding before the United States International Trade Commission ("ITC") (see
Note 10) coupled with a sustained decline in the Company's market
capitalization triggered an interim assessment by the Company to determine
whether certain of its finite-lived intangible assets may be impaired.
Accordingly, the Company estimated the undiscounted future net cash flows to be
generated by these finite-lived intangible assets to be less than their
carrying amount of $1,463.0 million. The cash flow projections related to these
finite-lived intangible assets as of June 30, 2002 reflected certain
anticipated changes in the Company's advertising delivery mechanism on TV Guide
Interactive and anticipated consolidation in the cable television industry. The
Company, with the assistance of a third party valuation expert, then estimated
the fair value of these finite-lived intangible assets at $250.7 million using
the traditional approach under Statement 144 as a measure of fair value. This
resulted in a pre-tax impairment loss of $1,212.3 million.

Under Statement 142, in addition to an annual test, goodwill and
indefinite-lived intangible assets must be tested on an interim basis if events
or circumstances indicate that the estimated fair value of the asset
has decreased below its carrying value. During the second quarter of 2002, the
unfavorable ruling in the ITC proceeding and the sustained decline in the
Company's market capitalization triggered an interim assessment by the Company
to determine whether the fair value of goodwill and indefinite-lived intangible
assets may be less than their carrying values as of June 30, 2002. The Company,
with the assistance of a third-party valuation expert, estimated the fair
values of the Company's indefinite-lived intangible assets and certain
reporting units as of June 30, 2002. As a result, the Company determined that
impairment charges of $22.8 million and $24.0 million should be recorded to
goodwill and trademark, respectively, as of June 30, 2002.

In total, interim impairment charges of $1,259.1 million were recorded as
operating expenses in the accompanying condensed consolidated statements of
operations for the nine months ended September 30, 2002. Their impacts on the
Company's segments were $(147.0) million to the Technology and Licensing
sector, $(1,104.0) million to the Interactive Platform sector, and $(8.1)
million to the Media and Services sector.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

14

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

(5) Reclassification--Cooperative Advertising and Product Placement Costs

In November 2001, the Financial Accounting Standards Board's ("FASB's")
Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue No.
01-09, Accounting for Consideration Given by a Vendor to a Customer (Including
a Reseller of the Vendor's Products). EITF No. 01-09, which is effective for
periods commencing after December 31, 2001, clarifies the income statement
classification of costs incurred by a vendor for certain cooperative
advertising and product placement paid to a vendor's customers. As a result of
the Company's adoption of the EITF consensus, certain of the Company's
cooperative advertising and product placement costs previously classified as
operating expenses have been reflected as a reduction of revenues earned from
that activity. Where applicable, amounts presented in prior periods have been
reclassified to comply with the income statement classifications for the
current period. Approximately $16.2 million and $40.2 million of cooperative
advertising and product placement costs previously classified as expenses have
been reflected as a reduction of revenues in the income statement for the three
and nine-month periods ended September 30, 2001, respectively.

(6) Acquisitions and Sales

TV Guide--Purchase Reserves

For the nine months ended September 30, 2002, approximately $10.9 million
($7.3 million in third-party contract termination costs and $3.6 million in
separation costs) has been charged against the reserve for third-party contract
termination and separation costs included in the purchase price allocation from
the acquisition of TV Guide. Additionally, for the same period, the reserve was
reduced by approximately $2.4 million and credited against goodwill. The
reserve had an outstanding balance of $14.9 million at December 31, 2001. See
the Company's Annual Report on Form 10-K for the year ended December 31, 2001,
as amended, for a description of the transaction. The Company expects that the
remaining reserve for third-party contract termination and separation costs of
$1.6 million at September 30, 2002 will be expended by year end.

WGN Superstation Transaction

In April 2001, the Company sold the business that distributes the WGN
Superstation signal. No gain or loss was recognized as a result of the
transaction. Concurrent with this transaction, the Company received a
$100 million advertising commitment over a six-year period from the acquirer.

SkyMall Transaction

On July 18, 2001, the Company acquired all of the outstanding common stock
of SkyMall. Under the terms of the agreement, SkyMall's stockholders received
0.03759 shares of Gemstar common stock and $1.50 for each

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

15

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

share of SkyMall common stock outstanding. The Unaudited Condensed Consolidated
Financial Statements include the results of operations of SkyMall from July 18,
2001. SkyMall is a specialty retailer that provides a large selection of
premium-quality products and services to consumers from a wide variety of
merchants and partners.

The aggregate purchase price of the SkyMall Transaction was $50.1 million,
which included cash of $22.2 million and approximately 741,000 shares of
Gemstar common stock issued to SkyMall stockholders at $36.58 per share, the
average price of the Company's common stock over the two-day period before and
after the SkyMall Transaction was agreed to and announced.

The purchase price also included $742,000, representing the fair value of
unexercised SkyMall options and warrants assumed by Gemstar and certain
transaction costs.

The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition (in thousands). The
Company finalized the allocation of the purchase price during the second
quarter of 2002.

Assets
Current assets............. $ 8,464
Property and equipment..... 7,207
Intangible assets.......... 4,500
Other assets............... 23
Goodwill................... 61,707
-------
81,901
Liabilities
Current liabilities........ 31,813
-------
Net purchase price............ $50,088
=======

The Company finalized its allocation of the purchase price to the fair value
of the acquired trade name at $4.5 million. The trade name is considered an
indefinite-lived intangible asset and is not subject to amortization.

The Company finalized its allocation of goodwill ($61.7 million) to its
applicable reporting unit in accordance with Statement 142. Goodwill generated
in this transaction is not subject to amortization in accordance with Statement
142 and is not deductible for tax purposes. In connection with the adoption of
Statement 142, the Company recorded an impairment charge of $37.7 million as of
January 1, 2002 related to the goodwill from the acquisition of SkyMall. The
goodwill balance at September 30, 2002 from this acquisition was $24.0 million
(see Note 3).

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

16

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

The following unaudited pro forma financial information reflects the
Company's results of operations for the three and nine-month periods ended
September 30, 2001 as though the SkyMall transaction had been completed as of
January 1, 2001 (in thousands, except per share amounts):

Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ----------------------
2002 2001 2002 2001
-------- --------- ----------- ---------
Restated
---------

Revenues................................ $253,350 $ 301,881 $ 815,454 $ 940,923
Net loss................................ (17,306) (142,865) (6,230,917) (426,987)
Basic and diluted loss per share........ (0.04) (0.35) (15.14) (1.04)

Magazine Distribution Business

In June 2002, the Company exited from its magazine distribution business by
assigning its existing distribution contracts to a third party and contracting
with the same party for distribution of TV Guide Magazine. The Company
recognized approximately $3.3 million in exit costs, which are included as
operating expenses in the accompanying condensed consolidated statements of
operations. No gain or loss was recognized as a result of this transaction.

(7) Receivables, net

At September 30, 2002, approximately $65.6 million, or 41%, of the Company's
net receivables are due from five entities.

(8) Capitalized Patent Costs

The Company's accounting policy with respect to patent prosecution and
litigation costs incurred to protect, strengthen and enforce the Company's
intellectual property rights is to defer such costs as intangible assets and to
amortize them using the straight-line method over the remaining lives of the
related patents. The Company reviews capitalized patent litigation costs
whenever events or changes in circumstances, such as adverse administrative or
judicial rulings, indicate that certain deferred costs should be expensed. The
propriety of such characterizations is determined by the Company based, in
part, on the advice of outside counsel. In June 2002, the Company received an
unfavorable ruling in a proceeding before the ITC involving three patents. The
ITC determined not to review this decision on August 29, 2002. The Company also
received an unfavorable ruling in the SuperGuide case. (See Note 10.) Although
the Company has appealed the ITC and SuperGuide rulings, the Company concluded
that as a result of the rulings, certain capitalized patent litigation costs
could no longer be

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

17

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

considered to strengthen the value of the patents. Accordingly, the Company
recorded a write-down of approximately $44.4 million to capitalized patent
litigation costs during the three months ended June 30, 2002, and will expense
all future legal costs associated with the SuperGuide and ITC cases. The
Company continues to capitalize patent prosecution and litigation costs which
the Company believes will protect, strengthen and enforce the Company's
intellectual property rights. (See Note 15.)

(9) Credit Arrangements

The Company's wholly owned subsidiary, TV Guide, has a $300 million six-year
revolving credit facility and a $300 million four-year amortizing term loan,
both expiring in February 2005 with a group of banks. Borrowings under the
credit facilities bear interest (2.81% at September 30, 2002) either at the
banks' prime rate or LIBOR, both plus a margin based on a sliding scale tied to
TV Guide's leverage ratio, as defined in the facility. The credit facilities
are guaranteed by certain subsidiaries of TV Guide and the stock of TV Guide's
subsidiaries is pledged as collateral. The credit facilities impose
restrictions on TV Guide's ability to pay dividends to Gemstar tied to TV
Guide's leverage ratio. This restriction does not apply to Gemstar's ability to
pay dividends. As of September 30, 2002, TV Guide had available borrowing
capacity under the six-year revolving credit facility of $160.6 million.
Principal payments of $15 million in the remainder of 2002, $90 million in 2003
and $23 million in 2004 are due under the $300 million amortizing term loan.
Outstanding borrowings at September 30, 2002 were $138.4 million under the
revolving credit facility and $128.0 million under the term loan. At September
30, 2002, the Company had an outstanding letter of credit issued under the
revolving credit facility for $1.0 million. The Company has determined that
there is a reasonable likelihood that TV Guide will be unable to maintain
compliance with a financial covenant in its term loan agreement during the
coming twelve months. The Company is currently evaluating options to maintain
compliance or mitigate the effects of any noncompliance.

The Company is a party to a loan guaranty to assist a printing services
supplier in obtaining a line of credit and term loans with a bank. The maximum
exposure to the Company created by this guaranty is $10.0 million.

(10) Legal Proceedings

The following is a description of material legal proceedings known to the
Company that have been filed subsequent to the Company's Form 10-K for the year
ended December 31, 2001, Form 10-Q for the period ended March 31, 2002 and Form
10-Q for the period ended June 30, 2002 or material proceedings previously
described in such filings that have undergone significant changes.

On April 26, 1999, the Judicial Panel on Multi-District Litigation ("MDL
Panel") ordered that certain patent infringement lawsuits be coordinated or
consolidated for pretrial proceedings in the Northern District of Georgia

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

18

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

(the "MDL Transfer Order"). These lawsuits are more fully described in the
Company's Form 10-K filing for the year ended December 31, 2001, as amended.
These cases involve Scientific-Atlanta and Pioneer Corporation, among other
parties and involve several patents. On August 30, 2002, the Company received
an Order from that court finding that two of the patents involved in these
cases were not infringed by certain digital set-top box products produced by
Scientific-Atlanta and Pioneer. On November 4, 2002, the court ruled that the
remaining Scientific-Atlanta and Pioneer products at issue in this proceeding
were not infringed by the two patents that were the subject of the August 30th
ruling. The Company intends to seek review of these decisions in the most
expedited manner possible.

The MDL proceedings also involve three patents which were involved in a case
in the United States District Court for the Western District of North Carolina
entitled SuperGuide Corporation v. DirecTV Enterprises, Inc., et al. (the
"SuperGuide case"), described more fully herein. The Company is a third-party
defendant in the SuperGuide case and has joined in SuperGuide's infringement
allegations against EchoStar. In two orders dated July 2, 2002 and July 25,
2002, the North Carolina court ruled that the products of the defendants in the
SuperGuide case, including EchoStar's, did not infringe the patents at issue.
This ruling was based in part on a previous ruling of that court interpreting
the scope of the patents at issue.

On October 25, 2002, the Georgia court hearing the MDL cases ruled that it
was obligated to accept the North Carolina court's previous ruling interpreting
the scope of the patents at issue without deciding whether the underlying
ruling was correct as a matter of law. The Georgia court has not ruled on
Scientific-Atlanta's infringement of these three patents under this
interpretation. The Company has previously announced that it is appealing the
SuperGuide case to the United States Court of Appeals for the Federal Circuit.

On October 18, 1999, a former employee of ODS Technologies, L.P. ("ODS"),
now a majority owned subsidiary of the Company, filed a complaint against ODS
and TV Guide in a Florida federal court, which complaint was amended on
November 12, 1999, asserting causes of action for violations of certain federal
statutes governing pension plans and for equitable estoppel. The amended
complaint sought an unspecified amount of damages for benefits allegedly due to
the plaintiff under his employment agreement with ODS. On April 22, 2002, the
court granted ODS and TV Guide summary judgment dismissing the case. The former
employee appealed the grant of summary judgment, but the appeal subsequently
was dismissed. The plaintiff has filed a motion for reinstatement and this case
is currently pending on appeal.

On January 18, 2000, the Company's StarSight subsidiary filed a patent
infringement action against TiVo Inc. ("TiVo") in the U.S. District Court for
the Northern District of California. The suit claims, among other matters, that
TiVo willfully infringed certain StarSight intellectual property by virtue of
TiVo's deployment, marketing, offers to sell and sale of personalized video
recorder devices containing an unlicensed IPG. StarSight is seeking an
injunction and monetary damages. On February 25, 2000, TiVo answered
StarSight's Complaint,

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

19

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

and also filed counterclaims against the Company and StarSight alleging, among
others, that the Company has violated federal antitrust law and the California
unfair business practices act. In its counterclaims, TiVo seeks, among other
relief, damages and an injunction. On August 5, 2002, the court entered a
stipulation at the parties' request to stay the proceeding pending resolution
of the investigation before the ITC, described below, and the court has
accepted that agreement. After the resolution of any and all appeals stemming
from the ITC investigation (including any appeal to the United States Court of
Appeals for the Federal Circuit), we expect the court will be notified of this
fact and expect the case to be re-activated at that point.

During July and August 2000, TV Guide was served with more than 20 class
action complaints filed primarily in the U.S. District Court for the Southern
District of New York on behalf of magazine subscribers. These complaints, which
have been consolidated into a single action, allege that TV Guide, the Magazine
Publishers Association ("MPA"), and 12 other publishers of consumer magazines
have violated federal antitrust laws by conspiring to limit the discounting of
magazine subscription prices by means of rules adopted by the MPA and the Audit
Bureau of Circulation. The plaintiffs seek injunctive relief, unspecified
damages (trebled), and attorneys' fees and costs. Plaintiffs filed a motion for
partial summary judgment. After oral argument was heard on January 10, 2001,
the parties entered into settlement discussions. Settlement negotiations
continued over the next several months and in April 2002, the defendants
submitted final settlement documents to plaintiffs for their approval.
Subsequently, the parties signed a settlement agreement, and on July 3, 2002,
plaintiffs filed a motion for preliminary approval of the settlement. On August
29, 2002, the court held a hearing at which the pending motion was discussed.
The court entered an order on September 20, 2002, granting the motion for
preliminary approval.

On November 17, 2000, Pioneer Digital Technologies, Inc. filed suit against
the Company and various of its subsidiaries in Los Angeles County Superior
Court. On January 12, 2001, Pioneer Digital Technologies filed its first
amended complaint which claims, among other matters, that the Company and
certain of its subsidiaries have violated state antitrust and unfair
competition laws. Pioneer Digital Technologies is seeking damages and
injunctive relief against the Company. The parties are in pretrial proceedings.
In May 2002, the court set trial for September 2003.

On December 29, 2000, Gemstar International Group Limited., Barnes & Noble,
Inc. and Thomson Consumer Electronics were named as defendants in an action for
patent infringement by Jennifer Landau, an individual, that relates to e-book
technology. The Company was served with this action in May 2001. This action,
captioned Jennifer Landau v. Barnes & Noble, et al., USDC Case No. C-00-593-B,
was pending in the U.S. District Court for the District of New Hampshire. In
May 2002, Ms. Landau voluntarily dismissed this action with prejudice, and
there are no longer any claims pending against the Company or any other parties
to this litigation.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

20

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

On February 14, 2001, the Company and its StarSight subsidiary filed a
complaint requesting that the ITC commence an investigation pursuant to Section
337 of the Tariff Act of 1930, as amended, 19 U.S.C. Section 1337 ("Section
337"), regarding imports of certain set-top boxes and components thereof. The
complaint alleges that Pioneer Corporation, Pioneer Digital Technologies, Inc.,
Pioneer North America, Inc., Pioneer New Media Technologies, Inc.,
Scientific-Atlanta, Inc., EchoStar Communications Corporation and SCI Systems,
Inc. (collectively "Respondents"), are violating Section 337 by their unlawful
importation into the United States, sale for importation into the United
States, and/or sale in the United States after importation, of set-top boxes
and/or components that infringe, directly, contributorily or by inducement, of
certain patents owned by the Company. The complaint requests an order excluding
from entry into the United States all imported set-top boxes and components
that infringe, directly, contributorily or by inducement, any claims of the
patents in suit, and directing Respondents to cease and desist from importing,
marketing, advertising, demonstrating, warehousing, distributing, selling
and/or using set-top boxes or components that so infringe. On or about March
16, 2001, the ITC instituted the requested investigation referred to as "In the
Matter of Certain Set-Top Boxes and Components Thereof, Investigation No.
337-TA-454 (ITC)". An administrative hearing was held during December 2001. On
June 21, 2002, the Administrative Law Judge issued his initial determination
("ID"), finding that all of the patents were valid, that none of the patents at
issue had been infringed by any of the Respondents, that one of the patents at
issue was unenforceable both because it had been misused by the Company and
also because a co-inventor had not been named on the patent, and that the
Company failed to establish the technical prong of the ITC's domestic industry
requirement, which requires the Company to practice its inventions covered by
the patents in suit. The Company believes the ID is erroneous in many respects
and that the proper application of the law does not support it. On July 5,
2002, the Company and StarSight filed their Petition for Review by the ITC of
the ID. Respondents and ITC Staff also filed Petitions for Review of certain
aspects of the ID. On August 29, 2002, the ITC determined not to review the ID
and entered an additional finding with regard to the technical prong of the
domestic industry requirement on one claim of one of the patents. The
Commission took no position on the patent misuse findings of the Administrative
Law Judge. The Company filed a notice of appeal of the ITC determination to the
United States Court of Appeals for the Federal Circuit on October 25, 2002.

On March 23, 2001, Gemstar Development Corporation, a wholly owned
subsidiary of the Company, was added as a third-party defendant in the lawsuit
of SuperGuide Corporation v. DirecTV Enterprises, Inc., et al., in the U.S.
District Court for the Western District of North Carolina. The original claims
brought by SuperGuide Corporation against the defendants in this lawsuit are
for patent infringement with respect to three patents (the "SuperGuide
Patents"). In 1993, Gemstar Development Corporation received a license to the
SuperGuide Patents from SuperGuide Corporation within certain defined fields of
use. Defendants asked the court to join Gemstar Development Corporation to
these proceedings as a necessary party. After it was added as a party, Gemstar
Development Corporation brought claims for declaratory relief and breach of
contract against SuperGuide in this lawsuit relating to the 1993 license
agreement between SuperGuide and Gemstar Development Corporation. In addition,
Gemstar Development Corporation has asserted claims against EchoStar for
infringing the SuperGuide

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

21

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

Patents within Gemstar's defined fields of use. By orders dated July 2, 2002
and July 25, 2002, the District Court granted defendants' motion for summary
judgment finding that defendants do not infringe the SuperGuide Patents based
upon the manner in which the court previously construed the SuperGuide Patents
and dismissed all remaining claims in the case without prejudice. The Company
has filed a notice of appeal to the United States Court of Appeals for the
Federal Circuit.

On November 2, 2001, Thomson multimedia, Inc. ("Thomson") sought leave to
add the Company and certain subsidiaries into a case captioned Pegasus
Development Corporation and Personalized Media Communications, L.L.C. v.
DirecTV, Inc., Hughes Electronics Corporation, Thomson Consumer Electronics,
Inc. and Philips Electronics North America Corporation; Thomson multimedia,
Inc. v. Pegasus Development Corporation, Personalized Media Communications,
L.L.C., TVG-PMC, Inc., StarSight Telecast, Inc., and Gemstar-TV Guide
International, Inc., United States District Court for the District of Delaware,
Case No. 00-1020 (GMS). At that time, Thomson asserted a declaratory judgment
claim against the Gemstar parties seeking a declaration of noninfringement and
invalidity of certain patents as to which the Company is a licensee. In
addition to its claim for declaratory relief (discussed above), Thomson has now
also added a claim for antitrust violations under federal and state law. On
April 22, 2002, Thomson also filed a tag-along notice with the Judicial Panel
for Multi-District Litigation (the "MDL Panel") requesting that this entire
action be transferred to Georgia for coordinated pretrial proceedings with the
MDL proceedings discussed in the Company's Form 10-K for the period ended
December 31, 2001, as amended. On June 3, 2002, the MDL Panel issued a
Conditional Transfer Order and Simultaneous Separation and Remand of Certain
Claims conditionally transferring Thomson's antitrust claims to Georgia, but
separating and remanding the balance of the claims in this case to Delaware. In
response, Thomson filed a motion with the MDL Panel to transfer the entire case
to Georgia. On October 16, 2002, the MDL Panel issued an Order of Transfer and
Simultaneous Separation and Remand of Certain Claims in which it denied
Thomson's motion to transfer the entire case to Georgia. In so ruling, the MDL
Panel adopted its decision in the June 3, 2002 Conditional Transfer Order and
transferred Thomson's antitrust claims to Georgia, but separated and remanded
the balance of the claims in this case to Delaware. Now that the MDL Panel has
issued its final order, the Company understands that the Delaware litigation
will be reactivated, and Thomson's antitrust claims will be transferred and
coordinated for pretrial purposes with the Georgia MDL Proceedings.

On November 30, 2001, Thomson initiated an arbitration with the American
Arbitration Association against the Company. The Statement of Claims filed by
Thomson alleges that the Company has breached certain obligations under a group
of agreements signed by the parties as of December 31, 1999 relating to a joint
venture between the parties for revenue sharing of advertising on electronic
programming guides. On January 7, 2002, the Company filed an Answering
Statement and Counterclaim denying all allegations of the claims filed by
Thomson and asserting counterclaims against Thomson and Thomson multimedia,
S.A. ("Thomson S.A.") alleging, among other things, that Thomson S.A. had
breached certain of its obligations under one of the agreements signed by the
parties as of December 31, 1999 relating to the introduction of electronic
programming

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

22

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

guides in Europe. In May 2002, the Company settled this dispute and entered
into a binding Letter of Intent with Thomson, and the arbitration has been
stayed pending the execution of a definitive agreement.

In April and May 2002, the Company and its principal executive officers and
directors were served with a number of complaints, filed in the United States
District Court for the Central District of California, alleging violations of
the Securities Exchange Act of 1934 (the "1934 Act") and the Securities Act of
1933 (the "1933 Act"). Also named in several of the complaints is The News
Corporation Limited ("News Corp."), a shareholder of the Company. The
complaints name some or all of the same parties as defendants, and purport to
state claims on behalf of all persons who purchased the Company's common stock
during various periods, the broadest of which is August 11, 1999 through April
4, 2002. More particularly, the alleged claims are brought under Sections 10(b)
and 20(a) of the 1934 Act, Section 11 of the 1933 Act and SEC Rule 10b-5. The
essence of the allegations is that the defendants allegedly intentionally
failed to properly account for revenue accrued from Scientific-Atlanta; failed
to properly account for a non-monetary transaction, pursuant to which
intellectual property rights were obtained, in exchange for cash and
advertising credits; and failed to properly record the fair value of technology
investments and marketable securities acquired in connection with the Company's
acquisition of TV Guide, Inc. Plaintiffs allege that this had the effect of
materially overstating the Company's reported financial results. Pursuant to
the parties' stipulation, the District Court has consolidated all of the
lawsuits (and any subsequently filed lawsuits) into one case known as In re
Gemstar-TV Guide International Securities Litigation, Master File No. 02-2775,
NM (PLAx) (C.D. Cal.) Several groups of plaintiffs and their counsel filed
motions to be appointed lead plaintiff and lead plaintiff's counsel. Pursuant
to an amended order dated August 9, 2002, the Court appointed the Teachers
Retirement System of Louisiana and the General Retirement System of the City of
Detroit as co-lead plaintiffs, and appointed Bernstein, Litowitz, Berger &
Grossman, L.L.P., as lead plaintiffs' counsel. Plaintiff Georgica Advisors has
requested that the court reconsider that decision and appoint it as lead
plaintiff. The motion is scheduled to be heard on November 18, 2002. Lead
plaintiffs are expected to file their consolidated complaint on or before
December 12, 2002 Defendants' response to the consolidated complaint is
expected to be due on or before February 14, 2003. In addition, an Oklahoma
limited partnership filed a lawsuit in the United States District Court for the
Northern District of Oklahoma on October 7, 2002 against some of the same
defendants, including the Company, based on the same core allegations and
purported causes of action alleged in the consolidated class action. Also, the
Company learned on or about November 1, 2002 that, based on these same core
allegations, a separate lawsuit was filed in the federal district court for the
Central District of California against the Company and some of the same
defendants. The lawsuit alleges state law based derivative claims, including
those based on various breaches of fiduciary duty. The Company believes the
allegations are without merit and intends to defend these actions vigorously.

In April and May 2002, the Company, along with several of its principal
executive officers and directors, were also sued in four purported shareholder
derivative actions. Three of these actions were filed in the Superior Court of
the State of California for the County of Los Angeles and one action was filed
in the Court of Chancery

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

23

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

of the State of Delaware, County of New Castle. These purported derivative
lawsuits allege various breaches of fiduciary duty and violations of the
California Corporations Code based upon the same general set of alleged facts
and circumstances as the federal shareholder suits. Pursuant to the parties'
stipulation, the California actions have been consolidated into one case before
a single judge. Plaintiffs are required to file their consolidated amended
complaint by late December 2002. On October 31, 2002, the Company was served
with another purported shareholder derivative action, this one in the United
States District Court for the Central District of California, based upon the
same general set of alleged facts and circumstances. The Company believes the
allegations are without merit and intends to defend the actions vigorously.

On August 22, 2002, Scientific-Atlanta filed an adversary complaint in the
United States Bankruptcy Court for the Northern District of California. The
Complaint alleged that by seeking to acquire certain assets (including certain
patents) owned by DIVA Systems Corporation ("DIVA"), the Company would be in
violation of a federal antitrust statute, Clayton Act (S)7, 15 U.S.C. (S) 18.
DIVA currently is a debtor-in-possession pursuant to Chapter 11 of the
bankruptcy code. Also on August 22, 2002, Scientific-Atlanta filed a tag along
notice with the MDL Panel, seeking to have its complaint concerning the
acquisition of DIVA assets transferred to the U.S. District Court for the
Northern District of Georgia, the court overseeing the cases subject to the MDL
Transfer Order described above. On October 2, 2002, the Bankruptcy Court
dismissed Scientific-Atlanta's adversary complaint. Shortly thereafter,
Scientific-Atlanta notified the MDL Panel that the Bankruptcy Court had
dismissed its adversary complaint.

On September 6, 2002, TV Guide Distribution, Inc. ("TVGD"), together with
six other plaintiffs comprising national distributors of magazines, filed an
action entitled TV Guide Distribution, Inc. et al. v. Ronald E. Scherer et al.,
in the Court of Common Pleas, Franklin County, Ohio (Case No. 02CVH09 9891).
The complaint named more than thirty defendants, made up of principals and
shareholders of United Magazine Company, Inc. ("Unimag") and their affiliates,
regional wholesalers of magazines that went out of business in September 1999,
leaving more than $100 million of outstanding receivables due and owing to the
national distributor plaintiffs. The complaint alleges that defendants engaged
in a course of conduct that violated Ohio statutes prohibiting fraudulent
conveyances and other unlawful payments designed to hinder, delay or defraud
TVGD and the other plaintiffs, Unimag's creditors. An initial status conference
has been scheduled for November 21, 2002. See the Company's Form 10-Q for the
quarter ended March 31, 2002, as amended, for a discussion of other ongoing
litigation involving Unimag and TVGD.

On September 25, 2002, the Company notified DIVA that it had elected not to
proceed with the purchase of DIVA's assets. In response, on September 30, 2002,
DIVA filed an adversary complaint against the Company for breach of contract
and other claims purportedly based upon the Company's decision not to acquire
DIVA's assets. After DIVA filed its complaint, at DIVA's request, the
Bankruptcy Court ordered an expedited trial on DIVA's claims against the
Company for breach of contract and specific performance. Trial of these claims
was

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

24

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

scheduled to begin in late October 2002. However, on October 17, 2002, DIVA
withdrew its request for an expedited trial, and agreed to dismiss its specific
performance claim. On October 17, 2002, the Company responded to certain of
DIVA's claims denying liability to DIVA, including any liability purportedly
based upon the Company's decision to terminate the asset purchase agreement. At
the same time, the Company filed counterclaims against DIVA and
Scientific-Atlanta for declaratory relief relating to the Company's decision
not to purchase DIVA's assets. Now that the Bankruptcy Court has vacated the
expedited trial date, the parties are in pretrial proceedings. On November 1,
2002, DIVA filed a First Amended Complaint against the Company and certain of
its senior executives. This First Amended Complaint adds additional claims
purportedly based upon the DIVA purchase agreement, as well as the Company's
decision not to acquire DIVA's assets. The Company believes that DIVA's
allegations are without merit and intends to defend this action vigorously.

On November 6, 2002, Scientific-Atlanta and PowerTV, Inc. ("S-A") filed a
counterclaim against the Company and certain of its subsidiaries in a case
captioned Personalized Media Communications, L.L.C. v. Scientific-Atlanta,
Inc., and PowerTV, Inc., United States District Court for the Northern District
of Georgia, Atlanta Division, Civil Action No. 02-CV-824 (CAP). At that time,
S-A asserted declaratory relief claims against the Gemstar parties seeking a
declaration of noninfringement, invalidity and unenforceability of certain
patents as to which the Company is a licensee. On November 6, 2002, S-A also
filed a motion with the MDL Panel to transfer this action to Delaware for
consolidation of pretrial proceedings with the Pegasus Development Corporation,
et al. v. DirecTV, Inc., et al. matter discussed above. The Company has not yet
been served with S-A's counterclaims or motion to transfer, and has therefore
not had the opportunity to fully evaluate this matter.

On November 7, 2002, the Company received a letter from the United States
Department of Justice ("DOJ"). The DOJ has indicated they believe that Gemstar
International Group Limited and TV Guide, Inc. may have engaged in unlawful
coordination of activities prior to their merger on July 12, 2000. The Company
has reason to believe that the DOJ may initiate an action against the Company
under federal antitrust laws in the near future. The DOJ has also indicated
that it would be willing to enter into negotiated agreement with the Company
and has provided the Company with a possible settlement structure, including
the imposition of a fine and certain other conditions and restrictions. The
Company believes that its conduct prior to the merger was lawful, but will
evaluate whether there are acceptable terms for a negotiated resolution of this
matter.

(11) Related Party Transactions

In connection with the acquisition of TV Guide in 2000, News Corp. became a
stockholder of the Company. As of September 30, 2002, News Corp. directly and
indirectly owns approximately 43% of the Company's outstanding common stock and
has the right to designate six directors on the Company's board. The Company
earned advertising revenues of $3.2 million and $2.4 million for the three
months ended September 30, 2002 and 2001, respectively, and $11.7 million and
$15.2 million for the nine months ended September 30, 2002 and 2001,

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

25

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

respectively, from entities controlled by News Corp. In addition, the Company
acquired programming from News Corp. controlled entities of $837,000 and $3.1
million for the three months ended September 30, 2002 and 2001, respectively,
and $3.6 million and $8.6 million for the nine months ended September 30, 2002
and 2001, respectively. Prior to its acquisition of TV Guide, the Company did
not have any significant transactions with News Corp. As of September 30, 2002
and December 31, 2001, the Company had receivables due from News Corp.
controlled entities totaling $3.7 million and $4.6 million, respectively, and
payables due to News Corp. controlled entities totaling $262,000 and $302,000,
respectively. The Company reimburses News Corp. for facilities and other
general and administrative costs incurred on the Company's behalf. Expenses
associated with these costs approximated $1.1 million and $1.3 million for the
three months ended September 30, 2002 and 2001, respectively, and $3.1 million
and $2.5 million for the nine months ended September 30, 2002 and 2001,
respectively. Expenses for the nine months ended September 30, 2001 included a
rent and facilities credit of $345,000 from News Corp. In addition, the Company
purchases paper through a paper procurement arrangement with News Corp. at
negotiated prices with paper suppliers based on the combined paper requirements
of the two organizations.

Liberty Media Corporation ("Liberty Media"), formerly an indirect wholly
owned subsidiary of AT&T Corp., directly or indirectly owned approximately 21%
of the issued and outstanding common stock of the Company from the date of the
acquisition of TV Guide in 2000 until May 2, 2001, the date Liberty Media sold
its interest in the Company to News Corp. For the period January 1, 2001 to May
2, 2001, the date Liberty Media ceased to be considered a related party of the
Company, the Company purchased programming from Liberty Media controlled
affiliates of $4.5 million. During the same period, the Company also sold
video, program promotion and guide services of $6.7 million to AT&T Broadband
and Internet Services ("BIS") and its consolidated affiliates. In addition,
during the same period, the Company purchased production services and
was provided satellite transponder facilities and uplink services from BIS
consolidated affiliates of $2.4 million. BIS is also wholly owned by AT&T Corp.
Prior to its acquisition of TV Guide, the Company did not have any significant
transactions with Liberty Media or BIS.

The Company has included in the amounts discussed above transactions with
News Corp., BIS, and Liberty Media and all known entities in which BIS, Liberty
Media and News Corp. have an interest greater than 50%. In addition, the
Company has transactions with entities in which BIS, Liberty Media and News
Corp. own, directly or indirectly, 50% or less.

(12) Segment Information

The Company categorizes its businesses into three groups which also
represent its reportable business segments: the Technology and Licensing
Sector, which is responsible for the development, licensing and protection of
intellectual property and proprietary technologies (including the IPGs
currently marketed under

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

26

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

brands such as GUIDE Plus+(R) and TV Guide(R) Interactive, the VCR Plus+(R)
system and electronic book technology marketed under brands such as the Gemstar
eBook(TM)); the Interactive Platform Sector, which derives recurring income
from advertising, interactive services and e-commerce on the Company's
proprietary interactive platforms, including advertising on the Company's IPGs
and TV Guide Online, interactive services, and e-commerce on tvguide.com,
skymall.com and other affiliated websites; and the Media and Services Sector,
which operates TV Guide Magazine, TV Guide Channel, TVG Network/SM/ ("TVG"),
SkyMall catalog sales, Superstar/Netlink Group ("SNG") and other
non-interactive platforms and media properties.

The Company's reportable segments are strategic business units that offer
different products and services and compete in different industries. The
Company's chief operating decision maker uses EBITDA (operating income before
stock compensation expense, depreciation and amortization, write-down and
impairment charges) to evaluate the performance of the three segments. Assets
of the reportable segments are not relevant for management of the businesses.

Segment information for the three and nine months ended September 30, 2002
and 2001 is as follows (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2002 2001 2002 2001
-------- -------- -------- --------
Restated Restated
-------- --------

Technology and Licensing Sector
Revenues(4)................. $ 40,378 $ 54,063 $147,451 $154,530
Operating expenses(1)(3)(4). 20,777 17,155 53,996 54,930
-------- -------- -------- --------
EBITDA(2)................... $ 19,601 $ 36,908 $ 93,455 $ 99,600
======== ======== ======== ========
Interactive Platform Sector
Revenues.................... $ 21,844 $ 21,917 $ 66,270 $ 51,178
Operating expenses(1)(3)(4). 19,156 27,348 59,086 69,284
-------- -------- -------- --------
EBITDA(2)................... $ 2,688 $ (5,431) $ 7,184 $(18,106)
======== ======== ======== ========
Media and Services Sector
Revenues(3)(4).............. $191,128 $223,883 $601,733 $711,790
Operating expenses(1)(3)(4). 150,903 163,710 484,610 518,742
-------- -------- -------- --------
EBITDA(2)................... $ 40,225 $ 60,173 $117,123 $193,048
======== ======== ======== ========
Consolidated
Revenues(3)(4).............. $253,350 $299,863 $815,454 $917,498
Operating expenses(1)(3)(4). 190,836 208,213 597,692 642,956
-------- -------- -------- --------
EBITDA(2)................... $ 62,514 $ 91,650 $217,762 $274,542
======== ======== ======== ========

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

27

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

- --------
(1) Operating expenses means operating expenses excluding provision for bad
debts, stock compensation expense, depreciation and amortization,
write-down and impairment charges.
(2) EBITDA means operating income before non-cash stock compensation expense,
depreciation and amortization, write-down and impairment charges.
Commencing January 1, 2002, goodwill and certain other intangible assets
are no longer subject to amortization. However, other intangible assets
acquired in transactions accounted for as purchases are still amortized and
such amortization is significant. Accordingly, the Company's business
sectors are measured based on EBITDA. EBITDA is presented supplementally as
the Company believes it is a standard measure commonly reported and widely
used by analysts, investors and others associated with its industry.
However, EBITDA does not take into account substantial costs of doing
business, such as income taxes, interest expense and depreciation and
amortization. While many in the financial community consider EBITDA to be
an important measure of comparative operating performance, it should be
considered in addition to, but not as a substitute for, operating income,
net income, cash flow provided by operating activities and other measures
of financial performance prepared in accordance with accounting principles
generally accepted in the United States of America that are presented in
the Unaudited Condensed Consolidated Financial Statements included in this
report. Additionally, the Company's calculation of EBITDA may be different
than the calculation used by other companies and, therefore, comparability
may be affected.
(3) Commencing January 1, 2002, the operating costs of the media sales group
have been allocated to the various business units based on advertising
revenue dollars earned. Prior period results, which included media sales
group commissions reported as revenues by the Media and Services Sector
have been reclassified to reflect such commission revenues as a reduction
of expenses in the Media and Services Sector. Effective January 1, 2002,
the Company revised its method of allocating corporate expenses to the
business sectors concurrent with a reorganization of certain corporate
functions. Had the new methodology been in effect in 2001, operating
expenses for each of the sectors for the three and nine-month periods ended
September 30, 2001 would have increased (decreased) approximately as
follows: Technology and Licensing Sector--$(900,000) and $(3.1) million,
respectively, Interactive Platform Sector--$(2.6) million and
$(8.3) million, respectively, and Media and Services Sector--$3.5 million
and $11.4 million, respectively.
(4) The Company's financial statements are presented in accordance with the
guidance provided by EITF No. 01-09. Where applicable, amounts presented in
the prior period have been reclassified to conform with the income
statement classifications for the current period. Such reclassifications
resulted in decreases in revenues for the three and nine-month periods
ended September 30, 2001 as follows: Technology and Licensing Sector--$15.2
million and $37.2 million, respectively, and Media and Services
Sector--$1.0 million and $3.0 million, respectively, and decreases in
expenses for the three and nine-month periods ended September 30, 2001 as
follows: Technology and Licensing Sector--$8.7 million and $19.3 million,
respectively, Interactive Platform Sector--$6.5 million and $17.9 million,
respectively, and Media and Services Sector--$1.0 million and $3.0 million,
respectively, resulting in a total reduction of $16.2 million and $40.2
million in both consolidated revenues and expenses for the three and
nine-month periods ended September 30, 2001.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

28

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

(13) Income Taxes

The income tax benefit for the three and nine months ended September 30,
2002 was $6.8 million and $523.2 million, respectively, which reflects an
effective tax rate of 28% and 36% for each of the respective periods. The
income tax benefit for the three and nine months ended September 30, 2001
(restated) was $22.6 million and $67.6 million, respectively, which reflects an
effective tax rate of 14% for both periods. The net increase in the effective
tax rate is primarily due to the change in the treatment of amortization of
goodwill in accordance with Statement 142, which has no associated impact on
the provision for income taxes. In addition, the overall effective tax rate
reported by the Company in any single period is impacted by, among other
things, the country in which earnings or losses arise, applicable statutory tax
rates and withholding tax requirements for particular countries, the
availability of net operating loss carry forwards and the availability of tax
credits for taxes paid in certain jurisdictions. Because of these factors, it
is expected that the Company's future tax expense as a percentage of income
before income taxes may vary from period to period.

(14) Stock Repurchase Program

In April 2002, the Company's Board of Directors authorized an extension of
its authorization granted in September 2001 to repurchase up to $300.0 million
of the Company's outstanding shares of common stock. The authorization
permitted the Company to purchase shares in the open market at prevailing
prices, or in privately negotiated transactions at then prevailing prices,
provided that the Company complied with SEC regulations regarding such
purchases. The extension expired on September 18, 2002. During the period
subsequent to the date the extension was granted through September 30, 2002,
the Company repurchased 6.9 million shares of the Company's common stock for an
aggregate price of $63.4 million. Since September 2001, the Company has
repurchased a total of 7.2 million shares for an aggregate price of $69.8
million.

(15) Subsequent Events

On October 17, 2002, the U.S. Securities and Exchange Commission issued a
formal order of investigation to determine whether there have been violations
of the federal securities laws by the Company and/or others. As previously
disclosed, the Audit Committee of the Board of Directors conducted an internal
review of the Company's revenue recognition practices relating to a limited
number of transactions. The Company previously disclosed that it has been in
discussions with the Commission regarding this internal review. The Company
intends to continue to fully cooperate with the Commission as it moves forward
in its process.

The Company is a party to certain proceedings consolidated in the United
States District Court for the Northern District of Georgia by the Judicial
Panel on Multi-District Litigation (the "MDL cases") against
Scientific-Atlanta, among other parties. These proceedings involve several of
the Company's patents, including

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

29

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

three patents which were also involved in a case in the United States District
Court for the Western District of North Carolina entitled SuperGuide
Corporation v. DirecTV Enterprises, Inc., et al. (the "SuperGuide case"). The
Company is a third-party defendant in the SuperGuide case and has joined in
SuperGuide's infringement allegations against EchoStar. In two Orders dated
July 2, 2002 and July 25, 2002, the North Carolina Court ruled that the
products of the defendants in the SuperGuide case, including EchoStar's, did
not infringe the patents at issue. This ruling was based in part on a previous
ruling of that Court interpreting the scope of the patents at issue.

On October 25, 2002, the Georgia Court hearing the MDL cases ruled that it
was obligated to accept the North Carolina Court's previous ruling interpreting
the scope of the patents at issue without deciding whether the underlying
ruling was correct as a matter of law. The Georgia Court has not ruled on
Scientific-Atlanta's infringement of these three patents under this
interpretation. The Company has previously announced that it is appealing the
SuperGuide case to the United States Court of Appeals for the Federal Circuit.

As a result of the ruling by the Georgia Court, the Company concluded that
the Court's decision raises doubts as to whether capitalized patent litigation
costs related to the three patents could continue to be reasonably considered
to strengthen the value of the patents. Accordingly, during the three months
ended December 31, 2002, the Company will write off approximately $9.5 million
of litigation costs that were previously capitalized as intangible assets in
accordance with the Company's accounting policy.

On August 14, 2002, the Company announced that News Corp., Dr. Henry Yuen,
Chief Executive Officer, and Elsie Leung, Chief Financial Officer, submitted a
joint proposal to the Company's Board of Directors to restructure the Company's
management and to settle disputes among the parties. The Board of Directors
formed a committee of independent directors to consider the proposal and to
make a recommendation to the Board concerning the proposal. The Special
Committee, with the assistance of its independent legal advisors, evaluated the
proposal. On November 7, 2002, the Board of Directors approved and the Company
executed definitive documentation related to this restructuring. Dr. Yuen
resigned as Chief Executive Officer of the Company. Dr. Yuen will continue as
Chairman of the Board in a non-executive capacity and, under a new five-year
employment agreement, will lead a business unit formed to pursue international
business development opportunities. In that role, Dr. Yuen will also strive to
enhance and improve the Company's interactive program guides and interactive
technologies. As part of the agreement, Dr. Yuen assigned to the Company all
intellectual property relating to the Company's business that he has developed
and develops in the future in his new role. In addition, he has granted the
Company the right of first refusal to certain future inventions related
to interactive television and interactive programming guides for a period of
time. Jeff Shell has been named Chief Executive Officer succeeding Dr. Yuen.
Additionally, the Company appointed Paul Haggerty as Acting Chief Financial
Officer. Mr. Haggerty, currently Executive Vice President for Finance at News
Corp., which owns approximately 43 percent of the outstanding stock of the
Company, succeeds Elsie Leung. Ms. Leung will

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

30

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(Continued)

remain as a member of the Board and, under a new three-year agreement, will
work with Dr. Yuen to pursue international opportunities for the Company. The
Company will be conducting a search for a permanent Chief Financial Officer.

Dr. Yuen will receive approximately $22 million and Ms. Leung approximately
$7 million as termination payments for their existing contracts. The cash
payable to Dr. Yuen and Ms. Leung under this settlement, as well as other
accrued but unpaid amounts due under their employment agreements totaling $8.0
million, will be held by the Company in a segregated account for up to six
months pending possible deposit of all or a portion of such cash into an escrow
account pursuant to the Sarbanes-Oxley Act. In addition, approximately 20
million outstanding options held by Dr. Yuen and Ms. Leung were cancelled. The
Company currently intends to grant Dr. Yuen and Ms. Leung approximately 8
million shares of restricted stock and approximately 9 million new stock
options in connection with their termination, employment and other future
agreements.

The Company expects to record a charge related to this settlement agreement
in the fourth quarter of 2002.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

31

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

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

The Unaudited Condensed Consolidated Financial Statements as of and for the
three and nine months ended September 30, 2001 included in this quarterly
report on Form 10-Q have been restated, but have not been reviewed or audited
by an independent accounting firm and should not be relied upon. For additional
information regarding the restatement, please refer to Note 2 to the Unaudited
Condensed Consolidated Financial Statements included in Item 1. All applicable
financial information presented in the following discussion and analysis gives
effect to the restatement.

Critical Accounting Policies and Estimates

The following discussion and analysis of our financial condition and results
of operations are based upon our Unaudited Condensed Consolidated Financial
Statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of such
financial statements requires the Company to make estimates and assumptions in
applying certain critical accounting policies. Certain accounting estimates are
particularly sensitive because of their significance to our Unaudited Condensed
Consolidated Financial Statements and because of the possibility that future
events affecting the estimates could differ materially from our current
expectations. We believe that the following are some of the more critical
judgment areas in the application of our accounting policies that affect our
financial statements.

Revenue Recognition--License Fees

We recognize revenues from per unit license fees based on units shipped
incorporating the Company's patented or proprietary technologies in the period
when the manufacturers' units shipped information is available to the Company.
Revenues from per subscriber fees from service providers are earned in the
month services are provided by a licensee using the Company's patented or
proprietary technologies. Revenues from annual and other license fees generally
are recognized based on the specific terms of the license agreements. From time
to time, the license agreement between the Company and a licensee may expire,
or for one reason or another, the licensee fails to remit license fees on a
timely basis, yet the same units continue to be shipped and the same services
continue to be deployed containing the Company's patented or proprietary
technologies. The Company looks to the four conditions under SAB 101, Revenue
Recognition in Financial Statements, to determine whether or not revenue should
be recognized: whether there is persuasive evidence that an arrangement exists,
whether delivery has occurred or service has been rendered, whether the price
is fixed or determinable and whether collection is reasonably assured.
Additionally, the Company may consider opinions of outside counsel when
appropriate. These decisions involve significant judgment by the Company.

The Company, in consultation with its recently engaged independent
accounting firm, anticipates reviewing the application of SAB 101 to certain
licensing transactions, particularly those which involve recognition of
revenues after the expiration of license agreements and lump sum settlements or
prepayments. As a result, the Company may determine that the accounting for
certain of these transactions did not comply with SAB 101.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

32

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Further discussion of the application of revenue recognition policies for
license fees is contained under the heading Technology and Licensing Sector.

Patent Prosecution and Litigation Costs

The Company's accounting policy with respect to patent prosecution and
litigation costs incurred to protect, strengthen and enforce the Company's
intellectual property rights is to defer such costs as intangible assets and to
amortize them using the straight-line method over the remaining lives of the
related patents. The Company reviews its capitalized patent prosecution and
litigation costs whenever events or changes in circumstances, such as adverse
administrative or judicial rulings, indicate that certain capitalized costs do
not increase the value of the related patents and, consequently, should be
expensed. These determinations are made by the Company based, in part, on the
advice of outside counsel.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The Company has a significant amount of property and equipment and
finite-lived intangible assets, primarily through the acquisition of TV Guide.
In accordance with Statement 144, the Company reviews its long-lived assets and
finite-lived intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may exceed its fair
value. This is measured by a comparison of the carrying amount of an asset to
the undiscounted future operating cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets, which is the amount at which that asset
could be bought or sold in a current transaction between willing parties.
Quoted market prices in active markets are the best evidence of fair value and
are used as the basis for the measurement, if available. In most instances,
quoted market prices in active markets will not be available for the Company's
long-lived assets and finite-lived intangibles. In those instances, the
estimate of fair value is based on the best information available, including
prices for similar assets and the results of using other valuation techniques.
Discounted future operating cash flows are commonly used by the Company as an
acceptable valuation technique and proxy for fair value. Valuation techniques
are inherently subjective.

The determination as to whether events or changes in circumstances indicate
that the carrying amount of an asset may exceed its fair value involves the
Company's judgment. In addition, should the Company conclude that an asset may
be impaired, the estimate of undiscounted future operating cash flows and the
final determination of the fair value of the asset are also based on the
judgment of the Company, assisted by third-party valuation experts. These
judgments can be impacted by a variety of underlying assumptions, such as the
general business climate, effectiveness of competition and supply and cost of
resources. Accordingly, actual results can differ significantly from the
assumptions made by the Company in making its estimates. Future changes in the
Company's estimates could result in indicators of impairment and future
impairment charges.

Assets to be disposed of by sale are reported at the lower of the carrying
amount or fair value less costs to sell.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

33

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Impairment of Goodwill and Other Intangible Assets

The Company has a significant amount of goodwill and other indefinite-lived
intangible assets, primarily through the acquisition of TV Guide. In accordance
with Statement 142, an intangible asset that is not subject to amortization
must be tested for impairment annually, or more frequently if events or changes
in circumstances indicate that the asset might be impaired. The impairment test
consists of a comparison of the fair value of an intangible asset with its
carrying amount. If the carrying amount of an intangible asset exceeds its fair
value, an impairment loss is recognized in an amount equal to that excess.

Goodwill of a reporting unit must be tested for impairment between annual,
required tests if an event occurs or circumstances change that would more
likely than not reduce the fair value of a reporting unit below its carrying
amount. The first step of the goodwill impairment test, used to identify
potential impairment, compares the fair value of a reporting unit with its
carrying amount, including goodwill. If the carrying amount of a reporting unit
exceeds its fair value, the second step of the goodwill impairment test is
performed to measure the amount of impairment loss, if any. The second step of
the goodwill impairment test compares the implied fair value of reporting unit
goodwill with the carrying amount of that goodwill. If the carrying amount of
reporting unit goodwill exceeds the implied fair value of that goodwill, an
impairment loss is recognized in an amount equal to that excess.

As discussed above, the determination of fair value involves significant
judgments and estimates when quoted market prices do not exist. Accordingly,
future changes in the Company's estimates could result in further impairment
charges of goodwill and indefinite-lived intangible assets. A discussion of
impairment losses recognized in 2002 is contained under Notes 3 and 4 to the
Unaudited Condensed Consolidated Financial Statements.

Income Taxes

The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. The Company records a valuation allowance, if necessary, to
reduce deferred tax assets to an amount it believes is more likely than not to
be realized.

The Company has income both from foreign and domestic sources. In the
preparation of our financial statements, we are required to estimate our income
taxes in each of the jurisdictions in which we operate, including estimating
both our actual current tax exposure and assessing temporary differences
resulting from differing treatment of items for tax and accounting purposes.
Assessment of our actual current tax exposure includes assessing tax
strategies, the status of tax audits and open audit periods with the taxing
authorities. To the extent that we have deferred tax assets, we must assess the
likelihood that our deferred tax assets will be

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

34

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

recovered from future taxable income and to the extent that we believe that
recovery is not likely, we must establish a valuation allowance. As of
September 30, 2002, we have established a valuation allowance of $73.0 million
against our deferred tax assets. In the future, we may adjust our estimates of
the amount of valuation allowance needed and such adjustment would impact our
provision for income taxes in the period of such change.

Allowance for Doubtful Accounts

We have significant amounts due to us from our customers. We continuously
evaluate our outstanding accounts receivable for collectibility. This
evaluation involves the Company's judgment in assessing the aging of the
amounts due to us and in reviewing the credit-worthiness of each customer.
Should a customer's financial condition deteriorate in a manner that could
decrease the customer's ability to pay amounts due to us, or should significant
adverse events cause a change in the Company's ability to collect amounts due
to us, we might be required to provide an additional allowance for doubtful
accounts which would reduce our earnings.

Multi-Platform Advertising Sales

The Company believes that a potential competitive advantage in advertising
is the combined reach of its various advertising platforms--TV Guide Magazine
with a circulation of 9 million copies, IPG with a combined platform of more
than 18.5 million, TV Guide Channel with more than 50 million subscribers, and
tvguide.com with 5.3 million unique visitors per month, all targeted at
consumers who are interested in television guidance. In order to maximize the
effectiveness of such a competitive advantage, the Company offers customers the
opportunity to simultaneously advertise on two or more of its various delivery
platforms ("multi-platform" advertising). To encourage advertisers to increase
the amount of total advertising they purchase from the Company, in late 2001,
the Company established a Multi-Platform Advertising Program ("MPA Program") to
provide incentives in the form of discounts to advertisers who agree to use
multiple platforms. Often such discounts are significant, and frequently equal
and occasionally exceed the pre-discounted value of the advertising on the IPG
platform in the MPA Program.

In the third and fourth quarters of 2001, customers of the Company who had
committed to purchase advertising on Company platforms other than the IPG
(primarily the TV Guide Magazine) were offered an opportunity to advertise on
the IPG platform in amounts approximately equal in value with their existing
commitments to advertise on the print or channel platforms. Customers who
accepted this offer were charged for the IPG advertising and were provided with
advertising of an approximate equal value on the print or channel platforms at
no additional cost. All of the revenue associated with these transactions was
recorded as IPG revenue.

In the fourth quarter of 2001, the Securities and Exchange Commission
provided additional guidance regarding multiple-element transactions in SAB
101, Frequently Asked Questions and Answers, Question 4. This guidance directed
that revenue in multiple-element transactions should be allocated based upon
the relative fair value of the elements involved in the transaction, provided
that each element represents a separate earnings process. The Company's
decision to reclassify $2.7 million in advertising revenue in conjunction with
the restatement of the Unaudited Condensed Consolidated Financial Statements
included herein (see Note 2 to the

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

35

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Unaudited Condensed Consolidated Financial Statements) applies this guidance,
in that the $5.5 million in total advertising value provided to multi-platform
purchasers during the third and fourth quarters of 2001 was evenly split
between IPG and print advertising. The Company, in consultation with its
recently engaged independent accounting firm, is continuing to review the
applicability of the referenced guidance to the multi-platform advertising
transactions and, as a result, may determine that additional revenue should be
reclassified from the Interactive Platform Sector to the Media and Services
Sector.

Results of Operations

The Company completed several transactions during 2001 that affect the
comparability of the results of operations.

. In April 2001, the Company sold the business that distributes the WGN
superstation signal. Accordingly, the Unaudited Condensed Consolidated
Financial Statements do not include the results of operations of WGN
subsequent to that date.

. In July 2001, the Company acquired 100% of the outstanding common stock
of SkyMall. The acquisition was accounted for as a purchase.
Accordingly, the Unaudited Condensed Consolidated Financial Statements
include the results of operations of SkyMall from July 2001.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

36

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

The following table sets forth certain unaudited financial information for
the Company for the three and nine months ended September 30, 2002 and 2001 (in
thousands).

Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------------
2002 2001(1)(3) 2002 2001(1)(3)
-------- ---------- ----------- ----------
Restated Restated
---------- ----------

Statement of Operations Data:
Revenues.............................................. $253,350 $ 299,863 $ 815,454 $ 917,498
Operating expenses:
Operating expenses, excluding stock compensation,
depreciation and amortization, write-down and
impairment charges.................................. 190,836 208,213 597,692 642,956
Stock compensation.................................... 1,318 6,534 19,612 23,691
Depreciation and amortization......................... 76,558 235,199 313,834 709,062
Write-down of capitalized patent litigation costs(4).. -- -- 44,424 --
Impairment of intangible assets(5).................... -- -- 1,259,147 --
-------- --------- ----------- ----------
268,712 449,946 2,234,709 1,375,709
-------- --------- ----------- ----------
Operating loss........................................... (15,362) (150,083) (1,419,255) (458,211)
Interest expense......................................... (2,277) (4,880) (7,798) (23,982)
Other expense, net....................................... (6,431) (7,840) (23,811) (6,786)
-------- --------- ----------- ----------
Loss before income taxes, extraordinary loss on debt
extinguishment and cumulative effect of an accounting
change................................................. (24,070) (162,803) (1,450,864) (488,979)
Income tax benefit....................................... (6,764) (22,552) (523,228) (67,572)
-------- --------- ----------- ----------
Loss before extraordinary loss on debt extinguishment and
cumulative effect of an accounting change.............. (17,306) (140,251) (927,636) (421,407)
Extraordinary loss on debt extinguishment, net of tax.... -- -- -- (2,100)
Cumulative effect of an accounting change, net of tax.... -- -- (5,303,281) --
-------- --------- ----------- ----------
Net loss................................................. $(17,306) $(140,251) $(6,230,917) $ (423,507)
======== ========= =========== ==========
Other Financial Data:
Net cash provided by (used in):
Operating activities.................................. $ (2,212) $ 32,190 $ 150,868 $ 155,470
Investing activities.................................. (9,192) (53,689) (8,208) 26,302
Financing activities.................................. (34,720) (22,083) (137,725) (279,528)
EBITDA(2)............................................. 62,514 91,650 217,762 274,542

- --------
(1) Effective July 18, 2001, the Company's consolidated operating results
include the operating results of SkyMall. SkyMall was acquired in a
transaction accounted for as a purchase. Effective April 2001, the
consolidated operating results exclude the operating results of the
business that distributed the WGN superstation signal, which was sold.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

37

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

(2) EBITDA means operating income before non-cash stock compensation expense,
depreciation and amortization, write-down and impairment charges.
Commencing January 1, 2002, goodwill and certain other intangible assets
are no longer subject to amortization. However, other intangible assets
acquired in transactions accounted for as purchases are still amortized and
such amortization is significant. Accordingly, the Company's business
sectors are measured based on EBITDA. EBITDA is presented supplementally as
the Company believes it is a standard measure commonly reported and widely
used by analysts, investors and others associated with its industry.
However, EBITDA does not take into account substantial costs of doing
business, such as income taxes, interest expense and depreciation and
amortization. While many in the financial community consider EBITDA to be
an important measure of comparative operating performance, it should be
considered in addition to, but not as a substitute for, operating income,
net income, cash flow provided by operating activities and other measures
of financial performance prepared in accordance with accounting principles
generally accepted in the United States of America that are presented in
the Unaudited Condensed Consolidated Financial Statements included in this
report. Additionally, the Company's calculation of EBITDA may be different
than the calculation used by other companies and, therefore, comparability
may be affected.
(3) The Company's financial statements are presented in accordance with the
guidance provided by EITF No. 01-09. Where applicable, amounts presented in
the prior period have been reclassified to conform with the income
statement classifications for the current period. Such reclassifications
resulted in a reduction of $16.2 million and $40.2 million in both
consolidated revenues and expenses for the three and nine-month periods
ended September 30, 2001, respectively.
(4) Write-down of capitalized patent litigation costs resulted from adverse
rulings in the ITC and SuperGuide cases.
(5) Impairment of intangible assets represents a write-down of the carrying
value of goodwill, finite-lived intangible assets and trademarks.

Overview of Significant Events

The Company's normal and customary business practice is to assess whether
certain events necessitate a change in assumptions and estimates as they relate
to its established accounting policies on revenue recognition, allowances,
capitalized patent litigation costs, and the carrying value of intangible
assets. The Company has assessed the impact of certain significant events that
occurred during the nine months ended September 30, 2002 to determine their
effect on the Company's financial results.

On June 21, 2002, an Administrative Law Judge issued an ID in a United
States International Trade Commission ("ITC") proceeding denying the Company's
request for an exclusionary order to prevent further importation of certain
set-top boxes containing IPGs which the Company believes infringe some of its
patents. The ITC determined not to review this decision on August 29, 2002. On
July 2, 2002, the United States District Court for the Western District of
North Carolina in the legal proceeding SuperGuide Corporation v. DirecTV
Enterprises, Inc., et al (the "SuperGuide case") ruled that certain of the
defendants' products did not infringe the SuperGuide Patents, and on July 25,
2002, the court dismissed all remaining claims in the case. The Company

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

38

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

was a third party defendant in this matter and had joined in SuperGuide's
infringement allegations against EchoStar. The Company has now appealed the ITC
and SuperGuide rulings. (See Note 10 to the Unaudited Condensed Consolidated
Financial Statements.)

The Company assessed the impact of these rulings on its assumptions and
estimates in applying its accounting policy with respect to patent prosecution
and litigation costs incurred to protect, strengthen and enforce the Company's
intellectual property rights. Under its policy, the Company defers such costs
as intangible assets and amortizes them using the straight-line method over the
remaining lives of the related patents. The Company reviewed the carrying value
of capitalized patent litigation costs as a result of the rulings in the ITC
and SuperGuide cases. Although the Company has filed an appeal in the ITC and
SuperGuide cases, the Company concluded that these rulings raised doubts as to
whether certain capitalized patent litigation costs could be reasonably
considered to strengthen the value of the patents. Accordingly, the Company
recorded a write-down of $44.4 million to capitalized patent litigation costs
during the quarter ended June 30, 2002 and will expense all of the future legal
costs of the SuperGuide and ITC cases. (See Note 8 to the Unaudited Condensed
Consolidated Financial Statements.)

Under the requirements of Statement 142, goodwill and indefinite-lived
intangible assets must be tested on an interim basis if events or circumstances
indicate that the estimated fair value of the assets has decreased below their
carrying value. Also, under the requirements of Statement 144, the Company is
required to record impairment losses on long-lived assets used in operations
when events and circumstances indicate that long-lived assets might be impaired
and the undiscounted cash flows estimated to be generated by those assets are
less than the carrying amounts of those assets. In view of the above-mentioned
adverse ruling in the ITC proceeding and the additional fact that the Company
has experienced a sustained decline in its market capitalization (expressed as
its share price multiplied by the number of shares outstanding) during 2002
from $11.5 billion at January 1, 2002 to $2.2 billion at June 30, 2002, the
Company performed an interim impairment analysis of its goodwill,
indefinite-lived intangible assets and certain finite-lived intangible assets
as of June 30, 2002, with the assistance of a third-party valuation expert,
with the following results:

. Based on an interim impairment analysis under Statement 142, the Company
recorded pre-tax impairment charges to its goodwill and trademark of
$22.8 million and $24.0 million, respectively, during the quarter ended
June 30, 2002. These charges were recorded as operating expenses in the
accompanying unaudited condensed consolidated statements of operations.

. Based on an impairment analysis under Statement 144, the Company
recognized a pre-tax impairment loss of $1,212.3 million during the
quarter ended June 30, 2002, after it was determined that the carrying
value of certain finite-lived intangible assets exceeded their fair
value.

Transitional Intangible Asset Impairment

The Company completed its transitional indefinite-lived intangible asset and
goodwill impairment tests during the three-month periods ended March 31, 2002
and June 30, 2002, respectively. The Company recorded

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

39

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

an impairment charge of $187.8 million, net of tax, to its indefinite-lived
intangible assets and $5,115.5 million to goodwill, resulting in a total
transitional impairment charge of $5,303.3 million, net of tax. The charge has
been recorded as the cumulative effect of an accounting change as of January 1,
2002 in the accompanying unaudited condensed consolidated statements of
operations.

Consolidated Results of Operations

Revenues for the three months ended September 30, 2002 were $253.4 million,
a decrease of $46.5 million, or 16%, compared to the same period in 2001. The
decrease for the three months ended September 30, 2002 was attributable to an
$8.0 million decrease in advertising revenues, primarily at TV Guide Channel
and TV Guide Magazine, a $13.6 million decrease in SNG C-band subscriber
revenues, a decrease of $13.8 million in licensing revenues, due primarily to
decreased licensing revenues from AOL Time Warner and Motorola, and a
$10.2 million decrease in TV Guide Magazine's newsstand and subscription
revenues.

For the nine months ended September 30, 2002, revenues were $815.5 million,
a decrease of $102.0 million, or 11%, compared to the same period in 2001. The
decrease for the nine months ended September 30, 2002 was attributable to a
$44.0 million decrease in SNG C-band subscriber revenues, a $23.0 million
decline in advertising revenues and a $33.5 million decrease in TV Guide
Magazine's newsstand and subscription revenues.

The Company's total advertising revenues for the three months ended
September 30, 2002 were $59.2 million, a decrease of $8.0 million, or 12%,
compared to the same period in 2001. For the nine months ended September 30,
2002, advertising revenues were $188.5 million, a decrease of $23.0 million, or
11%, compared to the same period in 2001. Total MPA Program sales, net of
discounts, included in the advertising revenues for the three and nine months
ended September 30, 2002 were $3.2 million and $13.1 million, respectively, of
which 34% and 38% of such sales have been allocated to the Interactive Platform
Sector, and 66% and 62%, respectively, have been allocated to the Media and
Services Sector. The general weakness in the advertising market, combined with
declining circulation at TV Guide Magazine, continue to impact the Company's
advertising revenues.

Operating expenses, excluding stock compensation, depreciation and
amortization, write-down and impairment charges, were $190.8 million for the
quarter ended September 30, 2002, a decrease of $17.4 million, or 8%, when
compared to the same period in the prior year. For the nine months ended
September 30, 2002, operating expenses were $597.7 million, a decrease of $45.3
million, or 7%, compared to the same period in the prior year. The decrease in
operating expenses for both periods was a result of the general cost controls
in effect throughout the Company. The decreases were also attributable to
reductions in TV Guide Magazine production expenses for paper, printing, and
postage and reduced programming costs for SNG. The decrease for the nine-month
period was partially offset by the additional expenses attributable to SkyMall.

Stock compensation expense reflects amortization of the portion of the
purchase price of acquired businesses assigned to unearned compensation for
unvested stock options assumed by the Company. The

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

40

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

unearned compensation is being amortized over the remaining vesting period of
the options. Stock compensation expense for the quarter ended September 30,
2002 was $1.3 million, a decrease of $5.2 million primarily due to the
separation of four senior officers and two executive officers from the Company
in the first six months of 2002. For the nine months ended September 30, 2002,
stock compensation expense was $19.6 million which also included $12.9 million
of accelerated unearned compensation amortization resulting from an executive
officer who separated from the Company during the period.

Depreciation and amortization during the quarter ended September 30, 2002
was $76.6 million, a decrease of $158.6 million compared to the same period in
2001. For the nine months ended September 30, 2002, depreciation and
amortization was $313.8 million, a decrease of $395.2 million compared to the
same period in the prior year. The decrease in depreciation and amortization
for the three and nine-month periods was primarily a result of the adoption of
the provisions of Statement 142, which became effective January 1, 2002.
Statement 142 requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead be tested for impairment at
least annually in accordance with the provisions of Statement 142. See Notes 3
and 4 to the condensed consolidated financial statements. Other intangible
assets acquired in transactions accounted for as purchases are still amortized
and such amortization is significant.

The write-down of capitalized patent litigation costs of $44.4 million in
June 2002 resulted from the ITC and SuperGuide rulings. (See Overview of
Significant Events.)

Impairment of intangible assets represents a write-down of the carrying
amount of finite-lived intangible assets ($1,212.3 million), goodwill ($22.8
million) and trademark ($24.0 million) to their fair values based on analyses
performed as of June 30, 2002.

Interest expense was $2.3 million for the three months ended September 30,
2002 and $7.8 million for the nine months ended September 30, 2002, compared to
$4.9 million and $24.0 million, respectively, for the same periods in the prior
year. The decreases in interest expense during the three and nine-month periods
were attributable to lower debt levels coupled with lower interest rates.

Other expense, net decreased to $6.4 million for the three months ended
September 30, 2002 from $7.8 million for the same period in 2001. For the nine
months ended September 30, 2002, other expense, net was $23.8 million as
compared to $6.8 million for the prior year period. The decrease in other
expense, net for the three-month period was primarily attributable to a $6.8
million write-down of certain investments during the quarter ended September
30, 2001 as compared with a $2.0 million write-off of an asset in the same
period of 2002. Additionally, the Company earned $2.9 million less interest
income on cash balances during the 2002 quarterly period primarily due to lower
interest rates. The increase in other expense, net for the nine-month period
was primarily due to a $12.6 million decrease in interest income coupled with a
write-down of certain marketable securities held by one of the Company's
equity-method investees. The decline in the fair value of such securities was
determined to be other than temporary.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

41

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

The provision for income tax benefit as a percentage of loss before income
taxes, extraordinary loss on debt extinguishment and cumulative effect of an
accounting change for the three and nine months ended September 30, 2002 was
28% and 36%, respectively, compared to 14% for both periods in 2001. The income
tax benefit for the three and nine months ended September 30, 2002 was $6.8
million and $523.2 million, respectively. The income tax benefit for the three
and nine months ended September 30, 2001 was $22.6 million and $67.6 million,
respectively. The net increase in the effective tax rate is primarily due to
the change in the treatment of amortization of goodwill in accordance with
Statement 142, which has no associated impact on the provision for income
taxes. In addition, the overall effective tax rate reported by the Company in
any single period is impacted by, among other things, the country in which
earnings or losses arise, applicable statutory tax rates and withholding tax
requirements for particular countries, the availability of net operating loss
carry forwards and the availability of tax credits for taxes paid in certain
jurisdictions. Because of these factors, it is expected that the Company's
future tax expense as a percentage of income before income taxes may vary from
period to period.

The cumulative effect of an accounting change relates to the Company's
adoption of Statement 142 effective January 1, 2002. The Company is required to
test goodwill and any intangible assets identified as having an indefinite
useful life for impairment in accordance with the provisions of Statement 142
and report any transitional impairment loss as the cumulative effect of a
change in accounting principle as of January 1, 2002 in the unaudited condensed
consolidated statement of operations. The transitional impairment loss for
goodwill and indefinite-lived intangible assets from application of these new
rules was $5,303.3 million, net of tax.

Sector Results of Operations

The Company categorizes its businesses into three groups which also
represent its reportable business segments: the Technology and Licensing
Sector, which is responsible for the development, licensing and protection of
intellectual property and proprietary technologies (including the IPGs
currently marketed under brands such as GUIDE Plus+(R) and TV Guide(R)
Interactive, the VCR Plus+(R) system and electronic book ("eBook") technology
marketed under brands such as the Gemstar eBook(TM)); the Interactive Platform
Sector, which derives recurring income from advertising, interactive services
and e-commerce on the Company's proprietary interactive platforms, including
advertising on the Company's IPGs and TV Guide Online, interactive services,
and e-commerce on tvguide.com, skymall.com and other affiliated websites; and
the Media and Services Sector, which operates TV Guide Magazine, TV Guide
Channel, TVG Network/SM/ ("TVG"), SkyMall catalog sales, Superstar/Netlink
Group ("SNG") and other non-interactive platforms and media properties.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

42

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

The following table sets forth certain financial information for the
Company's business sectors for the three and nine-month periods ended September
30, 2002 and 2001 (in thousands). The Company's business sectors are measured
based on EBITDA (operating income before stock compensation expense,
depreciation and amortization, write-down and impairment charges).

Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2002 2001 2002 2001
-------- -------- -------- --------
Restated Restated
-------- --------

Technology and Licensing Sector
Revenues(4)................. $ 40,378 $ 54,063 $147,451 $154,530
Operating expenses(1)(3)(4). 20,777 17,155 53,996 54,930
-------- -------- -------- --------
EBITDA(2)................... $ 19,601 $ 36,908 $ 93,455 $ 99,600
======== ======== ======== ========
Interactive Platform Sector
Revenues.................... $ 21,844 $ 21,917 $ 66,270 $ 51,178
Operating expenses(1)(3)(4). 19,156 27,348 59,086 69,284
-------- -------- -------- --------
EBITDA(2)................... $ 2,688 $ (5,431) $ 7,184 $(18,106)
======== ======== ======== ========
Media and Services Sector
Revenues(3)(4).............. $191,128 $223,883 $601,733 $711,790
Operating expenses(1)(3)(4). 150,903 163,710 484,610 518,742
-------- -------- -------- --------
EBITDA(2)................... $ 40,225 $ 60,173 $117,123 $193,048
======== ======== ======== ========
Consolidated
Revenues(3)(4).............. $253,350 $299,863 $815,454 $917,498
Operating expenses(1)(3)(4). 190,836 208,213 597,692 642,956
-------- -------- -------- --------
EBITDA(2)................... $ 62,514 $ 91,650 $217,762 $274,542
======== ======== ======== ========

- --------
(1) Operating expenses means operating expenses excluding provision for bad
debts, stock compensation expense, depreciation and amortization,
write-down and impairment charges.
(2) EBITDA means operating income before non-cash stock compensation expense,
depreciation and amortization, write-down and impairment charges.
Commencing January 1, 2002, goodwill and certain other intangible assets
are no longer subject to amortization. However, other intangible assets
acquired in transactions accounted for as purchases are still amortized and
such amortization is significant. Accordingly, the Company's business
sectors are measured based on EBITDA. EBITDA is presented supplementally as
the Company believes it is a standard measure commonly reported and widely
used by analysts, investors and others associated with its industry.
However, EBITDA does not take into account substantial costs of doing
business, such as income taxes, interest expense and depreciation and
amortization. While many in the financial community consider EBITDA to be
an important measure of comparative operating performance, it should be
considered in addition to, but not as a substitute for, operating income,
net

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

43

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

income, cash flow provided by operating activities and other measures of
financial performance prepared in accordance with accounting principles
generally accepted in the United States of America that are presented in the
Unaudited Condensed Consolidated Financial Statements included in this
report. Additionally, the Company's calculation of EBITDA may be different
than the calculation used by other companies and, therefore, comparability
may be affected.
(3) Commencing January 1, 2002, the operating costs of the media sales group
have been allocated to the various business units based on advertising
revenue dollars earned. Prior period results, which included media sales
group commissions reported as revenues by the Media and Services Sector
have been reclassified to reflect such commission revenues as a reduction
of expenses in the Media and Services Sector. Effective January 1, 2002,
the Company revised its method of allocating corporate expenses to the
business sectors concurrent with a reorganization of certain corporate
functions. Had the new methodology been in effect in 2001, operating
expenses for each of the sectors for the three and nine months ended
September 30, 2001 would have increased (decreased) approximately as
follows: Technology and Licensing Sector--$(900,000) and $(3.1) million,
respectively, Interactive Platform Sector--$(2.6) million and
$(8.3) million, respectively, and Media and Services Sector--$3.5 million
and $11.4 million, respectively.
(4) The Company's financial statements are presented in accordance with the
guidance provided by EITF No. 01-09. Where applicable, amounts presented in
the prior period have been reclassified to conform with the income
statement classifications for the current period. Such reclassifications
resulted in decreases in revenues for the three and nine-month periods
ended September 30, 2001 as follows: Technology and Licensing Sector--$15.2
million and $37.2 million, respectively, and Media and Services Sector--
$1.0 million and $3.0 million, respectively, and decreases in expenses for
the three and nine-month periods ended September 30, 2001 as follows:
Technology and Licensing Sector--$8.7 million and $19.3 million,
respectively, Interactive Platform Sector--$6.5 million and $17.9 million,
respectively, and Media and Services Sector--$1.0 million and $3.0 million,
respectively, resulting in a total reduction of $16.2 million and $40.2
million in both consolidated revenues and expenses for the three and
nine-month periods ended September 30, 2001.

The following discussion of each of the Company's segments is based on the
unaudited financial information provided above.

Technology and Licensing Sector

The Technology and Licensing Sector is responsible for the development,
licensing and protection of intellectual property and proprietary technologies.
Revenues in this sector are comprised of license fees paid by third-party
licensees for the Company's proprietary technologies and patents primarily
related to IPGs, video recording and electronic books. The Company's licensing
activities cover multiple industries including consumer electronics, cable,
satellite, Internet appliances, personal computers, and publications worldwide,
with major licensees such as Motorola, AT&T, Charter Communications, Comcast,
Shaw, Thomson multimedia, Sony, Matsushita (Panasonic) and others. Sector
operations include research and development, and the creation, protection and
licensing of patents and proprietary technologies.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

44

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

The Company's accounting policy related to recognition of licensing revenues
provides that revenues from per unit license fees typically charged to hardware
manufacturers are earned based on units shipped incorporating the Company's
proprietary technologies and are recognized in the period when manufacturers'
units shipped information is available to the Company. Revenues from per
subscriber license fees typically charged to video service providers, such as
MSOs, are earned and recognized in the month service is provided by such
service provider using the Company's patented proprietary technologies.
Revenues from annual and other licenses generally are recognized based on the
specified terms of the license agreements. In the cable and satellite sectors,
the Company has adopted a general policy that the per subscriber license fees
charged to an MSO with a make, sell and use license include the cost of
licenses that would otherwise be required of manufacturers which incorporate
the Company's technologies into the set-top boxes shipped to the licensed MSO.
For this reason, as more and more direct agreements are concluded with MSOs for
the Company's IPG technologies and services, per subscriber revenues are
expected to increase, while per unit license fees from set-top box suppliers
are expected to decrease.

In 1998, the Company entered into a license agreement with America Online
("AOL"), predecessor of AOL Time Warner. Following the acquisition of Time
Warner by AOL in January 2001, the Company informed AOL Time Warner that the
Company believed the AOL agreement applied to Time Warner cable subscribers
based on language in the agreement which required AOL to use its best efforts
to extend the agreement to AOL affiliates. AOL Time Warner responded that the
agreement did not apply to Time Warner cable subscribers for several specified
reasons. After meeting with AOL Time Warner in the second quarter of 2001 and
based on the status of negotiations to extend the agreement to Time Warner
cable subscribers, the Company concluded that the AOL agreement applied to Time
Warner Cable subscribers and recorded revenues based on the agreement starting
with the third quarter of 2001. The total receivable from AOL Time Warner under
this license agreement at September 30, 2002 is $18.1 million of which $6.8
million was earned in the three months ended March 31, 2002. Starting in the
second quarter of 2002, the Company suspended recognition of revenues from AOL
Time Warner pending resolution of negotiations with AOL Time Warner on an
amended license agreement. The Company continues to believe that the
outstanding receivable from AOL Time Warner is collectible.

For the three months ended September 30, 2002, revenues for the Technology
and Licensing Sector were $40.4 million, a decrease of $13.7 million, or 25%,
when compared to revenues for the same period in 2001. For the nine months
ended September 30, 2002, revenues for this sector were $147.5 million, a
decrease of $7.1 million, or 5%, when compared to revenues for the same period
in 2001. Approximately $5.3 million of the decrease for the three-month period
was attributable to the Company's decision to suspend recognition of revenues
from AOL Time Warner as described above.

In October 2000, the Company received $188 million in cash from a set-top
box manufacturer to settle outstanding arbitration and litigation proceedings.
Of the $188 million cash received, approximately $120 million was in prepayment
of a 10-year technology licensing agreement. This prepayment is being amortized
into income based on the number of set-top boxes that such manufacturer ships,
with a differentiation made for shipments to MSOs having licensing agreements
with the Company and uncontracted MSOs. Revenues in the Technology and

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

45

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Licensing sector for the three-month periods ended September 30, 2002 and 2001
include $7.6 million and $13.5 million, respectively, recognized in connection
with the agreement, while the corresponding nine-month periods included $23.8
million and $44.6 million, respectively. At September 30, 2002, $42.7 million
remained to be recognized over the remaining term of the agreement.

Beginning in June 2002, one of the Company's licensees in the Technology and
Licensing Sector stopped making payments required under its license agreement.
That licensee, which is in the process of being acquired, has informed the
Company that it will make no payments going forward based upon a dispute over
certain provisions of the agreement. This dispute does not affect any payments
previously received by the Company under the agreement. At the time the
payments were terminated, revenues under this agreement were approximately
$800,000 per month. The Company has not recognized any revenue under this
agreement in the three months ended September 30, 2002. The Company is
presently evaluating its options with regard to this dispute and plans to
address this matter with the licensee's acquiring entity upon the completion of
the acquisition.

The decrease in revenues is also due to declines in per unit license fees
from set-top manufacturers, which resulted from an increasing number of units
being shipped to MSOs who are already licensing the Company's services and
technologies for their subscribers. In such instances, the Company has a policy
of waiving or greatly reducing the per unit fee. The decrease was also due in
part to a decline in the shipment of DirecTV satellite receivers and other
devices sold in the consumer electronics sector. These decreases in sector
revenues were partially offset by increased licensing revenues due to growth in
the number of TV Guide Interactive subscribers and by reductions in cooperative
advertising and product placement costs. Cooperative advertising and product
placement expenses recorded in the three and nine months ended September 30,
2002 decreased by $12.2 million and $35.0 million, respectively. Under EITF No.
01-09, these expenses are recorded as a reduction of revenues.

Operating expenses in the sector increased by $3.6 million, or 21%, for the
three months and remained relatively unchanged for the nine months ended
September 30, 2002 as compared with the same periods in the prior year. The
increase for the three-month period was primarily due to general and
administrative expenses as well as legal expenses resulting from the Company's
decision to expense all costs associated with the SuperGuide and ITC cases
subsequent to June 30, 2002.

Interactive Platform Sector

The Interactive Platform Sector derives recurring revenues from advertising,
interactive services and e-commerce on the Company's proprietary interactive
platforms, which include advertising on the various IPGs controlled by the
Company, interactive wagering on TVG, e-commerce on the Company's websites and
the eBook devices, and through revenue sharing under license agreements. Sector
activities include the construction and operation of the infrastructure for the
delivery of services and advertising to the interactive platforms, media
research, wagering operations and trafficking, tracking and billing of
advertising. The Company's IPG platform currently is comprised primarily of
television sets incorporating the Gemstar GUIDE Plus+ IPG and digital cable
set-top boxes incorporating the TV Guide Interactive and StarSight(R) IPGs.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

46

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

The most significant source of revenues in this sector is advertising on the
IPG. Such advertising is generated in three different ways: strategic
advertising commitments, the multi-platform sales program and sales to other
advertisers who may or may not advertise on the Company's other advertising
platforms ("Stand-Alone Advertisers"). A summary of the IPG advertising
revenues from each of these initiatives is as follows (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
------- ------- ------- -------

Strategic Advertisers..... $ 9,108 $12,800 $30,109 $28,351
Multi-Platform Advertisers 1,071 267 4,279 267
Stand-Alone Advertisers... 3,390 2,601 8,890 6,255
------- ------- ------- -------
Total.................. $13,569 $15,668 $43,278 $34,873
======= ======= ======= =======

Strategic advertising revenues are primarily derived from long-term
commitments from three significant customers. In April 2001, the Company
secured a long-term commitment in conjunction with the sale of the WGN
Superstation distribution business. The commitment is for $100 million over six
years for advertising on the Company's platforms. IPG advertising revenues
recognized from this contract in the three-month period ended September 30,
2002 and 2001 were $4.5 million and $5.0 million, respectively, while revenues
for the corresponding nine-month periods were $14.0 million and $9.0 million,
respectively.

The second significant strategic advertising commitment is from Thomson
multimedia, Inc., ("Thomson") a consumer electronics manufacturer with which
the Company has multiple licensing and advertising transactions. In May 2002, a
binding letter of intent was signed which reaffirms Thomson's commitment to
spend $10 million in IPG advertising for each year in 2002 and 2003 and to
purchase IPG advertising during the next five years in an amount equal to a
per-box fee multiplied by the number of satellite set-top boxes shipped.
Thomson also committed to spend $3 million in general advertising on any of the
Company's various delivery platforms within a five-year period and the Company
is required to provide an equivalent amount of advertising at no additional
cost to Thomson. IPG advertising revenues recognized from this commitment in
the three months ended September 30, 2002 and 2001 were $4.3 million and $2.8
million, respectively, while revenues for the corresponding nine-month periods
were $12.3 million and $5.6 million, respectively.

The third strategic advertising commitment is from a set-top box
manufacturer as part of a long-term licensing and settlement agreement. This
manufacturer prepaid $17.5 million in IPG advertising, which was recognized as
revenue over an 18-month period, ending in March 2002, as the advertising was
aired. No advertising revenues from such manufacturer were recognized in the
three months ended September 30, 2002. IPG advertising revenues recognized from
this commitment for the three months ended September 30, 2001 included
$5.0 million, while revenues for the nine-month periods ended September 30,
2002 and 2001 included $3.1 million and $12.4 million, respectively.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

47

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

In an effort to attract customers to simultaneously advertise on two or more
of its various delivery platforms, in late 2001, the Company established the
MPA Program to provide incentives in the form of discounts for multi- platform
advertisers. Often such discounts are significant, and frequently equal and
occasionally exceed the pre-discounted value of the advertising on the IPG
platforms. See Critical Accounting Policies and Estimates--Multi-Platform
Advertising Sales in this Item 2. Revenues are allocated among the sectors
based on the relative fair value of the advertising inventory, as measured by
the advertiser-specific rates or market rates of similar advertisers for each
medium. The IPG platform is frequently involved in sales under the MPA Program,
which contributed $1.1 million and $4.3 million to the sector revenues for the
three and nine months ended September 30, 2002, respectively, compared to
$267,000 for each of the corresponding periods in 2001.

Included in stand-alone advertising revenues for the nine months ended
September 30, 2001 is $2.1 million relating to advertising purchased by
SkyMall, Inc. prior to the Company's acquisition of SkyMall.

For the three months ended September 30, 2002, revenues for the Interactive
Platform Sector were relatively unchanged at $21.8 million when compared to
revenues for the same period in 2001. Declines in advertising on the IPG and
tvguide.com, were substantially offset by an increase in interactive wagering
and e-commerce activities. The Company recognized no non-monetary advertising
revenues in any of the periods presented. The decline in IPG advertising
revenues was due to a $3.7 million decrease in cash advertising sales generated
from strategic commitments, partially offset by a $1.6 million increase in
multi-platform and stand-alone sales for the quarter ended September 30, 2002.

For the nine months ended September 30, 2002, revenues for this sector were
$66.3 million, an increase of $15.1 million, or 29%, when compared to revenues
for the same period in 2001. The increase in revenues was attributable to
increased e-commerce revenues attributable to SkyMall and increased interactive
wagering activities, coupled with an increase in IPG advertising sales. Such
increases were partially offset by a decrease in revenues from advertising on
tvguide.com.

Expenses for this sector were $19.2 million for the quarter ended September
30, 2002, a decrease of $8.2 million, or 30%, compared to $27.3 million for the
same period in 2001. For the nine months ended September 30, 2002, expenses for
this sector were $59.1 million, a decrease of $10.2 million, or 15%, when
compared to expenses for the same period in 2001. Expenses in this sector
include amounts paid to licensees as marketing and advertising expenses and
other amounts paid to licensees under revenue sharing arrangements. A
significant portion of these payments to licensees under marketing and
advertising arrangements is incurred to promote the Company's products on those
cable systems that carry TV Guide Interactive. Amounts expensed under these
arrangements were $4.4 million and $3.5 million for the three months ended
September 30, 2002 and 2001, respectively, and $15.5 million and $10.9 million
for the nine months ended September 30, 2002 and 2001, respectively. The
increased marketing and advertising expenses and the expenses associated with
skymall.com (acquired July 2001) were favorably offset by decreases in general
and administrative expenses.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

48

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Media and Services Sector

The Media and Services Sector operates TV Guide Magazine, TV Guide Channel,
TVG, SkyMall catalog sales, SNG and other non-interactive platforms and media
properties. Revenues in this sector are principally composed of subscription
fees and advertising revenues of the TV Guide magazines and the TV Guide
Channel and programming package revenues from C-band households. The Company
sold the business that distributes the WGN superstation signal in April 2001
for approximately its net book value and acquired SkyMall in July 2001.

For the three and nine months ended September 30, 2002, revenues for the
Media and Services Sector were $191.1 million and $601.7 million, respectively,
compared to $223.9 million and $711.8 million, respectively, for the same
periods in 2001. Revenues in this sector decreased by $32.8 million and $110.1
million for those periods, respectively, primarily due to decreased revenues
earned by TV Guide Magazine and SNG.

The following table shows the breakdown of the revenues in the Media and
Services Sector by revenue source (in thousands):

Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, Increase September 30, September 30, Increase
2002 2001 (Decrease) 2002 2001 (Decrease)
------------- ------------- ---------- ------------- ------------- ----------

TV Guide Magazine........ $ 99,100 $115,733 $(16,633) $310,017 $374,596 $ (64,579)
SNG...................... 56,012 69,629 (13,617) 176,311 220,285 (43,974)
TV Guide Channel......... 22,990 23,028 (38) 72,041 68,328 3,713
SkyMall.................. 5,816 5,929 (113) 19,235 5,929 13,306
Other.................... 7,210 9,564 (2,354) 24,129 42,652 (18,523)
-------- -------- -------- -------- -------- ---------
Total................. $191,128 $223,883 $(32,755) $601,733 $711,790 $(110,057)
======== ======== ======== ======== ======== =========

TV Guide Magazine continues to face declines in paid circulation due to
difficulty in attracting new subscribers and reduced newsstand sales, largely
due to the increasing costs of acquiring new subscribers and the proliferation
of competing products and emerging technology. The reduced revenues from new
subscribers are being slightly offset by improved renewal rates from existing
subscribers. At September 30, 2002, TV Guide Magazine had a total circulation
of 9.0 million copies, relatively unchanged from the same point in time in
2001, but 9% lower than at December 31, 2000. The circulation figures include
"waiting room" and hotel copies, which do not generate subscription revenues
but contribute to advertising revenues. Circulation of these copies has
increased to 2.4 million copies at September 30, 2002 from 1.3 million copies
at September 30, 2001.

The C-band direct-to-home satellite market, in which SNG operates, continues
to decline due to the growth of the newer generation direct broadcast satellite
systems and continued cable system expansions. During the nine months ended
September 30, 2002, the number of C-band subscribers in the industry decreased
by 23% to approximately 637,000 subscribers. At September 30, 2002, SNG
provided service to 399,000 of these subscribers, a decrease of 27% from the
subscribers served by SNG as of December 31, 2001.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

49

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

On November 2, 1999, SNG signed an agreement with EchoStar whereby SNG
promotes and solicits orders for EchoStar's direct broadcast subscription
service, the DISH Network. In exchange, SNG receives an initial commission for
each current or past SNG subscriber who subscribes to the DISH Network and a
monthly residual commission over the life of the agreement. Revenues recognized
from this arrangement totaled $11.0 million and $30.7 million for the three and
nine months ended September 30, 2002, respectively, as compared to $7.7 million
and $27.0 million in the corresponding periods of 2001. This agreement has
resulted in an acceleration of the decline in the number of SNG subscribers and
this effect is expected to continue.

Expenses for this sector were $150.9 million for the quarter ended September
30, 2002, a decrease of $12.8 million, or 8%, when compared to expenses for the
same period in 2001. For the nine-month period ended September 30, 2002,
expenses for this sector were $484.6 million, a decrease of $34.1 million, or
7%, when compared to expenses for the same period in 2001. The decrease for the
three and nine-month periods was primarily due to cost reductions of $12.9
million and $44.5 million, respectively, at SNG as a result of declining
numbers of subscribers and decreases of $4.0 million and $18.1 million,
respectively, at TV Guide Magazine as a result of ongoing production cost
reduction efforts for paper, printing and postage. The decrease for the
nine-month period was partially offset by $29.2 million of expenses
attributable to SkyMall and exit costs related to the magazine distribution
business as described below.

The Company has traditionally operated a magazine distribution business,
which was responsible for distributing approximately 90 titles with a combined
circulation of approximately 410 million copies per year in addition to the TV
Guide Magazine. These magazines were distributed through magazine wholesalers,
who in turn sold them to retailers. The magazine wholesaler segment of this
distribution chain, reacting to increased competition and demands by retailers,
experienced significant consolidation over the last several years. As such, the
credit risk and credit concentration increased dramatically for distributors,
effectively reducing the risk-adjusted returns for TV Guide's distribution
business. Due to this change in business environment, and following the general
approach of discontinuing non-core activities in order to focus on its core
business, the Company contracted with a third party for distribution of TV
Guide Magazine and assigned the existing distribution contracts to that same
party. The distribution business generated approximately $12.6 million in
annual revenue during 2001 with no significant impact on EBITDA. The Company
recognized approximately $3.3 million in costs related to its exit from the
distribution business in the second quarter of 2002. Such costs are included in
operating expenses for the nine months ended September 30, 2002 in the Sector
Results of Operations for the Media and Services Sector.

Related Parties and Other Significant Relationships

In connection with the acquisition of TV Guide in 2000, News Corp. became a
stockholder of the Company. As of September 30, 2002, News Corp. directly and
indirectly owns approximately 43% of the Company's outstanding common stock and
has the right to designate six directors on the Company's board. The Company
earned advertising revenues of $3.2 million and $2.4 million for the three
months ended September 30, 2002 and 2001, respectively, and $11.7 million and
$15.2 million for the nine months ended September 30, 2002 and 2001,
respectively, from entities controlled by News Corp. In addition, the Company
acquired programming from

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

50

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

News Corp. controlled entities of $837,000 and $3.1 million for the three
months ended September 30, 2002 and 2001, respectively, and $3.6 million and
$8.6 million for the nine months ended September 30, 2002 and 2001,
respectively. Prior to its acquisition of TV Guide, the Company did not have
any significant transactions with News Corp. As of September 30, 2002 and
December 31, 2001, the Company had receivables due from News Corp. controlled
entities totaling $3.7 million and $4.6 million, respectively, and payables due
to News Corp. controlled entities totaling $262,000 and $302,000, respectively.
The Company reimburses News Corp. for facilities and other general and
administrative costs incurred on the Company's behalf. Expenses associated with
these costs approximated $1.1 million and $1.3 million for the three months
ended September 30, 2002 and 2001, respectively, and $3.1 million and $2.5
million for the nine months ended September 30, 2002 and 2001, respectively.
Expenses for the nine months ended September 30, 2001 included a rent and
facilities credit of $345,000 from News Corp. In addition, the Company
purchases paper through a paper procurement arrangement with News Corp. at
negotiated prices with paper suppliers based on the combined paper requirements
of the two organizations.

Liberty Media Corporation ("Liberty Media"), formerly an indirect wholly
owned subsidiary of AT&T Corp., directly or indirectly owned approximately 21%
of the issued and outstanding common stock of the Company from the date of the
acquisition of TV Guide in 2000 until May 2, 2001, the date Liberty Media sold
its interest in the Company to News Corp. For the period January 1, 2001 to May
2, 2001, the date Liberty Media ceased to be considered a related party of the
Company, the Company purchased programming from Liberty Media controlled
affiliates of $4.5 million. During the same period, the Company also sold
video, program promotion and guide services of $6.7 million to AT&T Broadband
and Internet Services ("BIS") and its consolidated affiliates. In addition,
during the same period, the Company purchased production services and was
provided satellite transponder facilities and uplink services from BIS
consolidated affiliates of $2.4 million. BIS is also wholly owned by AT&T Corp.
Prior to its acquisition of TV Guide, the Company did not have any significant
transactions with Liberty Media or BIS.

The Company has included in the amounts discussed above, transactions with
News Corp., BIS, and Liberty Media and all known entities in which BIS, Liberty
Media and News Corp. have an interest greater than 50%. In addition, the
Company has transactions with entities in which BIS, Liberty Media and News
Corp. own, directly or indirectly, 50% or less.

The Company has multiple transactions with Thomson multimedia, Inc.,
including Thomson's licensing of the Company's VCR Plus+, GUIDE Plus+ and eBook
technologies, Thomson's advertising on the Company's platforms, primarily the
IPG platforms, the Company's participation in marketing and promotion campaigns
on Thomson products carrying the Company's technology, and a joint venture for
the sale of advertising on electronic program guides on televisions. During the
three months ended September 30, 2002 and 2001, revenues earned from the
relationship with Thomson were $10.6 million and $16.5 million, respectively,
and expenses incurred were $2.9 million and $14.1 million, respectively. During
the nine months ended September 30, 2002 and 2001, revenues earned from the
relationship with Thomson were $38.2 million and $44.3 million, respectively,
and expenses incurred were $9.3 million and $29.2 million, respectively. As of
September 30, 2002,

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

51

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

the Company had receivables due from and a payable due to Thomson totaling
$16.9 million (of which $5.3 million is over 90 days past due) and
$11.4 million, respectively.

In May 2002, the Company signed a binding Letter of Intent with Thomson to
broaden areas included in their strategic partnership and to also settle all
issues raised in an arbitration between the parties (See Note 10 to the Notes
to the Unaudited Condensed Consolidated Financial Statements). The Letter of
Intent renews the commercial relationship in which the Company's GUIDE Plus+
IPG is incorporated in Thomson's televisions. The Letter of Intent also
reaffirms Thomson's commitment to spend $10 million in IPG advertising for each
year in 2002 and 2003 and to purchase IPG advertising during the next five
years in an amount equal to a per box fee multiplied by the number of satellite
set-top boxes shipped. Thomson also committed to spend $3 million in general
advertising on any of the Company's various delivery platforms within a
five-year period and the Company is required to provide an equivalent amount of
advertising at no additional cost to Thomson. A component of the overall
revenue from Thomson described above is IPG advertising revenue. IPG
advertising revenues recognized from this relationship in the three months
ended September 30, 2002 and 2001 were $4.3 million and $2.8 million,
respectively, while revenues for the corresponding nine-month periods were
$12.3 million and $5.6 million, respectively. The Company suspended recognition
of licensing revenue relating to the GUIDE Plus+ portion of the agreement
during the quarter ended September 30, 2002 as the Company and Thomson are in
process of renegotiating the terms thereof.

This cooperation provides for Thomson to share in guide revenues generated
by GUIDE Plus+ IPGs incorporated in Thomson's consumer electronic products. The
licensing of Gemstar's IPG technology for incorporation into Thomson devices
will focus on the next generation digital products including digital
televisions, digital-ready televisions and digital recorders such as hard disc
recorders and DVD-recordables, in addition to analog televisions. The companies
also propose cooperation to strengthen their respective intellectual property
positions and develop interactive services and two-way response networks with
Gemstar using Thomson as a preferred supplier for broadcast and response
networks for both video and data in its interactive services.

Liquidity and Capital Resources

For the nine months ended September 30, 2002, net cash flows from operating
activities were $150.9 million. This cash flow, plus existing cash resources
and proceeds from the exercise of stock options of $1.3 million, was used to
fund $61.5 million for repayment of long-term debt and capital lease
obligations, $6.4 million for capital expenditures, $25.1 million for additions
to intangible assets, primarily patent prosecution and litigation costs, $14.1
million for distributions to minority interests, primarily in SNG, and $63.4
million to repurchase outstanding shares of the Company's common stock.

At September 30, 2002, the Company's cash, cash equivalents and marketable
securities classified as current assets aggregated $385.5 million, which
includes cash and cash equivalents of $167.3 million domiciled outside the
United States.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

52

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

At September 30, 2002, approximately $65.6 million, or 41%, of the Company's
receivables are due from five entities. The Company currently believes these
receivables to be realizable; however, events may occur in the future which
could cause the Company to change its assessment of the amount of
recoverability. As of September 30, 2002, net receivables totaled $159.3
million, a decrease of $125.8 million when compared to the balance at December
31, 2001. The decrease is primarily due a $15.1 million increase in the
allowance for doubtful accounts, a $73.2 million decrease in receivables
related to the magazine distribution business, and a $37.5 million decrease in
balances due from various other customers, including Thomson multimedia.

The Company's wholly owned subsidiary, TV Guide, has a $300 million six-year
revolving credit facility and a $300 million four-year amortizing term loan,
both expiring in February 2005 with a group of banks. Borrowings under the
credit facilities bear interest (2.81% at September 30, 2002) either at the
banks' prime rate or LIBOR, both plus a margin based on a sliding scale tied to
TV Guide's leverage ratio, as defined in the facility. The credit facilities
are guaranteed by certain subsidiaries of TV Guide and the stock of TV Guide's
subsidiaries is pledged as collateral. The credit facilities impose
restrictions on TV Guide's ability to pay dividends to Gemstar tied to TV
Guide's leverage ratio. This restriction does not apply to Gemstar's ability to
pay dividends. As of September 30, 2002, TV Guide had available borrowing
capacity under the six-year revolving credit facility of $160.6 million.
Principal payments of $15 million in the remainder of 2002, $90 million in 2003
and $23 million in 2004 are due under the $300 million amortizing term loan.
Outstanding borrowings at September 30, 2002 were $138.4 million under the
revolving credit facility and $128.0 million under the term loan. At September
30, 2002, the Company had an outstanding letter of credit issued under the
revolving credit facility for $1.0 million. The Company has determined that
there is a reasonable likelihood that TV Guide will be unable to maintain
compliance with a financial covenant in its term loan agreement during the
coming twelve months. The Company is currently evaluating options to maintain
compliance or mitigate the effects of any noncompliance.

The Company is a party to a loan guaranty to assist a printing services
supplier in obtaining a line of credit and term loans with a bank. The maximum
exposure to the Company created by this guaranty is $10.0 million.

The Company collects in advance a majority of its TV Guide magazine
subscription fees, SNG subscription fees and certain of its UVTV superstation
revenues. In addition, the Company receives nonrefundable prepaid license fees
from certain licensees. The Company's liability for prepaid magazine
subscriptions is limited to the unearned prepayments in the event customers
cancel their subscriptions. The Company's liability for other prepayments is
limited to a refund of unearned prepayments in the event that the Company is
unable to provide service. No material refunds have been paid to date.

As of September 30, 2002, deferred revenue totaled $303.0 million, a
decrease of $67.9 million when compared to $370.9 million at December 31, 2001.
The decrease in deferred revenue was attributable to declines in circulation of
TV Guide Magazine coupled with the decline in the subscriber base of the C-band
industry and the recognition of nonrefundable prepaid license fees.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

53

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

The Company does not have any material commitments for capital expenditures.
The Company believes that the anticipated cash flows from operations, and
existing cash, cash equivalents and short-term marketable securities balances,
will be sufficient to satisfy its expected working capital, capital expenditure
and debt requirements in the foreseeable future.

In April 2002, the Company's Board of Directors authorized an extension of
its authorization granted in September 2001 to repurchase up to $300 million of
the Company's outstanding shares of common stock. The authorization permitted
the Company to purchase shares in the open market at prevailing prices, or in
privately negotiated transactions at then prevailing prices, provided that the
Company complied with SEC regulations regarding such purchases. The extension
expired on September 18, 2002. During the period subsequent to the date the
extension was authorized through September 30, 2002, the Company repurchased
6.9 million shares for an aggregate price of $63.4 million. Since September
2001, the Company has repurchased a total of 7.2 million shares for an
aggregate price of $69.8 million.

The terms of an option agreement entered into in connection with the
Company's acquisition of the intellectual property of a privately held company
require the Company to exercise an option to acquire substantially all of the
assets of such company for $3.0 million if it achieves certain financial and
operating goals. The Company received notice that such goals have been met and
is exercising the option.

On May 22, 2002, the Company entered into an agreement with DIVA Systems
Corporation ("DIVA"), a provider of server-based technology and software
systems for cable television, to acquire substantially all of its assets as
part of a bankruptcy proceeding for approximately $40.0 million, payable
primarily in shares of the Company's common stock. The transaction has not been
completed. On September 25, 2002, the Company notified DIVA that it had elected
not to proceed with the purchase of DIVA's assets. DIVA subsequently filed a
complaint against the Company for breach of contract and other claims based
upon the Company's decision not to acquire DIVA's assets. The Company later
filed counterclaims against DIVA. The parties are presently in pretrial
proceedings. See Note 10 to the Unaudited Condensed Consolidated Financial
Statements.

Subsequent Events

Management Restructuring

On August 14, 2002, the Company announced that News Corp., Dr. Henry Yuen,
Chief Executive Officer, and Elsie Leung, Chief Financial Officer, submitted a
joint proposal to the Company's Board of Directors to restructure the Company's
management and to settle disputes among the parties. The Board of Directors
formed a committee of independent directors to consider the proposal and to
make a recommendation to the Board concerning the proposal. The Special
Committee, with the assistance of its independent legal advisors, evaluated the
proposal. On November 7, 2002, the Board of Directors approved and the Company
executed definitive documentation related to this restructuring. Dr. Yuen
resigned as Chief Executive Officer of the Company. Dr. Yuen will continue as
Chairman of the Board in a non-executive capacity and, under a new five-year
employment agreement, will lead a business unit formed to pursue international
business development

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

54

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

opportunities. In that role, Dr. Yuen will also strive to enhance and improve
the Company's interactive program guides and interactive technologies. As part
of the agreement, Dr. Yuen assigned to the Company all intellectual property
relating to the Company's business that he has developed and develops in the
future in his new role. In addition, he has granted the Company the right of
first refusal to certain future inventions related to interactive television
and interactive programming guides for a period of time. Jeff Shell has been
named Chief Executive Officer succeeding Dr. Yuen. Additionally, the Company
appointed Paul Haggerty as Acting Chief Financial Officer. Mr. Haggerty,
currently Executive Vice President for Finance at News Corp., which owns
approximately 43 percent of the outstanding stock of the Company, succeeds
Elsie Leung. Ms. Leung will remain as a member of the Board and, under a new
three-year agreement, will work with Dr. Yuen to pursue international
opportunities for the Company. The Company will be conducting a search for a
permanent Chief Financial Officer.

Dr. Yuen will receive approximately $22 million and Ms. Leung approximately
$7 million as termination payments for their existing contracts. The cash
payable to Dr. Yuen and Ms. Leung under this settlement, as well as other
accrued but unpaid amounts due under their employment agreements totaling $8.0
million, will be held by the Company in a segregated account for up to six
months pending possible deposit of all or a portion of such cash into an escrow
account pursuant to the Sarbanes-Oxley Act. In addition, approximately
20 million outstanding options held by Dr. Yuen and Ms. Leung were cancelled.
The Company currently intends to grant Dr. Yuen and Ms. Leung approximately
8 million shares of restricted stock and approximately 9 million new stock
options in connection with their termination, employment and other future
agreements.

The Company expects to record a charge related to this settlement agreement
in the fourth quarter of 2002.

Nasdaq Delisting Proceeding

On August 19, 2002, the Company received a Nasdaq Staff Determination that
its securities are subject to delisting from the Nasdaq National Market because
the Company failed to file its Form 10-Q for the quarter ended June 30, 2002 on
a timely basis. On November 9, 2002, the Nasdaq Listing Qualifications Panel
granted the Company's request for an exception to continue its listing on the
Nasdaq National Market based on the following conditions:

. On or before November 19, 2002, the Company must file with the SEC and
Nasdaq the Form 10-Q for the quarter ended September 30, 2002,
notwithstanding the absence of the requisite SAS 71 accountant review.

. On or before March 3, 2003, the Company must file with the SEC and
Nasdaq all necessary amended filings for fiscal 2000, 2001 and 2002,
including affirmative statements that the filings have been reviewed
and/or audited in accordance with SEC requirements.

. On or before June 30, 2003, the Company must solicit proxies and hold an
annual meeting for fiscal 2001.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

55

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

To fully comply with the terms of this exception, the Company must be able
to demonstrate compliance with all requirements for continued listing on the
Nasdaq National Market. The Nasdaq Panel also reserved its right to modify,
alter or extend the terms of this exception upon a review of the Company's
reported financial results.

SEC Formal Investigation

On October 17, 2002, the U.S. Securities and Exchange Commission issued a
formal order of investigation to determine whether there have been violations
of the federal securities laws by the Company and/or others. The Company
previously disclosed that it has been in discussions with the Commission
regarding the Company's recently completed internal accounting review. The
Company intends to continue to fully cooperate with the Commission as it moves
forward in its process.

DOJ Correspondence

On November 7, 2002, the Company received a letter from the DOJ. The DOJ has
indicated they believe that Gemstar International Group Limited and TV Guide,
Inc. engaged in unlawful coordination of activities prior to their merger on
July 12, 2000. The Company has reason to believe that the DOJ may initiate an
action against the Company under federal antitrust laws in the near future. The
DOJ has also indicated that it would be willing to enter into negotiated
agreement with the Company and has provided the Company with a possible
settlement structure, including the imposition of a fine and certain other
conditions and restrictions. The Company believes that its conduct prior to the
merger was lawful, but will evaluate whether there are acceptable terms for a
negotiated resolution of this matter.

Recent Accounting Pronouncements

In November 2001, the Financial Accounting Standards Board's ("FASB's")
Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue No.
01-09, Accounting for Consideration Given by a Vendor to a Customer (Including
a Reseller of the Vendor's Products). EITF No. 01-09, which is effective for
periods commencing after December 31, 2001, clarifies the income statement
classification of costs incurred by a vendor for certain cooperative
advertising and product placement paid to a vendor's customers. As a result of
the EITF consensus, certain of the Company's cooperative advertising and
product placement costs previously classified as operating expenses have been
reflected as a reduction of revenues earned from that activity. Where
applicable, amounts presented in prior periods have been reclassified to comply
with the income statement classifications for the current period. Approximately
$16.2 million and $40.2 million of cooperative advertising and product
placement costs previously classified as expenses have been reflected as a
reduction of revenues in the unaudited condensed consolidated statements of
operations for the three and nine-month periods ended September 30, 2001,
respectively.

In July 2001, the FASB issued Statement 142, Goodwill and Other Intangible
Assets. Statement 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead be

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

56

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

tested for impairment at least annually in accordance with the provisions of
Statement 142. The Company adopted the provisions of Statement 142 effective
January 1, 2002. In connection with the adoption of Statement 142, the Company
evaluated its existing intangible assets that were acquired in prior purchase
business combinations, and made any necessary reclassifications in order to
conform with the criteria outlined in SFAS No. 141, Business Combinations, for
recognition apart from goodwill. In addition, the Company reassessed the useful
lives and residual values of all intangible assets acquired in purchase
business combinations, and made any necessary amortization period adjustments.
Finally, the Company tested goodwill and any intangible assets identified as
having an indefinite useful life for impairment in accordance with the
provisions of Statement 142. As a result of the application of these new rules,
the Company reported a transitional impairment charge for goodwill and
indefinite-lived intangible assets as the cumulative effect of an accounting
change of $5,303.3 million, net of tax as of January 1, 2002 in the
accompanying unaudited condensed consolidated statements of operations.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. This statement replaces Statement No. 121.
However, it retains the fundamental provisions of Statement No. 121 for
recognition and measurement of the impairment of long-lived assets to be held
and used and for measurement of long-lived assets to be disposed of by sale.
This statement applies to all long-lived assets, including discontinued
operations, and replaces the provisions of APB Opinion No. 30, Reporting
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, for the disposal of segments of a business. This statement requires
that those long-lived assets be measured at the lower of carrying amount or
fair value less cost to sell, whether reported in continuing operations or in
discontinued operations. The Company adopted this statement effective January
1, 2002. Adoption of this statement did not have a material impact on the
Unaudited Condensed Consolidated Financial Statements at January 1, 2002.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement 13, and Technical Corrections
("Statement 145"). In addition to amending or rescinding other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions, Statement
145 precludes companies from recording gains and losses from the extinguishment
of debt as an extraordinary item. The Company must implement Statement 145 in
the first quarter of 2003 and all comparative financial statements will be
reclassified to conform to the 2003 presentation. The anticipated effect of the
statement includes the reclassification of an extraordinary loss on debt
extinguishment to net loss of $2.1 million ($0.01 per share) for the nine
months ended September 30, 2001. There will be no effect on net loss or net
loss per share.

On June 30, 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities ("Statement 146"). Statement 146
nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). It requires that a liability be recognized
for those costs only when the liability is incurred, that is, when it meets the
definition of a liability in the FASB's conceptual framework. Statement 146
also establishes fair value as the objective for initial measurement of
liabilities related to exit or disposal activities. Statement 146

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

57

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

is effective for exit or disposal activities that are initiated after December
31, 2002, with earlier adoption encouraged. The Company does not expect that
the adoption of Statement 146 will have a material impact on its financial
position or results of operations.

In September 2002, the EITF reached a consensus on EITF Issue No. 02-13,
Deferred Income Tax Considerations in Applying the Goodwill Impairment Test in
FASB Statement No. 142, Goodwill and Other Intangible Assets ("EITF 02-13").
EITF 02-13, which is effective for goodwill impairment tests performed after
September 12, 2002, requires that deferred income taxes, if any, be included in
the carrying amount of a reporting unit for the purposes of the first step of
the SFAS 142 goodwill impairment test. It also provides guidance for
determining whether to estimate the fair value of a reporting unit by assuming
that the unit could be bought or sold in a non-taxable transaction versus a
taxable transaction and the income tax bases to use based on this
determination. The Company does not expect that the adoption of EITF 02-13 will
have a material impact on its financial position or results of operations.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995

The foregoing "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section and other portions of this Form 10-Q contain
various "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, which represent the Company's expectations or beliefs
concerning future events. Statements containing expressions such as "may,"
"will," "continues," "believes," "anticipates," "estimates", "plans" or
"expects" used in the Company's periodic reports on Forms 10-K, 10-K/A, 10-Q,
10-Q/A and 8-K filed with the SEC are intended to identify forward-looking
statements. The Company cautions that these and similar statements included in
this report and in previously filed periodic reports including reports filed on
Forms 10-K, 10-K/A, 10-Q, 10-Q/A and 8-K are further qualified by important
factors that could cause actual results to differ materially from those in the
forward-looking statement, including, without limitation, those referred to
below in "Certain Factors Affecting Business, Operating Results and Financial
Condition" and elsewhere in this Form 10-Q. Such statements reflect the current
views of the Company or its management with respect to future events and are
subject to certain risks, uncertainties and assumptions including, but not
limited to those discussed below. Such factors, together with the other
information in this Form 10-Q, should be considered carefully in evaluating an
investment in the Company's common stock. The cautionary statements contained
or referred to in this section should be considered in connection with any
subsequent written or oral forward-looking statements that the Company or
persons acting on the Company's behalf may issue. The Company undertakes no
obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

58

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Certain Factors Affecting Business, Operating Results and Financial Condition

Our financial statements have been restated and have not been audited or
reviewed.

On November 14, 2002, the Company filed Amendment No. 2 to its Annual Report
on Form 10-K/A for the year ended December 31, 2001 (the "Annual Report"),
Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarter ended
March 31, 2002, its Quarterly Report on Form 10-Q for the quarter ended June
30, 2002 and its Quarterly Report on Form 10-Q for the quarter ended September
30, 2002, each of which restated certain historical financial statements and
other information contained in reports previously filed with the SEC. None of
the financial statements contained in such reports has been audited or reviewed
by an independent accounting firm and therefore should not be relied upon. In
addition, the Company recently dismissed its independent accounting firm and
engaged a new independent accounting firm to audit the Company's financial
statements contained in the Annual Report and to conduct a review of the
financial statements contained in such Quarterly Reports on Form 10-Q. There
can be no assurance as to when such audit and reviews will be completed or that
at the conclusion of such audit, the independent accounting firm will issue an
unqualified opinion, or any opinion, on the financial statements contained in
the Annual Report. The Company is also reviewing its accounting policies and
transactions to ensure compliance with accounting principles generally accepted
in the United States of America. Specifically, the Company will be focusing on
the accounting for licensing and advertising revenues, including but not
limited to, revenues from strategic customers and multi-platform advertisers.
The Company believes that it is likely that, as a result of such accounting
firm's audit and review and the Company's ongoing review of its accounting
policies and the application of the policies to various types of transactions,
the Company will further restate the financial statements contained in its
Annual Report and such Quarterly Reports on Form 10-Q in amendments to such
reports. Such restatements may be material. Any further restatement of such
financial statements may adversely affect the Company's business and results of
operations.

We face risks related to an SEC investigation and securities litigation.

The SEC has issued a formal order of investigation to determine whether the
Company has violated the federal securities laws. Although the Company intends
to fully cooperate with the SEC in this matter, the SEC may determine that the
Company has violated federal securities laws. If the SEC so determines, the
Company may face criminal sanctions and/or have to pay significant fines or pay
restitution to certain stockholders. In addition, the Company has been named a
defendant in a number of class-action lawsuits. As a result, management's
attention will be diverted to the defense of such lawsuits and the Company will
have to expend significant monetary and human resources on such defense. These
lawsuits could also result in significant monetary judgments against the
Company.

We may be delisted from the Nasdaq National Market.

On August 19, 2002, the Company received a Nasdaq Staff Determination that
its securities are subject to delisting from the Nasdaq National Market because
the Company failed to file its Form 10-Q for the quarter ended June 30, 2002 on
or before August 14, 2002. On November 8, 2002, the Nasdaq Listing
Qualifications

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

59

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Panel granted the Company's request for an exception to continue its listing on
the Nasdaq National Market based on the following conditions:

. On or before November 19, 2002, the Company must file with the SEC and
Nasdaq the Form 10-Q for the quarter ended September 30, 2002,
notwithstanding the absence of the requisite SAS 71 accountant review;

. On or before March 3, 2003, the Company must file with the SEC and
Nasdaq all necessary amended filings for fiscal years 2000, 2001 and
2002, including the affirmative statements that the filings have been
reviewed and/or audited in accordance with SEC requirements;

. On or before March 31, 2003, the Company must file with the SEC and
Nasdaq the Form 10-K for the year ended December 31, 2002; and

. On or before June 30, 2003, the Company must solicit proxies and hold an
annual meeting for fiscal 2001.

To fully comply with the terms of this exception, the Company must be able
to demonstrate compliance with all requirements for continued listing on the
Nasdaq National Market. If the Company fails to meet any of these conditions,
our securities may be delisted from the Nasdaq National Market. In addition,
the Nasdaq Panel reserved the right to modify, alter or extend the terms of
this exception. If the Nasdaq Panel altered or modified the terms of this
exception and the Company was unable to meet the modified terms, our securities
may be delisted from the Nasdaq National Market.

We face competition in many areas and the competition could negatively impact
our operating results.

We face competition from a wide range of other companies in the
communications, advertising, media, entertainment, information, Internet
services, software and technology fields. The competitive environment could,
among other results, require price reductions for our products, require
increased spending on marketing and product development, limit our ability to
develop new products and services, limit our ability to expand our customer
base or even result in attrition in our customer base. Any of these occurrences
could negatively impact our operating results.

New products and rapid technological change may adversely affect our
operations.

The emergence of new consumer entertainment products and technologies,
changes in consumer preferences and other factors may limit the life cycle of
our technologies and any future products we might develop. Our future
operations could be adversely impacted by our ability to identify emerging
trends in our markets and to develop and market new products and services that
respond to competitive offerings, technological changes and changing consumer
preferences in a timely manner and at competitive costs.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

60

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

The marketing and market acceptance of our interactive program guides may not
be as rapid as we expected.

The market for our IPGs has only recently begun to develop, is rapidly
evolving and is increasingly competitive. Demand and market acceptance for our
IPGs are subject to uncertainty and risk. We cannot predict whether, or how
fast, this market will grow or how long it can be sustained. For GUIDE Plus+,
which is incorporated in consumer electronics products, the deployment rate
will be dependent on the strength or weakness of the consumer electronics
industry, and in particular, the sale of television sets. For TV Guide
Interactive, which is incorporated into digital set-top boxes, the deployment
rate will be dependent on the growth of digital cable television subscribers.
Purchases of consumer electronics products and digital cable television
subscriptions are largely discretionary and may be affected by general economic
trends in the countries or regions in which such products or subscriptions are
offered. If the market for our IPGs develops more slowly than expected or
becomes saturated with competitors, our operating results could be adversely
impacted.

The composition of IPG license revenue may change.

The Company historically has charged a per-unit license fee for the
incorporation of our IPG technology into hardware devices, including
televisions, VCRs, digital cable set-top boxes, digital satellite receivers,
and others. We have begun to enter into direct agreements with cable MSOs and
other service providers to provide IPG services based on a per-subscriber
per-month fee, such fee being inclusive of the per-unit license fee otherwise
chargeable to the supplier of the set-top box to the licensed MSO. The impact
of signing such agreements with service providers is that the Company will
recognize less license fees at the time of shipment of the set-top box, but
will establish a revenue stream with potentially much greater net present value
when cable subscribers activate their digital service. These new per-subscriber
per-month agreements have reduced license fees recognized in 2002, and
depending on the timing of certain events, will also reduce licensing revenues
in 2003. Digital cable television subscriptions are generally priced at a
premium to analog cable television service and represent discretionary
expenditures for consumers. Consequently, general economic trends may result in
fluctuations in the amount of revenue received by the Company under this
recurring revenue model.

Continued consolidation of the cable and satellite broadcasting industry
could change the terms of existing agreements; the impact of these changes is
not certain.

We have entered into agreements with a large number of cable MSOs for
distribution of our IPGs. If, as expected, consolidation of the cable and
satellite broadcasting industry continues, some of these agreements may be
affected by mergers, acquisitions or system swaps. Although the Company has
sought to protect itself against any negative consequences resulting from such
transactions with provisions in our agreements with cable MSOs, it is
conceivable that certain combinations of events could change the terms of the
agreements and such changes could negatively affect our results of operations.
In addition, some of our agreements with MSOs allow for the agreement to be
terminated prior to the scheduled expiration date at the option of the service
provider. The exercise of such unilateral termination rights could have a
material adverse effect on the amount of revenue received by the Company under
these agreements.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

61

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Our business may be adversely affected by changes in the consumer electronics
market.

We derive significant revenues from manufacturer license fees for our VCR
Plus+ and IPG technologies. We do not manufacture hardware, but rather depend
on the cooperation of third-party consumer electronics manufacturers to
incorporate our technology into their products. Many of our license agreements
do not require the inclusion of our technology into any specific number or
percentage of units shipped by the licensees, and only a few of these
agreements guarantee a minimum licensing fee over their term. Accordingly, we
cannot control or predict the number of models or units shipped by any
manufacturer employing our technology. Demand for new consumer electronics
devices, such as television sets, VCRs, integrated satellite receiver decoders,
personal computers and Internet appliances, may be adversely impacted by
increasing market saturation, durability of products in the marketplace, new
competing products and alternate consumer entertainment options. Our future
operating results are dependent on continued growth in consumer electronics
employing our technologies and any decline in sales of consumer electronics
products employing our technologies could have an adverse impact on our
operating results.

Dependence on the cooperation of cable systems, television broadcasters,
publications and data providers could adversely affect our revenues.

Program guide and advertising data is delivered to network headends, cable
headends, and broadcast stations for inclusion in the vertical blanking
interval of television signals and to local affiliate cable systems for
delivery to set-top boxes in subscribers homes via the out-of-band frequencies
of local cable systems. There can be no assurance that these delivery
mechanisms will distribute the data without error or that the agreements
governing certain of these relationships can be maintained on economical terms.
Our data broadcast through the vertical blanking interval can be, and has been
in the past in certain markets, deleted or modified by some of the local cable
systems. Widespread deletion or modification of such data could have a material
adverse impact on the Company's GUIDE Plus+ business. In addition, we purchase
some of our program guide information from commercial vendors. The quality,
accuracy or timeliness of such data may not continue to meet our standards or
be acceptable to consumers. Our VCR Plus+ system relies on consumer access to
PlusCode numbers through licensed publications. We are dependent on the
maintenance and renewal of agreements governing the PlusCode publications to
ensure the distribution of the PlusCodes.

The majority of TV Guide Channel's customers are not under long-term license
agreements, which could result in cable MSOs terminating the service at anytime
with minimal prior notice of such discontinuation. A significant decline in
distribution of the TV Guide Channel could have a material adverse effect on
the amount of licensing and advertising revenue received by the Company.

Seasonality and variability of consumer electronic product shipments and
newsstand sales of our print products may affect our revenues and results of
operations on a quarterly or annual basis.

Shipments of consumer electronics products tend to be higher in the third
and fourth calendar quarters. General advertising also tends to be higher in
the fourth quarter. In addition, manufacturer shipments vary from

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

62

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

quarter to quarter depending on a number of factors, including retail inventory
levels and retail promotional activities. Newsstand sales of our print products
tend to be higher in the first and fourth calendar quarters. As a result, we
may experience variability in our licensing and advertising revenues.

VCR Plus+ revenues may decline due to full penetration of the product in a
declining market.

Future revenues derived from VCR Plus+ may decline due to the fact that
virtually all major VCR manufacturers have licensed the VCR Plus+ technology
and the fact that we have already expanded into most major markets worldwide.
The worldwide shipment of VCRs has been declining and this decline is expected
to accelerate as they are replaced by digital recording devices. Although VCR
Plus+ is now being incorporated into some digital recording devices, there is
no assurance that this practice will become widespread. In addition, our IPG
technology may be more relevant than our VCR Plus+ technology for these digital
recording devices.

TV Guide Magazine, which is a significant business, has experienced
significant declines in circulation and EBITDA and such declines may continue.

We provide TV Guide Magazine to households and newsstands and customized
monthly program guides to customers of cable and satellite service providers.
TV Guide Magazine has seen circulation decline significantly over the past
several years. The primary cause of this decline is increased competition from
free television listings included in local newspapers, electronic program
guides incorporated into digital cable and satellite services, and other
sources. Declines in TV Guide Magazine's circulation and EBITDA may continue,
and the declines could be significant.

Paper and postal price increases can materially raise our costs associated
with the production and delivery of the TV Guide print products, including TV
Guide Magazine.

The price of paper can be a significant factor affecting TV Guide Magazine's
operating performance. We do not hedge against increases in paper costs. If
paper prices do increase and we cannot pass these costs on to our customers,
the increases may have a material adverse effect on us. Postage for product
distribution and direct mail solicitations is also a significant,
uncontrollable expense to us. Postal rates increased in February 2001,
July 2001 and again in June 2002 and are likely to increase in the future.

Digital recapture could adversely affect carriage of our analog products.

Cable television is transmitted on a limited frequency spectrum that must be
allocated between multiple analog and digital channels. As digital penetration
increases, MSOs are reclaiming analog bandwidth to launch more digital networks
and interactive television services, and are likely to continue this recapture
until such time as they rebuild their plants to increase bandwidth or there is
stability in the mix of analog and digital carriage. As with all analog
networks, digital recapture is an ongoing issue that can result in a
significant decline in the distribution of TV Guide Channel. As a result, we
may not be able to maintain our current analog distribution levels if digital
recapture continues, which could negatively impact our operating results.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

63

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Our C-band business, which is a significant business, is declining. These
declines may accelerate due to competing technologies and the subscriber
conversion arrangement with EchoStar.

We market entertainment services to C-band satellite dish owners in the
United States through our approximately 80% owned subsidiary, SNG. The C-band
satellite industry is shrinking generally due to the continued expansion of
cable systems and direct broadcast satellite ("DBS") services. C-band satellite
dishes are substantially larger and less attractive than direct broadcast
satellite dishes, which are small and less obtrusive. Recently enacted
legislation may permit direct broadcast satellite programmers to offer more
attractive programming than SNG. We expect the decline in the C-band industry
to continue.

In November 1999, SNG announced an exclusive DBS marketing alliance
agreement with EchoStar to convert existing and inactive C-band customers of
SNG to EchoStar's high power (small satellite dish) DISH Network service. Under
the conversion process, EchoStar compensates SNG on a per subscriber basis,
both upon successful conversion and with residual payments over time. We
anticipate that this agreement will continue to accelerate the subscriber
decline in our C-band business.

Leverage associated with the debt assumed in the TV Guide acquisition may
adversely impact our financial operations.

As of September 30, 2002, we had outstanding approximately $266.4 million of
TV Guide long-term debt, which we acquired in the TV Guide merger. During the
next twelve months, scheduled debt retirements aggregate $82.5 million. This
debt is significant and could limit our ability to obtain any necessary
financing in the future for working capital, capital expenditures,
acquisitions, debt service requirements and other purposes. A significant
amount of our earnings may be dedicated to the payment of principal and
interest on debt and therefore would be unavailable for financing operations
and other business activities. The debt level and the covenants contained in
the debt instruments could limit flexibility in planning for, or reacting to,
changes in business because certain financing options may be limited or
prohibited. In particular, the Company has determined that there is a
reasonable likelihood that TV Guide will be unable to maintain compliance with
a financial covenant in its term loan agreement during the coming twelve
months. While the Company is currently evaluating options to maintain
compliance or mitigate the effects of any noncompliance, there can be no
assurance that any measures taken will be successful.

Our stock price has been volatile.

The market price of our common stock has historically been volatile. It is
likely that the market price of our common stock will continue to be subject to
significant fluctuations. The volatility of our stock price has increased after
the announcement of our restatement of certain historical financial
information. We believe that future announcements concerning us, our
competitors or our principal customers, including technological innovations,
new product introductions, governmental regulations, litigation or changes in
earnings estimated by analysts or any future decision to restate any of our
financial statements may cause the market price of our common stock to
fluctuate substantially in the future. Sales of substantial amounts of
outstanding common stock

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

64

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

in the public market could materially adversely affect the market price of our
common stock. Further, in recent years the stock market has experienced extreme
price fluctuation in equity securities of technology and media companies. Such
price and volume fluctuations often have been unrelated to the operating
performance of those companies. These fluctuations, as well as general
economic, political and market conditions, such as recessions, international
currency fluctuations, or tariffs and other trade barriers, may materially and
adversely affect the market price of our common stock.

We have a significant amount of receivables due from five entities.

At September 30, 2002, approximately $65.6 million, or 41%, of the Company's
receivables are due from five entities as described in Liquidity and Capital
Resources above. We currently believe these receivables to be realizable;
however, events may occur in the future which could cause the Company to change
its assessment of recoverability. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview of Significant Events.")

We have significant intangible assets on our balance sheet that may be
subject to impairment.

In July 2000, we acquired TV Guide in a transaction accounted for as a
purchase. In that transaction, close to $10 billion of the purchase price was
allocated to intangible assets. We were required under accounting principles
generally accepted in the United States of America in place through December
31, 2001 to review our intangible assets periodically for impairment when
circumstances indicate the carrying value of the intangible assets may exceed
their fair value. New accounting standards effective January 1, 2002 eliminated
the recoverability test for certain intangible assets and require that such
assets be reported at the lower of cost or fair value. At December 31, 2001,
our goodwill and intangible assets approximated $8,621.7 million. The Company
recorded a transitional impairment charge for goodwill and indefinite-lived
intangible assets of $5,303.3 million, net of tax as of January 1, 2002 in the
accompanying condensed consolidated statements of operations. The Company also
recorded an interim impairment charge as of June 30, 2002 for goodwill of $22.8
million, indefinite-lived intangible assets of $24.0 million and for
finite-lived intangible assets of $1,212.3 million in the accompanying
condensed consolidated statements of operations. Should adverse economic
conditions continue, or should other events impacting the value of certain of
our businesses occur, we may be required to record an additional significant
charge to earnings in our financial statements in the period any impairment of
our goodwill or other intangible assets is determined.

We invest in securities of technology companies, many of which have
experienced a decrease in value.

We hold investments in technology companies. Due to the recent price
volatility in the general stock market, and in particular the price volatility
of securities of technology companies, we realized other than temporary
decreases in the market value of our investments in technology companies and
wrote down their carrying value during 2001. We may realize further other than
temporary decreases in the market value of certain investments in future
periods.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

65

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

Any infringement by us on patent rights of others could result in litigation.

Patents of third parties may have an important bearing on our ability to
offer certain of our products and services. Many of our competitors as well as
other companies and individuals have obtained, and may be expected to obtain in
the future, patents that concern products or services related to the types of
products and services we plan to offer. We cannot provide assurance that we
will be aware of all patents containing claims that may pose a risk of
infringement by our products and services. In addition, patent applications in
the United States are generally confidential until a patent is issued, so we
cannot evaluate the extent to which our products and services may be covered or
asserted to be covered by claims contained in pending patent applications. If
one or more of our products or services is found to infringe patents held by
others, we may be required to stop developing or marketing the products or
services, to obtain licenses to develop and market the products or services
from the holders of the patents or to redesign the products or services in such
a way as to avoid infringing the patent claims. We cannot assess the extent to
which we may be required in the future to obtain licenses with respect to
patents held by others, whether the licenses would be available or, if
available, whether we would be able to obtain the licenses on commercially
reasonable terms. If we were unable to obtain the licenses, we might not be
able to redesign our products or services to avoid infringement.

An unfavorable outcome of certain legal proceedings may adversely affect our
business and operating results.

Our results may be affected by the outcome of pending and future litigation
and the protection and validity of patents and other intellectual property
rights. Our patent and other intellectual property rights are important
competitive tools and many generate income under license agreements. There can
be no assurance that our intellectual property rights will not be challenged,
invalidated or circumvented in the United States or abroad. Unfavorable rulings
in the Company's legal proceedings, including those described in Note 10 to the
Unaudited Condensed Consolidated Financial Statements, may have a negative
impact on the Company that may be greater or smaller depending on the nature of
the rulings.

Our management restructuring could affect our future success.

The operating results of any company are heavily dependent upon the efforts
and success of its senior management team. Recently, our senior management team
has undergone major changes, with the addition of a new Chief Executive Officer
and Acting Chief Financial Officer. We are currently conducting a search for a
permanent Chief Financial Officer. We are subject to certain risks associated
with a new management structure, including, among others, risks relating to
employee and business relations, managerial efficiency and effectiveness and
overall familiarity with our business and operations.

Dependence on key employees could affect our future success.

We are dependent on certain key members of our management, operations and
development staff, the loss of whose services could have a material adverse
effect on the Company. Although we have employment contracts with certain key
employees, such employment contracts would generally not restrict the
employee's ability to

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

66

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

leave the Company. Furthermore, recruiting and retaining additional qualified
engineering, marketing, and operations personnel will be critical to our
success. In addition, we may not be able to recruit or retain such personnel on
acceptable terms. Failure to attract and retain key personnel could have a
material adverse effect on our business, operating results and financial
condition.

Our interests may diverge from those of substantial stockholders.

News Corp. has significant influence over our business because of its
beneficial ownership of our common stock. There can be no assurance that its
interests are aligned with that of the Company's other shareholders. Investor
interests can differ from each other and from other corporate interests and it
is possible that this significant stockholder with a stake in corporate
management may have interests that differ from those of other stockholders and
of the Company itself. Furthermore, the management restructuring may result in
an increase of the influence of News Corp. over our business and affairs.

Government regulations may adversely affect our business.

The satellite transmission, cable and telecommunications industries are
subject to federal regulatory conditions, including Federal Communications
Commission ("FCC") licensing and other requirements. These industries are also
often subject to extensive regulation by local and state authorities. While
most cable and telecommunications industry regulations do not apply directly to
the Company, they affect programming distributors, a primary customer for our
products and services. Certain programming sold by our SNG subsidiary is
subject to the Satellite Home Viewer Improvement Act of 1999. In 2001, the FCC
issued a Notice of Inquiry concerning interactive television services, which
may indicate that the FCC intends to promulgate rules that could affect our IPG
business. In addition, our TVG network is subject to certain state and federal
laws and regulations applicable to pari-mutuel wagering on horse races and its
growth may be significantly affected by such laws and regulations. Future
developments relating to any of these regulatory matters may adversely affect
our business.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

67

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the impact of interest rate changes and changes in
the market values of its investments. The Company's exposure to market rate
risk for changes in interest rates relates primarily to its investment
portfolio and variable rate debt issued under TV Guide's $300 million six-year
revolving credit facility and $300 million amortizing term loan. The Company
has not used derivative financial instruments in its investment portfolio or to
hedge for interest rate fluctuations on its debt. The Company invests its
excess cash in debt instruments of the U.S. Government and its agencies, and in
high-quality corporate issuers and, by policy, limits the amount of credit
exposure to any one issuer. The Company protects and preserves its invested
funds by limiting default, market and reinvestment risk. Investments in both
fixed rate and floating rate interest earning instruments carry a degree of
interest rate risk. Fixed rate securities may have their fair market value
adversely impacted due to a rise in interest rates, while floating rate
securities may produce less income than expected if interest rates fall. Due in
part to these factors, the Company's future investment income may fall short of
expectations due to changes in interest rates or the Company may suffer losses
in principal if forced to sell securities which have declined in market value
due to changes in interest rates. Because the interest rates on the credit
facilities are variable, based upon the banks' prime rate or LIBOR, the
Company's interest expense and cash flow are impacted by interest rate
fluctuations. At September 30, 2002, the Company had $266.4 million in
outstanding borrowings under the credit facilities. If interest rates were to
increase or decrease by 100 basis points, the result, based upon the existing
outstanding debt, would be an annual increase or decrease of $2.7 million in
interest expense and a corresponding decrease or increase of $2.7 million in
the Company's operating cash flow.

ITEM 4. CONTROLS AND PROCEDURES

Review of Disclosure Controls and Changes in Management

The Company recently completed a previously-announced management
restructuring pursuant to which its Chief Executive Officer, Dr. Henry Yuen ,
and its Co-President, Co-Chief Operating Officer and Chief Financial Officer,
Elsie Leung, resigned. Effective November 7, 2002 , Jeff Shell and Paul
Haggerty were appointed Chief Executive Officer and Acting Chief Financial
Officer, respectively.

During the week since their appointment, Messrs. Shell and Haggerty have
commenced a review of the Company's disclosure controls and procedures, and are
in the process of evaluating whether the Company's disclosure controls and
procedures have been designed to ensure that (a) information required to be
disclosed in our reports filed under the Securities Exchange Act of 1934, as
amended, is gathered and made known to the Company's management, including
these officers, but other employees of the Company and its subsidiaries, as
appropriate to allow timely decisions regarding required disclosure, and (b)
this information is recorded, processed, summarized, evaluated and reported, as
applicable, within the time periods specified in the SEC's rules and forms.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

68

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

As of November 14, 2002, Messrs. Shell and Haggerty have not concluded their
evaluation and, accordingly, are not yet able to conclude whether or not the
design and operation of the Company's controls and procedures are sufficient to
accomplish the foregoing purposes. Prior to the management restructuring, the
Company, under the supervision of its former Chief Executive Officer and Chief
Financial Officer, commenced the process of reviewing the Company's disclosure
controls and procedures related to the recording, processing, summarization and
reporting of information in the Company's periodic reports that are filed with
the SEC. The Company was unable to complete the evaluation prior to the
resignations of Dr. Yuen and Ms. Leung. Messrs. Shell and Haggerty expect to
complete their evaluations concurrently with the completion of the reaudit of
the Company's financial statements for the years ended December 31, 2001,
December 31, 2000, and nine months ended March 31, 2000, and the review of the
Company's financial statements for the quarters ended March 31, 2002, June 30,
2002 and September 30, 2002, by the Company's new independent auditors.

Certifications of Principal Executive Officer and Principal Financial Officer

As a result of the ongoing evaluation of the Company's disclosure controls,
our Chief Executive Officer and acting Chief Financial Officer are unable to
provide certifications in the forms required by Rule 13a-14 under the
Securities Exchange Act of 1934, as amended. The Company has determined that
such certifications must either be provided in the exact form proscribed by
law, without modification, or not at all. Nothwithstanding their inability to
certify in the exact forms required by law, Messrs. Shell and Haggerty have
each informed the Company that (i) based on his knowledge, this Form 10-Q does
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this Form 10-Q, and (ii) based on his
knowledge, the financial statements, and other financial information included
in this Form 10-Q, fairly present in all material respects the financial
condition, results of operations and cash flows of the Company as of, and for,
the periods presented in this Form 10-Q.

Upon completion of (i) the evaluation of the Company's disclosure controls
and procedures under the supervision of its principal executive officer and its
principal financial officer, and (ii) the audit and review of the Company's
financial statements by the Company's new independent auditors as described
above, the Company intends to file an amendment to this Quarterly Report on
Form 10-Q that would include the executed certificates by its principal
executive officer and principal financial officer required under Rule 13a-14
under the Securities Exchange Act of 1934, as amended.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

69

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 10, Legal Proceedings, in the Unaudited Condensed Consolidated
Financial Statements.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

a. Exhibits

3.1 Amended and Restated By-laws of Gemstar-TV Guide International, Inc.
(incorporated by reference to Exhibit 3.1 to Gemstar's Form 8-K, filed
November 12, 2002)

10.1 Umbrella Agreement, dated November 7, 2002, by and among The News
Corporation Limited, Henry C. Yuen, Elsie Ma Leung and Gemstar-TV Guide
International, Inc. (incorporated by reference to Exhibit 10.1 to Gemstar's
Form 8-K, filed November 12, 2002)

10.2* Termination Agreement, entered into on November 7, 2002, by and between
Gemstar-TV Guide International, Inc., Gemstar Development Corporation, and
Henry C. Yuen (incorporated by reference to Exhibit 10.2 to Gemstar's Form 8-K,
filed November 12, 2002)

10.3* Patent Rights Agreement, entered into on November 7, 2002, by and between
Gemstar-TV Guide International, Inc. and Henry C. Yuen (incorporated by
reference to Exhibit 10.3 to Gemstar's Form 8-K, filed November 12, 2002)

10.4 Amendment No. 1 to the Stockholders' Agreement, entered into on November 7,
2002, by and among The News Corporation Limited, Henry C. Yuen, and
Gemstar-TV Guide International, Inc. (incorporated by reference to Exhibit 10.4 to
Gemstar's Form 8-K, filed November 12, 2002)

10.5 Employment Agreement, entered into on November 7, 2002, by and between
Gemstar-TV Guide International, Inc. and Henry C. Yuen (incorporated by
reference to Exhibit 10.5 to Gemstar's Form 8-K, filed November 12, 2002)

10.6 Letter Agreement, dated November 7, 2002, between Gemstar-TV Guide
International, Inc. and Dr. Henry Yuen (incorporated by reference to Exhibit 10.6
to Gemstar's Form 8-K, filed November 12, 2002)

10.7* Termination Agreement, entered into on November 7, 2002, by and between
Gemstar-TV Guide International, Inc. and Elsie Ma Leung (incorporated by
reference to Exhibit 10.7 to Gemstar's Form 8-K, filed November 12, 2002)

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

70

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

10.8 Employment Agreement, entered into on November 7, 2002, by and between
Gemstar-TV Guide International, Inc. and Elsie Ma Leung (incorporated by
reference to Exhibit 10.8 to Gemstar's Form 8-K, filed November 12, 2002)

10.9 Letter Agreement, dated November 7, 2002, between Gemstar-TV Guide
International, Inc. and Ms. Elsie Ma Leung (incorporated by reference to Exhibit
10.9 to Gemstar's Form 8-K, filed November 12, 2002)

10.10 Employment Agreement, dated October 8, 2002 between Gemstar-TV Guide
International, Inc. and Mr. Jeff Shell

* Certain information in this exhibit has been omitted and filed separately
with the Securities and Exchange Commission. Redacted portions of the
exhibit are indicated by asterisks, and a legend appears on the appropriate
pages. Confidential treatment has been requested with respect to the omitted
portions.

b. Reports on Form 8-K

The Company filed a report of Form 8-K under Item 5 on August 16, 2002,
announcing that the Company would delay the earnings release and the filing of
Form 10-Q for the quarter ended September 30, 2002 and would restate the 2001
financial results.

The Company filed a report on Form 8-K under Item 9 on September 26, 2002,
relating to sworn statements of Henry Yuen and Elsie Leung submitted to the
Securities and Exchange Commission ("SEC").

The Company filed a report on Form 8-K under Item 5 on September 26, 2002,
releasing preliminary financial information for the quarter ended June 30, 2002.

The Company filed a report on Form 8-K under Item 5 on October 15, 2002,
announcing agreement in principle with Henry Yuen and Elsie Leung.

The Company filed a report on Form 8-K under Item 5 on October 22, 2002,
announcing transition of SEC investigation to formal status.

The Company filed a report on Form 8-K under Item 4 on November 6, 2002,
announcing dismissal of KPMG LLP as the Company's independent accountants,
which was amended by the filing of a Form 8-K/A on November 13, 2002.

The Company filed a report on Form 8-K under Item 5 on November 12, 2002,
related to its management restructuring.

Items 2, 3, 4 and 5 are not applicable and have been omitted.

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

71

The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been audited or reviewed by an independent
accounting firm and should not be relied upon.
- --------------------------------------------------------------------------------

SIGNATURE

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

GEMSTAR-TV GUIDE INTERNATIONAL, INC.
(Registrant)

Date: November 14, 2002 By: /s/ PAUL HAGGERTY
---------------------------------------
Paul Haggerty
Acting Chief Financial Officer
(Principal Financial and Accounting Officer)

- --------------------------------------------------------------------------------
The information contained in the Unaudited Condensed Consolidated Financial
Statements included herein has not been reviewed by an independent accounting
firm. The Company recently engaged a new independent accounting firm to audit
its Consolidated Financial Statements and to conduct a SAS 71 review of its
Unaudited Condensed Consolidated Financial Statements. The Company believes
that it is likely that, as a result of such accounting firm's review of this
information and the Company's ongoing review of its accounting policies and the
application of these policies to various types of transactions, the Company
will further restate the Unaudited Condensed Consolidated Financial Statements.
Such restatements may be material. Accordingly, the information presented in or
derived from the Unaudited Condensed Consolidated Financial Statements
contained in this report should not be relied upon.

72

CERTIFICATION*

I, [identify certifying individuals], certify that:

1. I have reviewed this quarterly report on Form 10-Q of [identify registrant];

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and

3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: ________________________ ______________________________
[Signature]
[Title]

- --------
* Provide a separate certification for each principal executive officer and
principal financial officer of the registrant. See Rules 13a-14 and 15d-14.
The required certification must be in the exact form set forth above.

1