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 ~~June~~September 30, ~~2007~~2008

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

~~Commission~~For ~~file~~the ~~number~~transition –period ~~001-11112~~ from to

Commission File Number – 001-11112

AMERICAN MEDIA OPERATIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware		59-2094424
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
1000 American Media Way, Boca Raton, Florida		33464
(Address of principal executive offices)		(Zip Code)


1000 American Media Way, Boca Raton, Florida		33464
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (561) 997-7733

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See ~~definition~~the definitions of “large accelerated filer,” “accelerated filer” and ~~large~~“smaller ~~accelerated~~reporting ~~filer~~company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of ~~September~~November 30, ~~2007~~2008, there were 7,507.6 shares of common stock outstanding.

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

~~June~~September 30, ~~2007~~2008

		Page(s)
CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER FROM THOSE PROJECTED IN FORWARD-LOOKING STATEMENTS		3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2007 and as of June 30, 2007		4
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2008 and as of September 30, 2008		4
Unaudited Condensed Consolidated Statements of Loss for the Fiscal Quarters Ended June 30, 2006 and June 30, 2007		5
Unaudited Condensed Consolidated Statements of Income (Loss) for the Fiscal Quarter and Two Fiscal Quarters Ended September 30, 2007 and September 30, 2008		5
Unaudited Condensed Consolidated Statements of Cash Flows for the Fiscal Quarters Ended June 30, 2006 and June 30, 2007		6
Unaudited Condensed Consolidated Statements of Cash Flows for the Two Fiscal Quarters Ended September 30, 2007 and September 30, 2008		6
Notes to Unaudited Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1824
Item 3. Quantitative and Qualitative Disclosures about Market Risk		2537
Item 4. Controls and Procedures		25
Item 4T. Controls and Procedures		37
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		2637
Item 1A. Risk Factors		2637
Item 6. Exhibits		2637
Signatures		2738

CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS

THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER

FROM THOSE PROJECTED IN FORWARD-LOOKING STATEMENTS

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q for the quarterly period ended ~~June~~September 30, ~~2007~~2008 (this “Form 10-Q”) to the “Company” or “us,” “we” or “our” are to American Media Operations, Inc. and its subsidiaries. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, readers of this Form 10-Q are advised that this Form 10-Q contains both statements of historical facts and forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties, which could cause our actual results to differ materially from those indicated by the forward-looking statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, capital expenditures, capital structure and other financial items, (ii) statements regarding our plans and objectives, including planned introductions of new publications or other products, or estimates or predictions of actions by customers, advertisers, suppliers, competitors or regulatory authorities, (iii) statements of future economic performance, (iv) outcomes of contingencies such as legal or any regulatory proceedings, and (v) statements of assumptions underlying other statements and statements about our business.

Factors that could affect our actual results include the following:

• our ~~high~~ability ~~degree~~to ofrefinance ~~leverage~~our ~~and significant~~ debt ~~service obligations~~;

• ~~increased~~our ~~competition,~~high ~~including~~degree ~~price competition and competition from other publications and forms~~ of ~~media,~~leverage ~~such as television~~ and ~~radio~~significant ~~programs~~debt ~~and~~service ~~Internet sites concentrating on celebrity news~~obligations;

• changes in ~~demand~~discretionary ~~for~~consumer ~~our~~spending ~~services and products by our customers and advertisers~~patterns;

• changes in general economic and business conditions, both nationally and internationally, which can influence the readership level of our publications as well as advertising and circulation revenue;

• our ability to ~~attract~~realize ~~and~~expected ~~retain~~benefits ~~experienced~~from cost savings and ~~qualified~~revenue ~~personnel~~enhancement initiatives;

• ~~our~~any ~~ability~~downgrade toin ~~obtain~~the ~~sufficient~~rating ~~financing~~of ~~to continue to sustain or expand~~ our ~~operations~~securities;

• ~~adverse~~increased ~~results~~competition, inincluding ~~litigation~~price ~~matters~~competition orand ~~any~~competition ~~regulatory~~from ~~proceedings~~other publications and forms of media, such as television and radio programs and Internet sites concentrating on celebrity news and health and fitness;

• ~~any~~our ~~downgrade~~ability into ~~the~~implement ~~rating of~~ our ~~securities~~business strategy;

• ~~our~~changes ~~ability~~in todemand ~~comply~~for ~~with~~our ~~covenant~~services ~~requirements~~and inproducts by our ~~agreements~~customers ~~with~~and ~~our~~advertisers, ~~lenders~~including ~~and~~as ina ~~our~~result ~~indentures~~of the current economic downturn;

• ~~our~~changes ~~ability~~in tothe ~~implement~~price ~~and maintain an effective system~~ of ~~internal~~fuel, ~~controls~~paper ~~over~~or ~~financial~~postage ~~reporting~~costs;

• our ability to ~~realize~~renew ~~expected~~our ~~benefits~~wholesaler ~~from~~service ~~cost~~agreements ~~savings~~with ~~and~~respect ~~revenue~~to ~~enhancement~~the ~~initiatives~~distribution of our publications;

~~For~~• aany ~~further~~loss ~~discussion~~ of risk factors which could cause actual results to differ materially from those indicated by the forward-looking statements, see Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2007 (the “March 31, 2007 10-K”). Any written or oral forward-looking statements made by us or on our behalf are subject to these factors. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements may vary materially from those described in this Form 10-Q as intended, planned, anticipated, believed, estimated or expected. The risk factors included in this Form 10-Q and in the March 31, 2007 10-K are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our ~~forward-looking~~key ~~statements. Other unknown or unpredictable factors could also harm our future results. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.~~ vendors;

•

our ability to attract and retain experienced and qualified personnel;

•

adverse results in litigation matters or any regulatory proceedings; and

•

our ability to maintain an effective system of internal controls over financial reporting.

For a further discussion of risk factors which could cause actual results to differ materially from those indicated by the forward-looking statements, see Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008 (the “March 31, 2008 10-K”). Any written or oral forward-looking statements made by us or on our behalf are subject to these factors. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements may vary materially from those described in this Form 10-Q as intended, planned, anticipated, believed, estimated or expected. The risk factors included in the March 31, 2008 10-K are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also harm our future results. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

The forward-looking statements included in this Form 10-Q are made only as of the date of this Form 10-Q. We do not intend, and do not assume any obligations, to update these forward looking statements, except as required by law.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)

	March 31, 2007			June 30, 2007
	March 31, 2008			September 30, 2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6064,~~414~~166		$	3821,~~294~~359
Trade receivables, net of allowance for doubtful accounts of $5,909 and $6,008, respectively		48,502			54,781
Trade receivables, net of allowance for doubtful accounts of $7,521 and $7,124, respectively		57,074			58,529
Inventories		2328,~~525~~629			2326,~~465~~795
Prepaid expenses and other current assets		14,~~737~~229			1615,~~184~~260
Total current assets		~~147~~164,~~178~~098			~~132~~121,~~724~~943
PROPERTY AND EQUIPMENT, NET:
Leasehold improvements		1,~~724~~648			1,~~724~~676
Furniture, fixtures and equipment		4143,~~474~~105			4142,~~935~~461
Less – accumulated depreciation and amortization		(36,292	)		(37,429	)
Less – accumulated depreciation		(39,656	)		(39,390	)
Total property and equipment, net		65,~~906~~097			64,~~230~~747
OTHER ASSETS:
Deferred debt costs, net		2314,~~886~~050			2210,~~142~~240
Deferred rack costs, net		117,~~838~~749			108,~~365~~850
Other long-term assets		2,~~608~~750			2,~~884~~702
Total other assets		3824,~~332~~549			3521,~~391~~792
GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:
Goodwill		~~387~~359,~~463~~663			~~387~~359,~~463~~663
Other identified intangibles, net of accumulated amortization of $143,651 and $145,791, respectively		399,404			397,264
Other identified intangibles, net of accumulated amortization of $152,006 and $155,761, respectively		387,752			383,997
Total goodwill and other identified intangible assets		~~786~~747,~~867~~415			~~784~~743,~~727~~660
TOTAL ASSETS	$	~~979~~941,~~283~~159		$	~~959~~892,~~072~~142
LIABILITIES AND STOCKHOLDER’S DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	33,189		$	31,825
Term loan and revolving credit facility	$	12,629		$	459,621
Accrued expenses and other liabilities		57,418			53,289
Senior subordinated notes, net		—			413,718
Accrued interest		31,736			17,388
Accounts payable		42,511			30,923
Deferred revenues		42,619			41,593
Accrued expenses and other liabilities		65,210			68,869
Total current liabilities		164,962			144,095
Accrued interest		24,247			23,545
Deferred revenues		41,666			46,758
Total current liabilities		186,263			1,043,434
NON-CURRENT LIABILITIES:
Term loan and revolving credit facility		~~510~~497,~~000~~371			~~510,000~~—
Senior subordinated notes, including bond premium		550,217			550,191
Senior subordinated notes, net		567,681			154,728
Deferred income taxes		8688,~~521~~926			8892,~~046~~261
Management fee payable		2,000			4,000
Total liabilities		1,340,241			1,290,423
Total liabilities		1,313,700			1,296,332
COMMITMENTS AND CONTINGENCIES (Note 9)
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDER’S DEFICIT:
Common stock, $.20 par value; 10,000 shares authorized; 7,508 shares issued and outstanding		2			2
Additional paid-in capital		281,671			281,671
Accumulated deficit		(~~616~~680,~~258~~897	)		(~~619~~679,~~126~~886	)
Accumulated other comprehensive income		168			193
Accumulated other comprehensive income (loss)		142			(68	)
Total stockholder’s deficit		(~~334~~399,~~417~~082	)		(~~337~~398,~~260~~281	)
TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT	$	~~979~~941,~~283~~159		$	~~959~~892,~~072~~142

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these Unaudited Condensed Consolidated Financial Statements.

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands)

	Fiscal Quarters Ended
	Fiscal Quarter Ended						Two Fiscal Quarters Ended
	June 30, 2006			June 30, 2007
	September 30, 2007			September 30, 2008			September 30, 2007			September 30, 2008
OPERATING REVENUES:
Circulation	$	6670,~~214~~742		$	6768,~~024~~657		$	137,099		$	136,366
Advertising		4150,~~739~~383			4648,~~539~~961			96,886			91,206
Other		710,~~466~~789			811,~~276~~181			19,061			20,049
Total operating revenues		~~115~~131,~~419~~914			~~121~~128,~~839~~799			253,046			247,621
OPERATING EXPENSES:
Editorial		1312,~~736~~959			1213,~~837~~029			25,598			25,726
Production		3836,~~263~~427			3538,~~748~~639			71,773			71,910
Distribution, circulation and other cost of sales		2322,~~103~~200			2023,~~814~~171			42,838			44,141
Selling, general and administrative		3125,~~656~~759			22,~~956~~367			48,683			45,987
Depreciation and amortization		43,~~066~~211			32,~~284~~625			6,500			5,337
Total operating expenses		~~110~~100,~~824~~556			9599,~~639~~831			195,392			193,101
OPERATING INCOME		431,~~595~~358			2628,~~200~~968			57,654			54,520
OTHER INCOME (EXPENSE):
Interest expense		(24,~~341~~818	)		(2422,~~691~~180	)		(49,509	)		(45,673	)
Amortization of deferred debt costs		(1,543	)		(2,686	)
Senior subordinated notes to be issued		(17,291	)		—			(17,291	)		—
Other income, net		329			634
Amortization of deferred debt costs		(2,759	)		(2,806	)		(5,445	)		(5,552	)
Total other expense		(25,555	)		(26,743	)
Other income (expense), net		203			(222	)		837			84
LOSS BEFORE PROVISION (BENEFIT) FOR INCOME TAXES AND LOSS FROM DISCONTINUED OPERATIONS		(20,960	)		(543	)
Total other expense		(44,665	)		(25,208	)		(71,408	)		(51,141	)
PROVISION (BENEFIT) FOR INCOME TAXES		4,895			(508	)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES AND (LOSS) INCOME FROM DISCONTINUED OPERATIONS		(13,307	)		3,760			(13,754	)		3,379
LOSS FROM CONTINUING OPERATIONS		(25,855	)		(35	)
PROVISION FOR INCOME TAXES		3,876			3,137			3,368			2,868
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		(1,617	)		(88	)
(LOSS) INCOME FROM CONTINUING OPERATIONS		(17,183	)		623			(17,122	)		511
NET LOSS	$	(27,472	)	$	(123	)
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		(572	)		—			(756	)		500
NET (LOSS) INCOME	$	(17,755	)	$	623		$	(17,878	)	$	1,011

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these Unaudited Condensed Consolidated Financial Statements.

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Fiscal Quarters Ended
	Two Fiscal Quarters Ended
	June 30, 2006			June 30, 2007
	September 30, 2007			September 30, 2008
Cash Flows from Operating Activities:
Net loss	$	(27,472	)	$	(123	)
Net (loss) income	$	(17,878	)	$	1,011
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation of property and equipment		12,~~814~~221			1,~~144~~582
Amortization of other identified intangibles		24,~~252~~279			23,~~140~~755
Provision for bad debts		1,090			412
Senior subordinated notes to be issued		17,291			—
Amortization of deferred debt costs		1,543			2,686
Provision for bad debts		762			1,413
Amortization of deferred rack costs		5,191			3,548
Amortization of deferred debt costs		5,445			5,552
Write-off of deferred rack costs and property and equipment		1,144			—
Amortization of deferred rack costs		6,466			5,893
Provision for excess and obsolete inventory		—			154
Write-off of deferred rack costs and property and equipment		195			—
Deferred income tax provision (benefit)		4,806			(783	)
Provision for excess and obsolete inventory		211			82
Other		(167	)		(380	)
Deferred income tax provision		2,884			2,521
Other		(523	)		447
Decrease (increase) in operating assets:
Trade receivables		~~116~~(6,703	)		(62,~~691~~868	)
Inventories		~~9,495~~(850	)		~~(94~~1,752	)
Prepaid expenses and other current assets		~~249~~(1,785	)		(1,~~447~~031	)
Deferred rack costs		(~~408~~4,206	)		(26,~~075~~994	)
Other long-term assets		(~~202~~150	)		~~(276~~48	)
Increase (decrease) in operating liabilities:
Accounts payable		(21,~~697~~254	)		(111,~~364~~588	)
Accrued expenses and other liabilities		(4,~~478~~393	)		(41,~~268~~562	)
Accrued interest		(27,~~666~~189	)		(~~14,348~~702	)
Deferred revenues		(~~635~~1,171	)		(15,~~026~~092	)
Management fee payable		2,000			2,000
Total adjustments		18,447			(20,668	)
Total adjustments and changes in operating assets and liabilities		13,530			8,516
Net cash used in operating activities		(9,025	)		(20,791	)
Net cash (used in) provided by operating activities		(4,348	)		9,527
Cash Flows from Investing Activities:
Purchases of property and equipment		(~~621~~805	)		(~~468~~1,242	)
Proceeds from sale of assets		52389			~~385~~18
Proceeds from sale of discontinued operations		—			500
Investment in Mr. Olympia, LLC		(300	)		(300	)
Net cash used in investing activities		(~~869~~716	)		(~~383~~1,024	)
Cash Flows from Financing Activities:
Proceeds from term loan and revolving credit facility borrowings		40,000			—
Proceeds from revolving credit facility		—			34,000
Term loan and revolving credit facility principal repayments		~~(40,000~~—	)		—(84,379	)
Payment of deferred debt costs		(~~1,275~~942	)		(~~942~~408	)
Net cash used in financing activities		(~~1,275~~942	)		(~~942~~50,787	)
Effect of exchange rate changes on cash		~~117~~106			(4523	)
Net Decrease in Cash and Cash Equivalents		(115,~~052~~900	)		(2242,~~120~~807	)
Cash and Cash Equivalents, Beginning of Period		1960,~~591~~414			6064,~~414~~166
Cash and Cash Equivalents, End of Period	$	854,~~539~~514		$	3821,~~294~~359
Supplemental Disclosures of Non-Cash Financing Activities Information:
Non-cash deferred debt costs (incurred but not paid)	$	—		$	1,482

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these Unaudited Condensed Consolidated Financial Statements.

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, ~~2007~~2008

(1) Basis of Presentation

The Unaudited Condensed Consolidated Financial Statements include the accounts of American Media Operations, Inc. and its subsidiaries (collectively, the “Company”). The Company is a wholly owned subsidiary of American Media, Inc. (“Media”). Media’s parent entity is EMP Group L.L.C. (the “LLC”). The Company consolidates all majority owned subsidiaries and investments in entities in which it has a controlling influence. Non-majority owned investments are accounted for using the equity method when the Company has the ability to significantly influence the operating decisions of the issuer. When the Company does not have the ability to significantly influence the operating decisions of an issuer, the cost method is used. For entities that are considered variable interest entities, the Company applies the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 46-R, “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51.” All intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements reflect all normal and recurring adjustments which are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of the dates and for the periods presented. The Unaudited Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States of America for annual financial statements and should be read in conjunction with the financial statements and notes thereto for the year ended March 31, ~~2007~~2008 included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2007~~2008 (the “March 31, ~~2007~~2008 10-K”), including the summary of significant accounting policies set forth in Note 1 thereof. The operating results for the fiscal quarter and two fiscal quarters ended ~~June~~September 30, ~~2007~~2008 are not necessarily indicative of the results to be expected for any future period or for the full fiscal year.

~~(2)~~Liquidity ~~Comprehensive Loss~~

The ~~change~~Company’s inbank credit agreement entered into by the ~~components~~Company on January 30, 2006 (as amended, the “2006 Credit Agreement”) includes a $60.0 million revolving credit facility (the “Revolving Facility”) and a $450.0 million term loan commitment (the “Term Facility”). As of ~~other~~September 30, ~~comprehensive~~2008, ~~loss~~there iswas ~~comprised~~$20.0 million outstanding on the Revolving Facility and $439.6 million outstanding on the Term Facility. The Company subsequently borrowed an additional $40.0 million on the Revolving Facility on October 1, 2008. The Company’s Revolving Facility matures in January 2012 and the Company’s Term Facility matures in January 2013. The Revolving Facility and the Term Facility both will mature on February 1, 2009 if the Company has more than $25.0 million of ~~foreign~~the ~~currency~~10.25% Series B Senior ~~translation~~Subordinated ~~adjustments~~Notes due May 1, 2009 (the “2009 Notes”) outstanding on February 1, 2009. In addition, the Revolving Facility and isthe ~~reported~~Term asFacility ~~follows~~both will mature on October 15, 2010 if the Company has more than $10.0 million of the 8.875% Senior Subordinated Notes due January 15, 2011 (inthe ~~thousands~~“2011 Notes” and, together with the 2009 Notes, the “Notes”): outstanding on October 15, 2010. The Company has classified the entire balance of the 2006 Credit Agreement as a current liability on its September 30, 2008 balance sheet as the 2006 Credit Agreement may mature within twelve months of September 30, 2008. The Company has also classified the entire balance of the 2009 Notes of $413.7 million as a current liability on its September 30, 2008 balance sheet as the 2009 Notes mature within twelve months of September 30, 2008.

	Fiscal Quarter Ended
	June 30, 2006			June 30, 2007
Net loss	$	(27,472	)	$	(123	)
Foreign currency translation adjustments, net of tax		42			25
Comprehensive loss	$	(27,430	)	$	(98	)

In order to refinance the Notes, on August 26, 2008, the Company commenced tender offers to purchase and consent solicitations with respect to all of the Notes. On January 9, 2009, the Company amended its tender offers and consent solicitations. To finance the purchase of the Notes in the tender offers and the payment for consents in the consent solicitations, simultaneous with the tender offers and consent solicitations, the Company is offering up to (a) $21,245,380 aggregate principal amount of the Company’s 9% senior PIK notes due 2013 (the “Senior PIK Notes”), and (b) $300,000,000 aggregate principal amount of the Company’s 14% senior subordinated notes due 2013 (the “Senior Subordinated Notes” and, together with the Senior PIK Notes, the “New Notes”). We are a wholly owned subsidiary of Media. Together with the New Notes, Media is also offering 5,700,000 shares of Media’s common stock (the “Shares” and, together with the New Notes, the “Offered Securities”), representing 95% of Media’s outstanding shares of common stock. In order to tender Notes in the tender offers, a tendering holder must agree to purchase Offered Securities for a purchase price equal to the consideration such holder receives in the tender offers and consent solicitations. Among other matters, tendering holders must also deliver their consents to specified amendments to the indentures, which consents remove substantially all of the restrictive covenants and related defaults in the indentures governing the Notes. In connection with the tender offers, certain provisions of the 2006 Credit Agreement will be waived including the change of control event of default that would result from successful tender offers. For a more complete description of the tender offers and consent solicitations, see Note 7, “Senior

(3) Inventories

Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out (FIFO) method. The Company writes down inventory for estimated obsolescence and/or excess or damaged inventory. During the fiscal quarter ended June 30, 2007, the Company wrote down approximately $0.2 million of inventory. This write down is included in production expense in the accompanying Unaudited Condensed Consolidated Statements of Loss. The Company did not write down any inventory during the fiscal quarter ended June 30, 2006. Inventories are comprised of the following (in thousands):

	March 31, 2007		June 30, 2007
Raw materials – paper	$	16,867	$	17,617
Finished product — paper, production and distribution costs of future issues		6,658		5,848
Total inventory	$	23,525	$	23,465

~~(4)~~ Subordinated ~~Fair~~Indebtedness.” ~~Value~~The ofCompany ~~Financial~~cannot ~~Instruments~~make any assurances that such tender offers and consent solicitations will be successful. If such tender offers and consent solicitations are not successful, the Company will likely be required to restructure its capital structure through bankruptcy proceedings.

~~The~~Given ~~estimated~~the ~~fair~~continued ~~value~~weakness of the credit markets, there can be no assurance that the Company’s ~~financial~~can ~~instruments~~refinance its existing Notes or obtain the additional capital necessary to satisfy its short-term cash needs on satisfactory terms. In the event the Company is unable to extend or refinance the Notes, the 2006 Credit Agreement will likely mature early and the Company will not have sufficient funds to repay such indebtedness. In such event, the Company may have to liquidate assets on unfavorable terms, or be unable to continue as ~~follows~~a ~~(in~~going ~~thousands):~~concern, and incur additional costs associated with bankruptcy.

	March 31, 2007						June 30, 2007
	CarryingAmount			Fair Value			CarryingAmount			Fair Value
Term loan	$	450,000		$	450,000		$	450,000		$	450,000
Revolving credit facility		60,000			60,000			60,000			60,000
Subordinated indebtedness		550,000	(a)		515,125	(a)		550,000	(a)		522,500	(a)

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the Company’s consolidated financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should it be unable to continue as a going concern.

(a2) ~~Amount~~Comprehensive ~~does~~Income ~~not~~(Loss) ~~include bond premium.~~

The ~~fair~~change ~~value~~in of the ~~Company’s~~ ~~financial~~components ~~instruments~~of isother ~~estimated~~comprehensive ~~based~~income on(loss) ~~the~~is ~~quoted~~comprised ~~market prices for the same or similar issues, or on the current rate offered to the Company for financial instruments~~ of ~~the~~foreign ~~same~~currency ~~remaining~~translation ~~maturities.~~adjustments ~~The carrying amount for cash~~ and ~~cash~~is ~~equivalents,~~reported ~~accounts~~as ~~receivable,~~follows ~~accounts~~(in ~~payable~~thousands): ~~and accrued expenses approximates fair value because of the short maturity of those instruments.~~

(5) Income Taxes


	Fiscal Quarter Ended						Two Fiscal Quarters Ended
	September 30, 2007			September 30, 2008			September 30, 2007			September 30, 2008
Net (loss) income	$	(17,755	)	$	623		$	(17,878	)	$	1,011
Foreign currency translation adjustments, net of tax		(10	)		(219	)		15			(210	)

Comprehensive (loss) income	$	(17,765	)	$	404		$	(17,863	)	$	801

~~The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes: An Interpretation of FASB Statement No. 109”~~ (~~“FIN 48”~~3), onInventories April 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $2.7 million increase to the April 1, 2007 balance of accumulated deficit, net of the valuation allowance impact. The cumulative effect of the change in accumulated deficit resulted in a $0.3 million increase in accrued expenses and other liabilities and a $2.4 million reduction of a deferred tax asset previously recognized and included in deferred income taxes. The total amount of unrecognized tax benefits as of April 1, 2007 was $10.2 million, net of valuation allowance impact. Approximately $5.2 million of this amount would, if recognized, have an effect on the effective income tax rate. In addition to the unrecognized tax benefits, the Company had $1.2 million of interest and penalties accrued as of April 1, 2007. During the quarter ended June 30, 2007, the Company’s liability for unrecognized tax benefits did not change. An additional amount of approximately $20,000 of interest was accrued in the first quarter of fiscal year 2008. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes.

~~The~~Inventories ~~Company~~are ~~has~~stated ~~identified~~at ~~its “major” tax jurisdictions to include~~ the ~~federal government,~~lower ~~and the states~~ of ~~California,~~cost ~~Florida~~or ~~and New York~~market. ~~The~~Cost ~~only~~is ~~periods~~determined ~~subject~~on ~~to examination for~~ the ~~Company’s federal return are the fiscal years ended 2003~~first-in, ~~2005,~~first-out ~~2006,~~(FIFO) ~~and 2007 tax years~~method. ~~The~~Inventories ~~audit~~are comprised of the ~~tax~~following ~~year~~(in ~~2004~~thousands): has been completed without adjustment, but is still pending review by the Joint Committee on Taxation. The periods subject to examination for the Company’s major states are the fiscal years ended 2003-2007.

It is reasonably possible that the unrecognized tax benefits could significantly decrease within the next twelve months upon settlement of federal, state, and local tax matters. Until formal resolutions are reached between the Company and tax authorities, the determination of a possible range with respect to the impact on unrecognized tax benefits is not practicable.


	March 31, 2008		September 30, 2008
Raw materials – paper	$	23,854	$	23,081
Finished product — paper, production and distribution costs of future issues		4,775		3,714

Total inventory	$	28,629	$	26,795

(64) ~~Credit~~Goodwill ~~Agreement~~and Other Identified Intangible Assets

OnAs ~~January~~of March 31, 2008 and September 30, ~~2006~~2008, the Company ~~entered into~~had agoodwill ~~bank~~with ~~credit~~carrying ~~agreement~~values ~~(as~~of ~~amended,~~$359.7 ~~the~~million ~~“2006~~and ~~Credit~~other ~~Agreement”),~~identified ~~replacing~~intangible ~~its~~assets ~~then~~not ~~existing~~subject to ~~Amended~~amortization ~~and~~with ~~Restated~~carrying ~~Credit~~values ~~Agreement~~of ~~dated~~$352.3 asmillion. ofThe ~~January 23,~~other ~~2003~~identified ~~(the~~intangible ~~“2003~~assets ~~Credit~~not ~~Agreement”)~~subject to amortization consist of tradenames with indefinite lives.

The 2006 Credit Agreement allows for revolving loans, term loans, swingline loans and letters of credit in an aggregate principal amount of up to $510.0 million. The Company has the option to pay interest at the JP Morgan Chase Bank N.A. (“JP Morgan”) prime rate plus 2.25% or at the London interbank offering rate (“LIBOR”) plus 3.25%. As of June 30, 2007, all of the Company’s borrowings were based on LIBOR. The Company’s effective weighted-average interest rate on its term loan and its revolving credit facility during the fiscal quarter ended June 30, 2007 was 8.6%. The Company’s revolving credit commitment matures in January 2012 and the Company’s term loan matures in January 2013 but both may mature sooner if the Company does not refinance its outstanding 10.25% senior subordinated notes due 2009 (the “2009 Notes”) on or prior to February 1, 2009 in accordance with the requirements of the 2006 Credit Agreement (in which case the maturity date will be February 1, 2009) or the Company does not refinance its outstanding 8.875% senior subordinated notes due 2011 (the “2011 Notes” and, together with the 2009 Notes, the “Notes”) on or prior to October 15, 2010 in accordance with the requirements of the 2006 Credit Agreement (in which case the maturity date will be October 15, 2010). The 2006 Credit Agreement includes certain representations and warranties, conditions

~~precedent,~~Identified ~~affirmative~~intangible ~~covenants,~~assets ~~negative~~with ~~covenants~~finite ~~and~~lives events of default. The negative covenants include financial maintenance covenants comprised of a leverage ratio, a senior secured leverage ratio, a consolidated interest expense coverage ratio, and capital expenditure limits. The 2006 Credit Agreement also contains certain covenants that, subject to ~~certain~~amortization ~~exceptions,~~consist restrict paying cash dividends, incurring additional indebtedness, creating liens, making acquisitions or other investments, entering into certain mergers or consolidations and selling or otherwise disposing of ~~assets. The Company has obtained a number of waivers and amendments to~~ the ~~2006~~following ~~Credit~~at ~~Agreement since January~~March 3031, ~~2006.~~2008 and ~~As of June~~September 30, ~~2007,~~2008 ~~the Company was~~ (in ~~compliance~~thousands): with these covenants, as so amended. Although there can be no assurances, the Company anticipates that, based on current projections, its operating results for the remainder of fiscal year 2008 will be sufficient to satisfy the financial covenants, as amended, under the 2006 Credit Agreement.

The indebtedness under the 2006 Credit Agreement is secured by substantially all of the parent company’s assets and the assets of its domestic subsidiaries. In addition, the Company’s obligations are secured by a pledge of all of the issued and outstanding shares of, or other equity interests in, substantially all of its existing or subsequently acquired or organized domestic subsidiaries and a percentage of the capital stock of, or other equity interests in, certain of its subsequently acquired or organized subsidiaries.


		March 31, 2008							September 30, 2008
	Range of Lives	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Tradenames	8 - 27	$	14,186	$	(5,882	)	$	8,304	$	14,186	$	(6,104	)	$	8,082
Covenants not to compete	5 - 10		22,500		(18,949	)		3,551		22,500		(20,003	)		2,497
Subscriber lists	3 - 15		66,058		(45,825	)		20,233		66,058		(47,769	)		18,289
Non-subscriber customer relationships	8		9,502		(6,110	)		3,392		9,502		(6,645	)		2,857

		$	112,246	$	(76,766	)	$	35,480	$	112,246	$	(80,521	)	$	31,725

~~Included~~Amortization inexpense ~~the~~of ~~2006~~intangible ~~Credit~~assets ~~Agreement~~was is$2.1 amillion and $601.09 million ~~revolving~~for ~~credit~~the fiscal quarter ended ~~facility~~September 30, 2007 and a2008, respectively, and $~~450~~4.03 million ~~term~~and ~~loan commitment~~$3.8 Asmillion offor ~~June~~the two fiscal quarters ended September 30, 2007 and 2008, ~~under~~respectively. Based on the ~~2006~~carrying ~~Credit~~value ~~Agreement~~of identified intangible assets recorded at September 30, ~~the~~2008, ~~Company~~and ~~had~~assuming ~~$450.0~~no ~~million~~subsequent impairment of ~~borrowings~~the ~~under~~underlying assets, the ~~term~~amortization ~~loan~~expense ~~commitment~~for the remainder of fiscal year 2009 and ~~$60.0~~future ~~million~~fiscal ~~outstanding~~years ~~under~~is ~~the~~expected ~~revolving~~to ~~credit commitment.~~be as follows (in thousands):

On April 16, 2007, the Company entered into an Amendment and Waiver Agreement with respect to certain provisions of the 2006 Credit Agreement (the “April 2007 Waiver”). The April 2007 Waiver provided, among other things, for extensions of the applicable deadlines for delivery of the Company’s financial statements for the following periods: (i) for the fiscal quarter ended June 30, 2006 to May 15, 2007, which were filed on May 8, 2007, (ii) for the fiscal quarter ended September 30, 2006 to the earlier of (A) the date that is 30 days following delivery of the financial statements for the fiscal quarter ended June 30, 2006 and (B) June 15, 2007, which were filed on May 24, 2007, (iii) for the fiscal quarter ended December 31, 2006 to the earlier of (A) the date that is 30 days following delivery of the financial statements for the fiscal quarter ended September 30, 2006 and (B) July 15, 2007, which were filed on July 3, 2007, (iv) for the fiscal year ended March 31, 2007 to August 31, 2007, which was filed on August 31, 2007, and (v) for the fiscal quarter ending June 30, 2007 to the earlier of (A) the date that is 30 days following delivery of the financial statements for the fiscal year ended March 31, 2007 and (B) September 30, 2007. The April 2007 Waiver also amended a provision of the 2006 Credit Agreement which restricts the giving of any consideration to or for the benefit of any holder of Notes for any amendment, modification or waiver relating to a financial reporting violation, among other things, to reduce the requirement that the Company maintain a minimum amount of liquidity such that the provision now requires that the Company’s cash and cash equivalents and unused availability under the 2006 Credit Agreement are at least $25.0 million. Pursuant to the April 2007 Waiver, the Company paid an amendment fee in cash to lenders who approved the April 2007 Waiver equal to $0.50 per $1,000 in principal amount of the outstanding and available credit facilities of such lenders resulting in an aggregate payment of $0.3 million.


Fiscal Year	Amortization Expense
2009	$	3,754
2010		6,845
2011		5,402
2012		4,651
2013		2,622
Thereafter		8,451

	$	31,725

During the fiscal quarter ended September 30, 2008, the Company believed that the fair value of its goodwill and other intangible assets for certain reporting units may have declined below its carrying value based on management’s expectations of long-term cash flows resulting from declining profitability as a result of the overall market weakness due to the current economic slowdown. The Company concluded that it was required to perform an interim impairment test in accordance with Statement of Financial Accounting Standards (7“SFAS”) ~~Senior~~No. 142, ~~Subordinated~~“Goodwill and Other Intangible ~~Indebtedness~~Assets” (“SFAS No. 142”). Based on the results of the interim impairment test, the Company concluded that its goodwill and other intangible assets were not impaired as of September 30, 2008; however, there can be no assurances that they will not be impaired in future periods. If adverse events were to occur or circumstances were to change indicating that the carrying amount of such assets may not be fully recoverable, the assets would be reviewed for impairment and the assets may become impaired.

~~On March 17, 2006, the Company entered into Waiver and Consent Agreements with holders of a majority of the outstanding principal amount of both its 2009 Notes and 2011 Notes~~ (~~collectively, the “March 2006 Subordinated Debt Consent Agreements”~~5). InFair ~~addition,~~Value the Company entered into supplemental indentures under the indentures pursuant to which the Notes were issued (the “March 2006 Supplemental Indentures”). The March 2006 Supplemental Indentures, among other things, require the Company to meet specified leverage ratios as of ~~September 30,~~Financial ~~2007~~Instruments ~~and 2008.~~

IfThe ~~the~~estimated ~~Company~~fair ~~fails~~value toof ~~meet~~ the ~~specified~~Company’s ~~leverage~~financial ~~ratio~~instruments ofis ~~8:1~~ as ~~of September 30, 2007, it will be required to make one of three elections which are as~~ follows~~: (1) issue~~ ~~an additional $20.0 million of senior subordinated notes to the existing holders of the Notes, or~~ (~~2) issue a cash payment of $20.0 million to the holders of the Notes, or (3) issue equity or receive a cash equity contribution~~ in such amount as will result in net proceeds to the Company of no less than $40.0 million or in such lesser amount sufficient to permit the Company to achieve the specified leverage ratio (after giving pro forma effect to the reduction of indebtedness that shall be effected with such proceedsthousands).: ~~The Company anticipates that it will not meet the specified leverage test. If this occurs, the Company expects to issue $20.0 million of senior subordinated notes to the existing holders of the Notes.~~

If the Company fails to meet the specified leverage ratio of 7.25:1 as of September 30, 2008, it will be required to make one of three elections which are as follows: (1) issue an additional $35.0 million of senior subordinated notes to the existing holders of the Notes, or (2) issue a cash payment of $20.0 million to the holders of the Notes, or (3) issue equity or receive a cash equity contribution in such amount as will result in net proceeds to the Company of no less than $50.0 million or in such lesser amount sufficient to permit the Company to achieve the specified leverage ratio (after giving pro forma effect to the reduction of indebtedness that shall be effected with such proceeds).


	March 31, 2008						September 30, 2008
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Term loan	$	450,000		$	391,500		$	439,621		$	369,282
Revolving credit facility		60,000			49,800			20,000			16,900
Subordinated notes		570,000	(a)		381,382	(a)		570,000	(a)		444,289	(a)

(a)	Amount does not include bond premium and discount.

OnThe ~~May 15,~~fair ~~2007,~~value ~~the Company entered into (i) a Consent Agreement with certain holders~~ of the ~~2009~~Company’s ~~Notes,~~financial ~~who collectively~~instruments ~~held~~is aestimated ~~majority~~based ofon the ~~outstanding~~quoted ~~principal~~market ~~amount~~prices offor the ~~2009~~same ~~Notes and (ii) a Consent Agreement with certain holders of the 2011 Notes, who collectively held a majority of the outstanding principal amount of the 2011 Notes~~or ~~(collectively,~~similar ~~the “May 2007 Subordinated Debt Consent Agreements”). Pursuant to the May 2007 Subordinated Debt Consent Agreements~~issues, ~~the~~or ~~holders~~on ~~of a majority in principal amount of each series of Notes have provided their consents to specified amendments to~~ the ~~related~~current ~~indentures.~~rate ~~Pursuant~~offered to the ~~May 2007 Subordinated Debt Consent Agreements, the~~ Company ~~paid in cash $1.25 per $1,000 in principal amount of Notes to each holder of Notes,~~ for anfinancial ~~aggregate~~instruments ~~payment to all Note holders~~ of ~~$0.7 million. In addition, pursuant to~~ the ~~requirements~~same ofremaining the May 2007 Subordinated Debt Consent Agreements, on May 15, 2007, the Company entered into (i) an Eighth Supplemental Indenture, dated as of May 15, 2007, among the Company, the Note Guarantors named therein and the trustee, relating to the Indenture governing the 2009 Notes, and (ii) a Sixth Supplemental Indenture dated as of May 15, 2007, among the Company, the Note Guarantors named therein and the trustee, relating to the Indenture governing the 2011 Notes (collectively, the “May 2007 Supplemental Indentures”)maturities. The ~~principal~~carrying ~~purpose~~amount of the May 2007 Supplemental Indentures was to amend the related Indenture to permit the Company to extend the date by which it is required under such Indenture to file with the SEC and provide the trustee and holders of Notes (i) its quarterly report on Form 10-Q for ~~the~~cash quarter ended September 30, 2006 (the “Second Quarter 2007 Form 10-Q”) to June 15, 2007, which was filed on May 24, 2007, (ii) its quarterly report on Form 10-Q for the quarter ended December 31, 2006 (the “Third Quarter 2007 Form 10-Q”) to July 16, 2007, which was filed on July 3, 2007, (iii) its annual report on Form 10-K for the fiscal year ended March 31, 2007 (the “2007 Form 10-K”) to August 31, 2007, which was filed on August 31, 2007, and ~~(iv) its~~cash ~~quarterly report on Form 10-Q for the quarter ended June 30~~equivalents, ~~2007~~accounts ~~(the “First Quarter 2008 Form 10-Q”) to October 1~~receivable, ~~2007.~~accounts Inpayable addition, each Supplemental Indenture permits the Company, upon notice to the trustee, to extend the filing dates of its Second Quarter 2007 Form 10-Q to July 16, 2007, its Third Quarter 2007 Form 10-Q to August 15, 2007, its 2007 Form 10-K to October 1, 2007, and ~~its~~accrued ~~First~~expenses ~~Quarter~~approximates ~~2008 Form 10-Q to October 31, 2007 in return for a cash payment to~~fair ~~all~~value ~~holders~~because of ~~Notes~~the ~~equal~~short tomaturity ~~$1.25~~of ~~per~~those ~~$1,000 principal amount~~instruments.

(86) ~~Restructuring~~Credit ~~Activities~~Agreement

~~On April 4, 2006, the board of directors of the Company committed to a plan (the “Plan”) to restructure certain of its operations.~~ The ~~Plan was adopted to improve the~~ Company’s ~~profitability~~Revolving ~~and~~Facility ~~future~~matures ~~net~~in ~~cash~~January ~~flows,~~2012 and ~~includes actions that~~ the Company’s ~~has~~Term ~~taken~~Facility ~~and~~matures ~~intends~~in toJanuary ~~take,~~2013. ~~including:~~The ~~discontinuing~~Revolving ~~the~~Facility ~~publication of Celebrity Living Weekly, MPH~~ and ~~Shape En Espanol,~~ the ~~relocation~~Term ofFacility ~~the~~both ~~operations~~will ~~associated~~mature ~~with~~on ~~National Enquirer from New York City back to Boca Raton~~February 1, ~~Florida,~~2009 ~~centralizing~~if ~~certain operations, and reducing certain other operating, general and administrative expenses. The~~the Company’s ~~relocation~~has ~~plan~~more ~~involved~~than ~~the termination of approximately 50 employees. This activity resulted in a charge of~~ $225.~~3 million for termination benefits, $~~0.1 million ~~for~~of ~~costs~~the ~~associated~~2009 ~~with~~Notes ~~the~~outstanding ~~relocation~~on ~~of employees~~February 1, $02009.6 ~~million~~In ~~for facility~~addition, ~~closures~~the ~~and~~Revolving ~~$0.9~~Facility ~~million~~and ~~for~~the ~~deferred~~Term ~~rack~~Facility ~~cost~~both ~~write-offs.~~will ~~$2.8~~mature ~~million~~on ofOctober 15, ~~these~~2010 ~~charges~~if ~~was~~the ~~included~~Company inhas ~~selling,~~more ~~general~~than ~~and administrative expense and~~ $110.10 million of ~~these~~the ~~charges was included in loss from discontinued operations in~~2011 ~~the~~Notes ~~accompanying~~outstanding ~~Unaudited~~on ~~Condensed Consolidated Statements of Loss for the fiscal quarter ended June~~October 3015, ~~2006~~2010. InThe ~~addition,~~Company ~~these~~has ~~restructuring~~classified ~~charges~~the ~~were~~entire ~~primarily~~balance ~~incurred~~of in the ~~Tabloid~~2006 ~~Publications~~Credit ~~(formerly~~Agreement ~~known~~ as ~~“Newspaper Publications”)~~a ~~and~~current ~~Corporate/Other~~liability ~~reporting~~on ~~segments.~~its ~~Through June~~September 30, ~~2007,~~2008 ~~the~~balance ~~Company~~sheet ~~has~~as ~~paid~~the ~~termination~~2006 ~~benefits~~Credit ofAgreement ~~$2.3~~may ~~million,~~mature ~~$0.1~~within ~~million~~twelve ~~for relocation costs and $0.4 million for costs associated with facility closures. The~~months ~~Company~~of ~~has an accrual at June~~September 30, ~~2007 of $36,000 associated with this action which approximates fair value due to the short-term nature of the payments~~2008.

~~The~~In ~~following~~order ~~table~~to ~~sets~~refinance ~~forth~~the Notes, on August 26, 2008, the ~~detail~~Company commenced tender offers to purchase and ~~activity~~consent solicitations with respect to all of the Notes. On January 9, 2009, the Company amended its tender offers and consent solicitations. To finance the purchase of the Notes in the ~~restructuring~~tender ~~expense~~offers ~~accrual~~and ~~related~~the topayment ~~this~~for ~~activity~~consents ~~during~~in the ~~fiscal~~consent solicitations, ~~quarter~~simultaneous ~~ended~~with ~~June~~the tender offers and consent solicitations, the Company is offering (a) 30$21,245,380 ~~2007~~aggregate principal amount of the Company’s Senior PIK Notes, (inb) $300,000,000 ~~thousands~~aggregate principal amount of the Company’s Senior Subordinated Notes and (c): 5,700,000 Shares, representing 95% of Media’s outstanding shares of common stock. In order to tender Notes in the tender offers, a tendering holder must agree to purchase Offered Securities for a purchase price equal to the consideration being received by such holder in tender offers and consent solicitations. Among other matters, tendering holders must also deliver their consents to specified amendments to the indentures, which consents remove substantially all of the restrictive covenants and related defaults in the indentures governing the Notes. In connection with the tender offers, certain provisions of the 2006 Credit Agreement will be waived including the change of control event of default that would result from successful tender offers. For a more complete description of the tender offers and consent solicitations, see Note 7, “Senior Subordinated Indebtedness.” The Company cannot make any assurances that such tender offers and consent solicitations will be successful.

2007 Restructuring	BalancesMarch 31, 2007		Fiscal Year2008 Reversalof Accrual			Fiscal Year2008 CashPayments			Balances June 30,2007
Accrued liabilities:
Severance	$	43	$	(7	)	$	(36	)	$	—
Relocation		9		—			—			9
Facility Closures		29		—			(2	)		27
	$	81	$	(7	)	$	(38	)	$	36

Given the continued weakness of the credit markets, there can be no assurance that the Company can refinance its existing Notes or obtain the additional capital necessary to satisfy its short-term cash needs on satisfactory terms. In the event the Company is unable to extend or refinance the Notes, the 2006 Credit Agreement will likely mature early and the Company will not have sufficient funds to repay such indebtedness. In such event, the Company may have to liquidate assets on unfavorable terms, or be unable to continue as a going concern, and incur additional costs associated with bankruptcy.

OnDuring ~~June 14, 2006,~~ the ~~Company~~two ~~announced~~fiscal ~~that~~quarters itended ~~was~~September 30, ~~implementing~~2008, athe ~~strategy~~Company tomade ~~refocus~~ the ~~Company~~required ~~and devote~~quarterly ~~its~~principal ~~full~~payments ~~resources~~on toits ~~growing~~Term ~~its~~Facility ~~core~~borrowing ~~brands~~totaling $2.3 Asmillion. ~~part~~The ofCompany ~~this~~also ~~strategy,~~made ~~the~~a ~~Company~~fiscal ~~announced~~year ~~that~~2008 itExcess ~~will~~Cash ~~explore~~Flow ~~the~~payment ~~sale~~(as ofdefined ~~its~~in ~~five~~the ~~market~~2006 ~~leading~~Credit ~~special~~Agreement) ~~interest~~of ~~titles:~~$8.1 ~~Muscle &~~million ~~Fitness,~~on ~~Flex~~June 30, ~~Muscle &~~2008. ~~Fitness~~The ~~Hers, Country~~Company ~~Weekly,~~paid ~~and~~down ~~Mira!~~$34.0 million ~~These~~of ~~publications~~its ~~collectively~~Revolving ~~represented~~Facility ~~total~~on ~~revenues~~June 30, 2008, and ~~operating~~subsequently ~~income~~borrowed of $2034.70 million ~~and~~on ~~$7.3 million~~July 1, ~~respectively,~~2008. ~~for~~The ~~the~~Company ~~fiscal~~then ~~quarter~~paid ~~ended~~down ~~June 30, 2007~~$40.0 Asmillion ~~a result~~ of ~~the~~its ~~restatement of~~Revolving ~~the~~Facility ~~Company’s~~on ~~financial~~September 30, ~~statements~~2008, ~~for~~and ~~the~~subsequently ~~fiscal~~borrowed ~~year~~$40.0 million ~~ended~~on ~~March~~October 311, ~~2005~~2008. ~~and~~Commitment fee payments during the two fiscal quarters ended ~~June~~September 30, ~~2005~~2008 ~~and~~were ~~September 30,~~insignificant ~~2005~~as (the ~~“Restatement”)~~Revolving ~~and~~Facility ~~until~~was ~~the~~fully ~~Company~~drawn ~~becomes~~during ~~current~~the ~~with~~entire ~~its filings~~two ~~with~~fiscal ~~the~~quarters ~~SEC,~~with the ~~implementation~~exception of ~~this~~a ~~strategy~~few ~~has~~days near ~~been~~each ~~delayed~~quarter end.

The effective interest rate under the 2006 Credit Agreement, including amounts borrowed under the Term Facility and Revolving Facility, as of September 30, 2008, was 6.0%. The effective weighted-average interest rates under the 2006 Credit Agreement for the fiscal quarters ended September 30, 2007 and 2008 were 8.7% and 6.0%, respectively. The effective weighted-average interest rates under the 2006 Credit Agreement for the two fiscal quarters ended September 30, 2007 and 2008 were 8.6% and 6.4%, respectively. The decrease in the effective weighted-average interest rate between fiscal quarters ended September 30, 2007 and 2008 and two fiscal quarters ended September 30, 2007 and 2008 is tied to the decrease in the London interbank offering rate (“LIBOR”).

The 2006 Credit Agreement includes certain representations and warranties, conditions precedent, affirmative covenants, negative covenants and events of default. The negative covenants include financial maintenance covenants comprised of a leverage ratio, a senior secured leverage ratio, a consolidated interest expense coverage ratio, and capital expenditure limits. The 2006 Credit Agreement also contains certain covenants that, subject to certain exceptions, restrict paying dividends, incurring additional indebtedness, creating liens, making acquisitions or other investments, entering into certain mergers or consolidations and selling or otherwise disposing of assets. Concurrently with the successful completion of the offering of the New Notes, the Company expects to amend and restate the 2006 Credit Agreement of the Company and Media. The proposed amendments include revised financial covenant levels, an increase in interest rate margins, the

introduction of an interest rate floor, a broadening of the circumstances that would give rise to prepayment of the loans and the introduction of more restrictive covenants, particularly relating to indebtedness, investments, restricted payments and capital expenditures. Although there can be no assurances, the Company anticipates that, based on current projections (9including projected borrowings and repayments under the Revolving Facility) ~~Discontinued~~, ~~Operations~~its operating results for fiscal year 2009 will be sufficient to satisfy the financial covenants under the 2006 Credit Agreement after giving effect to the proposed amendments. If the proposed amendments do not become effective, based on the Company’s calculations, the Company does not expect to be in compliance with the senior secured leverage ratio financial covenant as of December 31, 2008 and in certain future periods. The Company’s ability to satisfy such financial covenants is dependent on its business performing in accordance with its projections. If the performance of the Company’s business deviates from its projections, the Company may not be able to satisfy such financial covenants, including the senior secured leverage ratio. The Company’s projections are subject to a number of factors, many of which are events beyond its control, which could cause the Company’s actual results to differ materially from its projections. If the Company does not comply with these or other covenants and restrictions contained in the 2006 Credit Agreement, the Company could default under the 2006 Credit Agreement. The outstanding debt under the 2006 Credit Agreement could then be declared immediately due and payable. Moreover, the instruments governing almost all of the Company’s other debt contain cross-acceleration provisions so that an acceleration under any of the Company’s debt may result in a default under the Company’s other debt. If a cross-acceleration occurs, the maturity of the Company’s other debt could be accelerated and become immediately due and payable. If that happens, the Company may not be able to satisfy its debt obligations, which would have a substantial adverse effect on the Company’s ability to continue as a going concern.

InOn January 7, ~~order~~2009, ~~to improve~~ the Company’s ~~profitability~~ and ~~future~~Media ~~net~~entered ~~cash~~into ~~flows,~~a inforbearance ~~April~~agreement ~~2006,~~with lenders representing a majority of outstanding amounts and commitments under the ~~Company~~2006 ~~discontinued~~Credit Agreement and the ~~Celebrity~~administrative ~~Living~~agent ~~Weekly~~under the 2006 Credit Agreement, ~~MPH~~pursuant to which such lenders and ~~Shape~~the Enadministrative ~~Espanol~~agent ~~publications~~agreed into, ~~accordance with~~subject to certain termination events, forbear until the ~~provisions~~earliest of ~~Statement~~(i) February 4, 2009, (ii) the date on which any of ~~Financial~~the ~~Accounting~~Existing ~~Standards~~Notes become or are declared to be due and payable and (~~“SFAS”~~iii) ~~No.~~ ~~144,~~the ~~“Accounting~~commencement ~~for~~of an insolvency proceeding with respect to the ~~Impairment~~Company, Media or ~~Disposal~~any of ~~Long-Lived~~their ~~Assets”~~subsidiaries ~~(“SFAS~~from ~~No. 144”).~~exercising ~~During~~any rights and remedies under the ~~fourth~~2006 ~~quarter~~Credit Agreement as a result of the ~~fiscal~~Company’s ~~year~~failure ~~2007~~(a) to pay the interest payment due on the 2009 Notes on November 1, 2008, (b) to comply with the ~~Company~~reporting ~~discontinued~~requirements in the ~~publication~~2006 ofCredit ~~Looking~~Agreement, ~~Good~~(c) to ~~Now.~~comply ~~Operating~~with ~~results~~the ofcorresponding ~~these~~requirements ~~publications~~in the ~~have~~indentures ~~been~~governing ~~classified~~the asNotes ~~discontinued~~and ~~operations~~(d) to ~~for~~comply ~~all~~with ~~periods~~the ~~presented.~~requirements ~~These~~of ~~publications~~the ~~were~~indentures ~~previously~~governing ~~included~~the Notes in ~~the~~ ~~Corporate/Other~~connection ~~segment~~with its failure to meet a specified leverage ratio.

~~The~~See ~~following~~Note ~~table sets forth total operating revenues~~13, ~~pre-tax~~“Subsequent ~~loss~~Events”. ~~from discontinued operations, income taxes and loss from discontinued operations for the fiscal quarters ended June 30, 2006 and 2007, respectively (in thousands):~~

	2006			2007
Total operating revenues	$	1,845		$	(65	)
Pre-tax loss from discontinued operations	$	(1,617	)	$	(88	)
Income taxes		—			—
Loss from discontinued operations	$	(1,617	)	$	(88	)

(7) Senior Subordinated Indebtedness

AtThe ~~its~~2009 ~~July 19,~~Notes ~~2007~~mature ~~meeting~~on May 1, ~~the~~2009. ~~Board~~The ~~of Directors of the~~ Company ~~decided~~has toclassified ~~discontinue~~ the ~~publication~~entire balance of ~~Weekly~~ ~~World News effective with~~ the ~~August 27,~~2009 ~~2007~~Notes ~~issue~~of $413.7 ~~This~~million ~~publication~~as ~~represented~~a ~~total~~current ~~revenues~~liability ~~and~~on ~~operating~~its September 30, ~~loss~~2008 ofbalance ~~$0.7~~sheet ~~million~~as ~~and~~the ~~$0.1~~2009 ~~million,~~Notes ~~respectively,~~mature ~~for~~within ~~the~~twelve ~~fiscal~~months ~~quarter~~of ~~ended June~~September 30, ~~2007~~2008.

~~(10)~~In ~~Litigation~~connection with the consent agreements the Company entered into in March 2006 with holders of a majority of the outstanding principal amount of each series of the Notes, the Company entered into supplemental indentures, the purpose of which was to amend the indentures relating to the Notes to, among other things, require the Company to meet a specified leverage ratio as of September 30, 2008. The Company failed to meet the specified leverage ratio of 7.25:1 required under the indentures as of September 30, 2008. As a result, on or prior to December 15, 2009, the Company was required to issue either $50.0 million of new equity or a sufficient amount of equity such that after giving pro forma effect to the reduction of indebtedness, the Company would have met the required specified leverage ratio. Alternatively, the Company could have issued an additional $36.3 million of Notes or made a cash payment of $20.7 million to existing holders of Notes. The Company intends to satisfy its obligations to meet the specified leverage ratio as of September 30, 2008 by issuing equity in connection with the offering of Offered Securities, which will result in the Company satisfying such ratio on a pro forma basis.

The Company has not currently entered into a financing agreement that permits the Company to refinance the 2009 Notes on a long-term basis. However, the Company is conducting, with respect to holders that are either “qualified institutional buyers” (as defined in Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”)) or persons outside the United States (in accordance with Regulation S of the Securities Act), (1) tender offers to purchase for cash any and all of its outstanding Notes and (2) related solicitations of consents from such holders of Notes to certain proposed amendments to the indentures governing the Notes (the “Proposed Amendments”). In addition, the Company is conducting a related solicitation of consents to the Proposed Amendments from all holders of Notes who do not, or are not eligible, to participate in the applicable tender offer.

Concurrently with the tender offers and consent solicitations, the Company is conducting an offering to the holders of Notes who participate in the tender offers of up to (a) $21,245,380 aggregate principal amount of the Company’s Senior PIK Notes, (b) $300,000,000 aggregate principal amount of the Company’s Senior Subordinated Notes and (c) 5,700,000 Shares, representing 95% of Media’s outstanding shares of common stock. In order to tender Notes in the tender offers, a tendering holder must agree to purchase Offered Securities for a purchase price equal to the consideration being received by such holder in the tender offers and consent solicitations. Among other matters, tendering holders must also deliver their consents to specified amendments to the indentures, which consents remove substantially all of the restrictive covenants and related defaults in the indentures governing the Notes. The Company cannot make any assurances that such tender offers and consent solicitations will be successful.

The Company failed to make the required semi-annual interest payment with respect to the 2009 Notes when due on November 1, 2008, and on December 1, 2008, such failure resulted in an event of default pursuant to the terms of the indenture governing the 2009 Notes. The Company also expects to fail to make the required semi-annual interest payment with respect to the 2011 Notes when due on January 15, 2009. In addition, the Company failed to file this quarterly report on Form 10-Q for the period ended September 30, 2008 when due on November 14, 2008. The Company has also failed to comply with the requirements of the indentures governing the Notes relating to its failure to meet a specified leverage ratio as of September 30, 2008, as described above. As a result, the Company entered into forbearance agreements with existing holders of approximately 81% of the outstanding aggregate principal amount of 2009 Notes and approximately 69% of the outstanding aggregate principal amount of 2011 Notes, pursuant to which such holders have agreed to forbear until the earliest of (i) 5:00 p.m., New York City time, on February 4, 2009, (ii) the date upon which any of the Notes become or are declared to be due and payable, (iii) the commencement (voluntary or involuntary) of an insolvency proceeding with respect to the Company or any of its subsidiaries, (iv) the date upon which the forbearance agreement by the lenders holding more than a majority of the borrowings under the Company’s credit facility expires, terminates or is breached and (v) if the Company has not launched the tender offers and related offering of the Offered Securities on the terms that may be agreed to by the parties hereto, in the sole discretion of such parties, prior to such date, January 10, 2009, from exercising any remedies under the indentures governing the Notes as a result of the Company’s (a) failure to comply with the reporting requirements of the indentures governing the Notes, (b) deferred interest payments with respect to the Notes or (c) failure to comply with the requirements of the indentures governing the Notes relating to the Company’s failure to meet a specified leverage ratio as of September 30, 2008. The Company intends to satisfy its obligations to meet the specified leverage ratio as of September 30, 2008 by issuing equity in connection with the offering of Offered Securities, which will result in the Company satisfying such ratio on a pro forma basis.

(8) Discontinued Operations

In order to improve the Company’s profitability and future net cash flows, the Company discontinued various publications during fiscal years 2007 and 2008 and has accounted for them in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). Operating results of these publications have been classified as discontinued operations for all periods presented. These publications were previously included in the Corporate/Other segment.

The following table sets forth total operating revenues, pre-tax income (loss) from discontinued operations, income taxes and income (loss) from discontinued operations for the fiscal quarter and two fiscal quarters ended September 30, 2007 and 2008, respectively (in thousands):


	Fiscal Quarter Ended September 30,					Two Fiscal Quarters Ended September 30,
	2007			2008		2007			2008
Total operating revenues	$	238		$	—	$	880		$	—

Pre-tax (loss) income from discontinued operations	$	(572	)	$	—	$	(756	)	$	500
Income taxes		—			—		—			—

(Loss) income from discontinued operations	$	(572	)	$	—	$	(756	)	$	500	(a)

(a)	Represents a gain on the proceeds from the sale of one of the discontinued operations.

(9) Litigation

Various suits and claims arising from the publication of the Company’s magazines have been instituted against the Company. The Company has insurance policies that likely would be available to recover any reasonably foreseeable material litigation costs and expenses. The Company periodically evaluates and assesses the risks and uncertainties associated with litigation independent from those associated with the Company’s potential claim for recovery from third party insurance carriers. At present, in the opinion of management, after consultation with outside legal counsel, the liability resulting from litigation, if any, will not have a material effect on the Company’s Unaudited Condensed Consolidated Financial Statements.

~~(11)~~12 ~~Business Segment Information~~

TheTable Company has aggregated its business into five reporting segments: Celebrity Publications, Tabloid Publications (the Company changed the name of the segment from “Newspaper Publications” during the fiscal quarter ended June 30, 2007), Women’s Health and Fitness Publications, Distribution Services and Corporate/Other. The aggregation of the Company’s business is based upon the Company’s publications having the following similarities: economic characteristics including gross margins, types of products and services, types of production processes, type or class of customer, and method of distribution, as required by SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“SFAS No. 131”). Contents

(10)

Business Segment Information

The Company has aggregated its business into five reporting segments: Celebrity Publications, Tabloid Publications, Women’s Health and Fitness Publications, Distribution Services and Corporate/Other. The aggregation of the Company’s business is based upon the Company’s publications having the following similarities: economic characteristics including gross margins, types of products and services, types of production processes, type or class of customer, and method of distribution, as required by SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“SFAS No. 131”).

The Celebrity Publications segment aggregation includes Star and Country Weekly.

The Tabloid Publications segment aggregation includes National Enquirer, Globe, and National Examiner.

The Women’s Health and Fitness Publications segment aggregation includes Shape and Fit Pregnancy.

The Distribution Services segment is comprised of Distribution Services, Inc. (“DSI”) which arranges for the placement of the Company’s publications and third-party publications with retailers and monitors through its regional managers and merchandising staff that these publications are properly displayed in stores, primarily ~~large~~national ~~supermarkets~~and regional supermarket chains and major retail chains such as Wal-Mart, Kroger Companies, Safeway, Super Valu/Albertson’s, Stop & Shop/Giant Food, Pathmark, Winn Dixie and ~~Target~~Food Lion. DSI coordinates (also known as acting as a “category ~~captain~~manager/front-end advisor”) the racking of magazine fixtures for selected retailers. In addition, DSI provides sales of marketing, merchandising and information gathering services for third parties including non-magazine clients.

11The Corporate/Other segment aggregation includes the following publications: Muscle & Fitness, Men’s Fitness, Muscle & Fitness Hers, Flex, Natural Health, Sun, and Mira!. In addition, the Corporate/Other segment also includes ancillary sales and corporate overhead. Ancillary sales primarily relate to licensing, syndication and new media. Corporate expenses not allocated to other segments include production and circulation department costs, and executive staff support departments such as information technology, accounting, legal, human resources and administration. While most of the publications aggregated in the Corporate/Other segment have certain similar economic characteristics and also similar products and services, production processes, type or class of customers, and method of distribution as some of the other publications which are aggregated into the other reporting segments (Celebrity Publications, Tabloid Publications and Women’s Health and Fitness Publications), their gross margins are dissimilar with such other publications. Accordingly, the Company has aggregated those publications into the Corporate/Other reporting segment.

The Corporate/Other segment aggregation includes the following publications: Muscle & Fitness, Men’s Fitness, Muscle & Fitness Hers, Flex, Natural Health, Weekly World News, Sun, and Mira!. In addition, the Corporate/Other segment also includes ancillary sales and corporate overhead. Ancillary sales primarily relate to licensing, syndication, new media and product merchandise sales. Corporate expenses not allocated to other segments include production and circulation department costs, and support departments such as information technology, accounting, legal, human resources and administration. While most of the publications aggregated in the Corporate/Other segment have certain similar economic characteristics and also similar products and services, production process, type or class of customer, and method of distribution as some of the other publications which are aggregated into the other reporting segments (Celebrity Publications, Tabloid Publications and Women’s Health and Fitness Publications), their gross margins are dissimilar with such other publications. Accordingly, the Company has aggregated those publications into the Corporate/Other reporting segment.

The Company’s accounting policies are the same for all reportable segments.

Segment Data

The following table presents the results of, and assets employed in, the Company’s five reporting segments for the fiscal quarter and two fiscal quarters ended ~~June~~September 30, ~~2006~~2007 and ~~2007~~2008, respectively. The information includes ~~certain~~ certain intersegment transactions and is, therefore, not necessarily indicative of the results had the operations existed as stand-alone businesses. Intersegment transactions represent intercompany advertising and other services, which are billed at ~~what~~ what management believes are prevailing market rates. These intersegment transactions, which represent transactions between operating units in different business segments, are eliminated in consolidation. The results of operations exclude the results of our discontinued operations for all periods presented. See Note 98, “Discontinued Operations,” for a discussion regarding discontinued operations.

		Segment (in thousands)											(in thousands)
		CelebrityPublications		TabloidPublications		Women’s Healthand FitnessPublications		DistributionServices		Corporate/Other (1)			EliminationEntries			ConsolidatedTotal
Operating revenues
Quarter ended June	2006	$	28,794	$	34,612	$	20,732	$	7,319	$	26,173		$	(2,211	)(2)	$	115,419
Quarter ended September 30,	2007	$	33,375	$	36,908	$	25,489	$	8,145	$	30,357		$	(2,360	)(2)	$	131,914
	2007	$	31,708	$	34,683	$	22,356	$	7,739	$	27,474		$	(2,121	)(2)	$	121,839
	2008	$	30,440	$	34,775	$	24,524	$	9,239	$	32,039		$	(2,218	)(2)	$	128,799
Two Quarters ended September 30,	2007	$	65,083	$	71,591	$	47,845	$	15,884	$	57,124		$	(4,481	)(2)	$	253,046
	2008	$	62,444	$	68,967	$	43,870	$	17,369	$	59,292		$	(4,321	)(2)	$	247,621
Operating income (loss)
Quarter ended June	2006	$	812	$	12,857	$	7,974	$	1,490	$	(18,538	)	$	—		$	4,595
Quarter ended September 30,	2007	$	9,970	$	18,325	$	10,067	$	2,036	$	(9,040	)	$	—		$	31,358
	2007	$	8,389	$	15,867	$	9,016	$	1,770	$	(8,842	)	$	—		$	26,200
	2008	$	6,838	$	16,010	$	6,558	$	2,668	$	(3,106	)	$	—		$	28,968
Two Quarters ended September 30,	2007	$	18,359	$	34,192	$	19,083	$	3,806	$	(17,786	)	$	—		$	57,654
	2008	$	15,041	$	31,575	$	13,155	$	4,662	$	(9,913	)	$	—		$	54,520
Depreciation and amortization
Quarter ended June	2006	$	492	$	657	$	—	$	90	$	2,827		$	—		$	4,066
Quarter ended September 30,	2007	$	490	$	658	$	—	$	7	$	2,056		$	—		$	3,211
	2007	$	494	$	657	$	—	$	9	$	2,124		$	—		$	3,284
	2008	$	431	$	656	$	—	$	31	$	1,507		$	—		$	2,625
Two Quarters ended September 30,	2007	$	984	$	1,315	$	—	$	16	$	4,185		$	—		$	6,500
	2008	$	862	$	1,311	$	—	$	62	$	3,102		$	—		$	5,337
Amortization of deferred rack costs
Quarter ended June	2006	$	1,015	$	2,098	$	126	$	—	$	1,847		$	—		$	5,086
Quarter ended September 30,	2007	$	513	$	1,163	$	187	$	—	$	977		$	—		$	2,840
	2007	$	816	$	1,422	$	196	$	—	$	1,114		$	—		$	3,548
	2008	$	797	$	1,300	$	105	$	—	$	735		$	—		$	2,937
Two Quarters ended September 30,	2007	$	1,329	$	2,585	$	383	$	—	$	1,974		$	—		$	6,271
	2008	$	1,597	$	2,562	$	184	$	—	$	1,550		$	—		$	5,893
Total Assets
At March 31, 2007		$	189,577	$	336,476	$	100,706	$	21,654	$	330,870		$	—		$	979,283
At March 31, 2008		$	179,319	$	335,125	$	103,889	$	17,246	$	305,580		$	—		$	941,159
At June 30, 2007		$	191,383	$	337,001	$	102,657	$	18,940	$	309,091		$	—		$	959,072
At September 30, 2008		$	175,917	$	333,401	$	103,204	$	20,653	$	258,967		$	—		$	892,142

(1) Income tax expense ~~(benefit)~~ of $43.9 million and $(03.5)1 million, interest expense of $24.38 million and $2422.72 million, other expense related to senior subordinated notes to be issued of $17.3 million and $0, and amortization of deferred debt costs of $12.58 million and $2.78 million for the fiscal quarters ended ~~June~~September 30, ~~2006~~2007 and ~~June~~September 30, 2008, respectively, are included in the Corporate/Other segment. Income tax expense of $3.4 million and $2.9 million, interest expense of $49.5 million and $45.7 million, other expense related to senior subordinated notes to be issued of $17.3 million and $0, and amortization of deferred debt costs of $5.4 million and $5.6 million for the two fiscal quarters ended September 30, 2007 and September 30, 2008, respectively, are included in the Corporate/Other segment.

(2)	Amount represents revenues from transactions with other operating segments of the Company.

(11)

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which enhances existing guidance for measuring assets and liabilities at fair value. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. The provisions of SFAS No. 157 were effective for the Company on April 1, 2008. The adoption of this statement did not have a material impact on the Company’s results of operations, financial position, cash flows or disclosures. In February 2008, the FASB issued FASB Staff Position No. 157-2, which delays the effective date of SFAS No. 157 for non-financial assets and liabilities to fiscal years beginning after November 15, 2008. With this deferral, the Company has not applied the provisions of SFAS No. 157 to non-financial assets and liabilities. The Company is still assessing the impact the adoption of SFAS No. 157 for non-financial assets and liabilities will have on its results of operations, financial position or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, An Amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 amends Accounting Research Bulletin No. 51 (“ARB 51”) to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of FASB Statement No. 141(R). The Company is currently evaluating the impact of the adoption of SFAS No. 160 on its financial statements, which is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The statement must be applied prospectively as of the beginning of the fiscal year in which the statement is initially adopted.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, “Determination of the Useful Life of Intangible Assets,” (“FSP No. 142-3”). FSP No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, in order to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R, “Business Combinations” (revised 2007), and other U.S. generally accepted accounting principles. FSP No. 142-3 is effective for the Company as of April 1, 2009, and will be applied prospectively to intangible assets acquired after the effective date.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 will be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to United States Auditing Standards Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company is currently evaluating the impact, if any, that the adoption of SFAS No. 162 will have on its results of operations, financial position or cash flows.

(12)

Supplemental Condensed Consolidating Financial Information

~~Subsequent~~The following totables present condensed consolidating financial information of (a) the ~~issuance~~parent company, American Media Operations, Inc., as issuer of the ~~Company’s condensed~~Notes, ~~consolidated~~(b) on ~~financial~~a ~~statements~~combined ~~for~~basis, the ~~quarter~~subsidiary ~~ended~~guarantors ~~December~~of the 31Notes, ~~2006~~and (c) on a combined basis, ~~management~~the ~~determined~~subsidiaries that are not guarantors of the Notes. ~~disclosures~~Separate infinancial statements of the ~~Company’s~~subsidiary ~~previously~~guarantors ~~issued~~are ~~consolidated~~not ~~financial~~presented ~~statements~~because ~~concerning~~each of the subsidiary guarantors tois 100% owned by the ~~senior~~parent ~~subordinated~~company ~~debt~~issuer ~~were~~and ~~inappropriate~~the ~~and~~guarantee ~~that~~by ~~the~~each ~~Company~~subsidiary ~~should~~guarantor ~~have~~is ~~included~~full ~~supplemental~~and ~~condensed~~unconditional ~~consolidating~~and ~~financial~~joint ~~information~~and several. As a result and in accordance with Rule 3-10(f) of Regulation S-X under the Securities Exchange Act of 1934, ~~(“Exchange Act”).~~the ~~The~~Company ~~information~~includes ~~for~~ the following: ~~fiscal quarter ended June 30, 2006 disclosed below, which had been previously omitted, has been included.~~

1215

The following tables present condensed combined consolidating financial information of (a) the parent company, (b) the subsidiary guarantors of the Notes, and (c) the subsidiaries that are not guarantors of the Notes. Separate financial statements of the subsidiary guarantors are not presented because each of the subsidiary guarantors is 100% owned by the parent company issuer, the guarantee by each subsidiary guarantor is full and unconditional and are joint and several. As a result and in accordance with Rule 3-10(f) of Regulation S-X under the Exchange Act, the Company includes the following:

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

AS OF ~~JUNE~~SEPTEMBER 30, ~~2007~~2008

(in thousands)

	Parent			Guarantors			Non-Guarantors			Eliminations			CondensedConsolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—1,358		$	3519,~~748~~558		$	~~2,546~~443		$	—		$	3821,~~294~~359
Trade receivables, net		—			5256,~~483~~357			2,~~298~~172			—			5458,~~781~~529
Inventories		—			2226,~~873~~251			~~592~~544			—			2326,~~465~~795
Prepaid expenses and other current assets		861,309			1613,~~704~~573			~~449~~492			(~~1,055~~114	)		1615,~~184~~260
Total current assets		862,667			~~127~~115,~~808~~739			53,~~885~~651			(~~1,055~~114	)		~~132~~121,~~724~~943
PROPERTY AND EQUIPMENT, NET:
Leasehold improvements		—			1,~~724~~676			—			—			1,~~724~~676
Furniture, fixtures and equipment		—			4142,~~446~~002			~~489~~459			—			4142,~~935~~461
Less – accumulated depreciation and amortization		—			(37,044	)		(385	)		—			(37,429	)
Less – accumulated depreciation		—			(38,990	)		(400	)		—			(39,390	)
Total property and equipment, net		—			64,~~126~~688			~~104~~59			—			64,~~230~~747
OTHER ASSETS:
Deferred debt costs, net		2210,~~142~~240			—			—			—			2210,~~142~~240
Deferred rack costs, net		—			108,~~365~~850			—			—			108,~~365~~850
Other long-term assets		—			2,~~873~~694			118			—			2,~~884~~702
Investment in subsidiaries		~~516~~565,~~301~~137			~~2,211~~372			—			(~~518~~565,~~512~~509	)		—
Total other assets		~~538~~575,~~443~~377			1511,~~449~~916			118			(~~518~~565,~~512~~509	)		3521,~~391~~792
GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:
Goodwill		—			~~382~~355,~~954~~153			4,~~509~~510			—			~~387~~359,~~463~~663
Other identified intangibles, net		6,000			~~391~~377,~~264~~997			—			—			~~397~~383,~~264~~997
Total goodwill and other identified intangible assets		6,000			~~774~~733,~~218~~150			4,~~509~~510			—			~~784~~743,~~727~~660
TOTAL ASSETS	$	~~544~~584,~~529~~044		$	~~923~~865,~~601~~493		$	108,~~509~~228		$	(~~519~~565,~~567~~623	)	$	~~959~~892,~~072~~142
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	—		$	30,722		$	1,103		$	—		$	31,825
Term loan and revolving credit facility	$	459,621		$	—		$	—		$	—		$	459,621
Accrued expenses and other liabilities		4,960			41,766			6,563			—			53,289
Senior subordinated notes, net		413,718			—			—			—			413,718
Accrued interest		17,388			—			—			—			17,388
Accounts payable		—			29,837			1,086			—			30,923
Deferred revenues		304			40,812			477			—			41,593
Accrued expenses and other liabilities		8,617			56,797			138			3,317			68,869
Total current liabilities		22,652			113,300			8,143			—			144,095
Accrued interest		23,544			1			—			—			23,545
Deferred revenues		—			46,272			486			—			46,758
Total current liabilities		905,500			132,907			1,710			3,317			1,043,434
NON-CURRENT LIABILITIES:
Term loan and revolving credit facility		510,000			—			—			—			510,000
Senior subordinated notes, net		154,728			—			—			—			154,728
Senior subordinated notes, including bond premium		550,191			—			—			—			550,191
Deferred income taxes		—			95,893			(201	)		(3,431	)		92,261
Deferred income taxes		—			89,178			(77	)		(1,055	)		88,046
Due to (from) affiliates		(77,903	)		71,556			6,347			—			—
Management fee payable		—			4,000			—			—			4,000
Total liabilities		982,325			300,356			7,856			(114	)		1,290,423
Due to (from) affiliates		(201,054	)		200,822			232			—			—
Total liabilities		881,789			407,300			8,298			(1,055	)		1,296,332
STOCKHOLDER’S EQUITY (DEFICIT):
Total stockholder’s equity (deficit)		(~~337~~398,~~260~~281	)		~~516~~565,~~301~~137			~~2,211~~372			(~~518~~565,~~512~~509	)		(~~337~~398,~~260~~281	)
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)	$	~~544~~584,~~529~~044		$	~~923~~865,~~601~~493		$	108,~~509~~228		$	(~~519~~565,~~567~~623	)	$	~~959~~892,~~072~~142

1316

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, ~~2007~~2008

(in thousands)

	Parent			Guarantors			Non-Guarantors			Eliminations			CondensedConsolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—156		$	5860,~~522~~534		$	13,~~892~~476		$	—		$	6064,~~414~~166
Trade receivables, net		—			4654,~~394~~392			2,~~108~~682			—			4857,~~502~~074
Inventories		—			2228,~~870~~058			~~655~~571			—			2328,~~525~~629
Prepaid expenses and other current assets		—38			1513,~~637~~694			~~407~~610			(~~1,307~~113	)		14,~~737~~229
Total current assets		—194			~~143~~156,~~423~~678			57,~~062~~339			(~~1,307~~113	)		~~147~~164,~~178~~098
PROPERTY AND EQUIPMENT, NET:
Leasehold improvements		—			1,~~724~~648			—			—			1,~~724~~648
Furniture, fixtures and equipment		—			4142,~~030~~600			~~444~~505			—			4143,~~474~~105
Less – accumulated depreciation and amortization		—			(35,932	)		(360	)		—			(36,292	)
Less – accumulated depreciation		—			(39,234	)		(422	)		—			(39,656	)
Total property and equipment, net		—			65,~~822~~014			8483			—			65,~~906~~097
OTHER ASSETS:
Deferred debt costs, net		2314,~~886~~050			—			—			—			2314,~~886~~050
Deferred rack costs, net		—			117,~~838~~749			—			—			117,~~838~~749
Other long-term assets		—			2,~~597~~741			119			—			2,~~608~~750
Investment in subsidiaries		~~499~~530,~~561~~899			13,~~708~~984			—			(~~501~~534,~~269~~883	)		—
Total other assets		~~523~~544,~~447~~949			1614,~~143~~474			119			(~~501~~534,~~269~~883	)		3824,~~332~~549
GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:
Goodwill		—			~~382~~355,~~953~~153			4,510			—			~~387~~359,~~463~~663
Other identified intangibles, net		—6,000			~~399~~381,~~404~~752			—			—			~~399~~387,~~404~~752
Total goodwill and other identified intangible assets		—6,000			~~782~~736,~~357~~905			4,510			—			~~786~~747,~~867~~415
TOTAL ASSETS	$	~~523~~551,~~447~~143		$	~~948~~913,~~745~~071		$	911,~~667~~941		$	(~~502~~534,~~576~~996	)	$	~~979~~941,~~283~~159
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	—		$	32,050		$	1,139		$	—		$	33,189
Term loan	$	12,629		$	—		$	—		$	—		$	12,629
Accrued expenses and other liabilities		—			55,879			1,539			—			57,418
Accounts payable		87			41,342			1,082			—			42,511
Accrued interest		31,175			463			98			—			31,736
Accrued expenses and other liabilities		4,838			55,939			(18	)		4,451			65,210
Deferred revenues		—			42,028			591			—			42,619
Accrued interest		24,246			1			—			—			24,247
Total current liabilities		31,175			130,420			3,367			—			164,962
Deferred revenues		134			40,952			580			—			41,666
Total current liabilities		41,934			138,234			1,644			4,451			186,263
NON-CURRENT LIABILITIES:
Term loan and revolving credit facility		~~510~~497,~~000~~371			—			—			—			~~510~~497,~~000~~371
Senior subordinated notes, including bond premium		550,217			—			—			—			550,217
Senior subordinated notes, net		567,681			—			—			—			567,681
Deferred income taxes		—			8793,~~749~~567			79(77	)		(14,~~307~~564	)		8688,~~521~~926
Management fee payable		—			2,000			—			—			2,000
Due to (from) affiliates		(156,761	)		150,371			6,390			—			—
Due to (from) affiliates		(233,528	)		229,015			4,513			—			—
Total liabilities		950,225			382,172			7,957			(113	)		1,340,241
Total liabilities		857,864			449,184			7,959			(1,307	)		1,313,700
STOCKHOLDER’S EQUITY (DEFICIT):
Total stockholder’s equity (deficit)		(~~334~~399,~~417~~082	)		~~499~~530,~~561~~899			13,~~708~~984			(~~501~~534,~~269~~883	)		(~~334~~399,~~417~~082	)
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)	$	~~523~~551,~~447~~143		$	~~948~~913,~~745~~071		$	911,~~667~~941		$	(~~502~~534,~~576~~996	)	$	~~979~~941,~~283~~159

1417

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME

FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2008

(in thousands)


	Parent			Guarantors		Non-Guarantors		Eliminations			Condensed Consolidated
OPERATING REVENUES:
Circulation	$	—		$	67,273	$	1,384	$	—		$	68,657
Advertising		—			47,288		1,673		—			48,961
Other		2,933			7,926		322		—			11,181

Total operating revenues		2,933			122,487		3,379		—			128,799

OPERATING EXPENSES:
Editorial		—			12,917		112		—			13,029
Production		1,794			35,913		932		—			38,639
Distribution, circulation and other cost of sales		—			22,611		560		—			23,171
Selling, general and administrative		264			21,018		1,085		—			22,367
Depreciation and amortization		—			2,614		11		—			2,625

Total operating expenses		2,058			95,073		2,700		—			99,831

OPERATING INCOME		875			27,414		679		—			28,968

OTHER INCOME (EXPENSE):
Interest expense		(22,180	)		—		—		—			(22,180	)
Amortization of deferred debt costs		(2,806	)		—		—		—			(2,806	)
Other (expense) income, net		(437	)		174		41		—			(222	)

Total other (expense) income		(25,423	)		174		41		—			(25,208	)

(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES AND EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		(24,548	)		27,588		720		—			3,760

(BENEFIT) PROVISION FOR INCOME TAXES		(9,343	)		12,269		211		—			3,137

EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		15,828			509		—		(16,337	)		—

NET INCOME	$	623		$	15,828	$	509	$	(16,337	)	$	623

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME

FOR THE TWO FISCAL QUARTERS ENDED SEPTEMBER 30, 2008

(in thousands)


	Parent			Guarantors			Non-Guarantors		Eliminations			Condensed Consolidated
OPERATING REVENUES:
Circulation	$	—		$	133,475		$	2,891	$	—		$	136,366
Advertising		—			87,602			3,604		—			91,206
Other		2,933			16,442			674		—			20,049

Total operating revenues		2,933			237,519			7,169		—			247,621

OPERATING EXPENSES:
Editorial		—			25,294			432		—			25,726
Production		1,794			68,163			1,953		—			71,910
Distribution, circulation and other cost of sales		—			42,957			1,184		—			44,141
Selling, general and administrative		264			43,785			1,938		—			45,987
Depreciation and amortization		—			5,314			23		—			5,337

Total operating expenses		2,058			185,513			5,530		—			193,101

OPERATING INCOME		875			52,006			1,639		—			54,520

OTHER INCOME (EXPENSE):
Interest expense		(45,482	)		(191	)		—		—			(45,673	)
Amortization of deferred debt costs		(5,552	)		—			—		—			(5,552	)
Other (expense) income, net		(437	)		441			80		—			84

Total other (expense) income		(51,471	)		250			80		—			(51,141	)

(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND INCOME FROM DISCONTINUED OPERATIONS		(50,596	)		52,256			1,719		—			3,379

(BENEFIT) PROVISION FOR INCOME TAXES		(17,317	)		19,668			517		—			2,868

EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		34,290			1,202			—		(35,492	)		—

INCOME FROM CONTINUING OPERATIONS		1,011			33,790			1,202		(35,492	)		511

INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			500			—		—			500

NET INCOME	$	1,011		$	34,290		$	1,202	$	(35,492	)	$	1,011

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF LOSS

FOR THE FISCAL QUARTER ENDED ~~JUNE~~SEPTEMBER 30, 2007

(in thousands)

	Parent			Guarantors			Non-Guarantors		Eliminations			CondensedConsolidated
OPERATING REVENUES:
Circulation	$	—		$	6569,~~480~~308		$	1,~~544~~434	$	—		$	6770,~~024~~742
Advertising		—			4448,~~658~~779			1,~~881~~604		—			4650,~~539~~383
Other		—2,862			7,~~968~~631			~~308~~296		—			810,~~276~~789
Total operating revenues		—2,862			~~118~~125,~~106~~718			3,~~733~~334		—			~~121~~131,~~839~~914
OPERATING EXPENSES:
Editorial		—			12,~~471~~687			~~366~~272		—			12,~~837~~959
Production		—1,840			3433,~~749~~648			~~999~~939		—			3536,~~748~~427
Distribution, circulation and other cost of sales		—			2021,~~246~~584			~~568~~616		—			2022,~~814~~200
Selling, general and administrative		—144			2124,~~929~~646			~~1,027~~969		—			2225,~~956~~759
Depreciation and amortization		—			3,~~266~~190			1821		—			3,~~284~~211
Total operating expenses		—1,984			9295,~~661~~755			2,~~978~~817		—			95100,~~639~~556
OPERATING INCOME		—878			2529,~~445~~963			~~755~~517		—			2631,~~200~~358
OTHER INCOME (EXPENSE):
Interest expense		(24,~~587~~739	)		(~~104~~79	)		—		—			(24,~~691~~818	)
Amortization of deferred debt costs		(2,686	)		—			—		—			(2,686	)
Senior subordinated notes to be issued		(17,291	)		—			—		—			(17,291	)
Other income, net		—			620			14		—			634
Amortization of deferred debt costs		(2,759	)		—			—		—			(2,759	)
Total other income (expense)		(27,273	)		516			14		—			(26,743	)
Other (expense) income, net		(447	)		611			39		—			203
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED OPERATIONS		(27,273	)		25,961			769		—			(543	)
Total other (expense) income		(45,236	)		532			39		—			(44,665	)
PROVISION (BENEFIT) FOR INCOME TAXES		(6,841	)		6,101			232		—			(508	)
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED OPERATIONS		(44,358	)		30,495			556		—			(13,307	)
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		20,309			537			—		(20,846	)		—
(BENEFIT) PROVISION FOR INCOME TAXES		(9,501	)		13,209			168		—			3,876
INCOME (LOSS) FROM CONTINUING OPERATIONS		(123	)		20,397			537		(20,846	)		(35	)
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		17,102			388			—		(17,490	)		—
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			(88	)		—		—			(88	)
(LOSS) INCOME FROM CONTINUING OPERATIONS		(17,755	)		17,674			388		(17,490	)		(17,183	)
NET INCOME (LOSS)	$	(123	)	$	20,309		$	537	$	(20,846	)	$	(123	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			(572	)		—		—			(572	)
NET (LOSS) INCOME	$	(17,755	)	$	17,102		$	388	$	(17,490	)	$	(17,755	)

1520

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF LOSS

FOR THE TWO FISCAL ~~QUARTER~~QUARTERS ENDED ~~JUNE~~SEPTEMBER 30, ~~2006~~2007

(in thousands)

	Parent			Guarantors			Non-Guarantors		Eliminations			CondensedConsolidated
OPERATING REVENUES:
Circulation	$	—		$	64134,~~941~~121		$	12,~~273~~978	$	—		$	66137,~~214~~099
Advertising		—			4093,~~257~~401			13,~~482~~485		—			4196,~~739~~886
Other		—2,862			715,~~251~~595			~~215~~604		—			719,~~466~~061
Total operating revenues		—2,862			~~112~~243,~~449~~117			27,~~970~~067		—			~~115~~253,~~419~~046
OPERATING EXPENSES:
Editorial		—			1324,~~438~~960			~~298~~638		—			1325,~~736~~598
Production		—1,840			3767,~~297~~995			~~966~~1,938		—			3871,~~263~~773
Distribution, circulation and other cost of sales		—			2241,~~627~~654			~~476~~1,184		—			2342,~~103~~838
Selling, general and administrative		—144			3046,~~611~~543			1,~~045~~996		—			3148,~~656~~683
Depreciation and amortization		—			46,~~046~~461			2039		—			46,~~066~~500
Total operating expenses		—1,984			~~108~~187,~~019~~613			25,~~805~~795		—			~~110~~195,~~824~~392
OPERATING INCOME		—878			455,~~430~~504			~~165~~1,272		—			457,~~595~~654
OTHER INCOME (EXPENSE):
Interest expense		(2449,~~301~~326	)		(40183	)		—		—			(2449,~~341~~509	)
Amortization of deferred debt costs		(1,543	)		—			—		—			(1,543	)
Senior subordinated notes to be issued		(17,291	)		—			—		—			(17,291	)
Other income, net		—			315			14		—			329
Amortization of deferred debt costs		(5,445	)		—			—		—			(5,445	)
Total other income (expense)		(25,844	)		275			14		—			(25,555	)
Other (expense) income, net		(447	)		1,231			53		—			837
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED OPERATIONS		(25,844	)		4,705			179		—			(20,960	)
Total other (expense) income		(72,509	)		1,048			53		—			(71,408	)
PROVISION (BENEFIT) FOR INCOME TAXES		3,313			1,527			55		—			4,895
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED OPERATIONS		(71,631	)		56,552			1,325		—			(13,754	)
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		1,685			124			—		(1,809	)		—
(BENEFIT) PROVISION FOR INCOME TAXES		(16,342	)		19,310			400		—			3,368
INCOME (LOSS) FROM CONTINUING OPERATIONS		(27,472	)		3,302			124		(1,809	)		(25,855	)
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		37,411			925			—		(38,336	)		—
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			(1,617	)		—		—			(1,617	)
(LOSS) INCOME FROM CONTINUING OPERATIONS		(17,878	)		38,167			925		(38,336	)		(17,122	)
NET INCOME (LOSS)	$	(27,472	)	$	1,685		$	124	$	(1,809	)	$	(27,472	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			(756	)		—		—			(756	)
NET (LOSS) INCOME	$	(17,878	)	$	37,411		$	925	$	(38,336	)	$	(17,878	)

1621

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE TWO FISCAL ~~QUARTER~~QUARTERS ENDED ~~JUNE~~SEPTEMBER 30, ~~2007~~2008

(in thousands)

	Parent			Guarantors			Non-Guarantors			Eliminations			~~CondensedConsolidated~~	CondensedConsolidated
Cash Flows from Operating Activities:
Net cash provided by (used in) operating activities	$	(37,431	)	$	15,874		$	766		$	—		$	(20,791	)
Net cash (used in) provided by operating activities	$	(44,025	)	$	56,057		$	995		$	(3,500	)		$	9,527
Cash Flows from Investing Activities:
Purchases of property and equipment		—			(~~360~~1,237	)		(~~108~~5	)		—			~~(468~~	)(1,242	)
Proceeds from sale of assets		—			~~385~~18			—			—			~~385~~	18
Investment in Mr. Olympia, LLC		(300	)		—			—			—			(300	)
Proceeds from sale of discontinued operations		—			500			—			—				500
Net cash used in investing activities		(300	)		25			(108	)		—			(383	)
Investment in Mr. Olympia, LLC		(300	)		—			—			—				(300	)
Cash Flows from Financing Activities:
Net cash used in investing activities		(300	)		(719	)		(5	)		—				(1,024	)
Due to (from) affiliates		38,673			(38,673	)		—			—			—
Cash Flows from Financing Activities:
Payment of deferred debt costs		(942	)		—			—			—			(942	)
Due to (from) affiliates		96,314			(96,314	)		—			—				—
Net cash provided by (used in) financing activities		37,731			(38,673	)		—			—			(942	)
Proceeds from revolving credit facility		34,000			—			—			—				34,000
Effect of exchange rate changes on cash		—			—			(4	)		—			(4	)
Term loan and revolving credit facility principal repayments		(84,379	)		—			—			—				(84,379	)
Net Increase (Decrease) in Cash and Cash Equivalents		—			(22,774	)		654			—			(22,120	)
Payment of deferred debt costs		(408	)		—			—							(408	)
Cash and Cash Equivalents, Beginning of Period		—			58,522			1,892			—			60,414
Dividend paid to parent		—			—			(3,500	)		3,500				—
Cash and Cash Equivalents, End of Period	$	—		$	35,748		$	2,546		$	—		$	38,294
Net cash provided by (used in) financing activities		45,527			(96,314	)		(3,500	)		3,500				(50,787	)
Effect of exchange rate changes on cash		—			—			(523	)		—				(523	)
Net Increase (Decrease) in Cash and Cash Equivalents		1,202			(40,976	)		(3,033	)		—				(42,807	)
Cash and Cash Equivalents, Beginning of Period		156			60,534			3,476			—				64,166
Cash and Cash Equivalents, End of Period	$	1,358		$	19,558		$	443		$	—			$	21,359

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE TWO FISCAL ~~QUARTER~~QUARTERS ENDED ~~JUNE~~SEPTEMBER 30, ~~2006~~2007

(in thousands)

	Parent			Guarantors			Non-Guarantors			Eliminations		CondensedConsolidated
Cash Flows from Operating Activities:
Net cash provided by (used in) operating activities	$	(26,661	)	$	17,824		$	(188	)	$	—	$	(9,025	)
Net cash (used in) provided by operating activities	$	(52,988	)	$	47,399		$	1,241		$	—	$	(4,348	)
Cash Flows from Investing Activities:
Purchases of property and equipment		—			(~~611~~686	)		(10119	)		—		(~~621~~805	)
Proceeds from sale of assets		—			52389			—			—		52389
Investment in Mr. Olympia, LLC		—(300	)		~~(300~~—	)		—			—		(300	)
Net cash used in investing activities		—(300	)		(~~859~~297	)		(10119	)		—		(~~869~~716	)
Cash Flows from Financing Activities:
Proceeds from term loan and revolving credit facility borrowings		40,000			—			—			—		40,000
Due to (from) affiliates		54,944			(54,944	)		—			—		—
Term loan and revolving credit facility principal repayments		(40,000	)		—			—			—		(40,000	)
Payment of deferred debt costs		(942	)		—			—			—		(942	)
Due to (from) affiliates		27,936			(27,936	)		—			—		—
Net cash provided by (used in) financing activities		54,002			(54,944	)		—			—		(942	)
Payment of deferred debt costs		(1,275	)		—			—			—		(1,275	)
Effect of exchange rate changes on cash		—			—			106			—		106
Net cash provided by (used in) financing activities		26,661			(27,936	)		—			—		(1,275	)
Net Increase (Decrease) in Cash and Cash Equivalents		714			(7,842	)		1,228			—		(5,900	)
Effect of exchange rate changes on cash		—			—			117			—		117
Cash and Cash Equivalents, Beginning of Period		—			58,522			1,892			—		60,414
Net Decrease in Cash and Cash Equivalents		—			(10,971	)		(81	)		—		(11,052	)
Cash and Cash Equivalents, End of Period	$	714		$	50,680		$	3,120		$	—	$	54,514
Cash and Cash Equivalents, Beginning of Period		—			17,279			2,312			—		19,591
Cash and Cash Equivalents, End of Period	$	—		$	6,308		$	2,231		$	—	$	8,539

1722

(13) Subsequent Events

The effectiveness of the amendment to the 2006 Credit Agreement is conditioned upon the consummation of the tender offers and offerings (the “Offerings”) currently being conducted by the Company and Media to holders of the Company’s existing notes as well as the satisfaction of other customary conditions. The amended 2006 Credit Agreement will permit the issuance of the notes currently being offered by the Company in the Offerings and will result in certain other changes to the 2006 Credit Agreement, including without limitation, the following: (i) the maximum senior secured leverage ratio and the minimum interest expense coverage ratio levels will be changed; (ii) the variable component of applicable interest rates will be subject to a floor equal to, in the case of Eurodollar loans, 3.5% and, in the case of alternate base rate loans, 4.5%; (iii) interest rate margins will increase to 5.5% in the case of alternate base rate loans and 6.5% in the case of Eurodollar loans; (iv) the term loans will be subject to hard call protection for three years following the amendment and restatement of the 2006 Credit Agreement (excluding mandatory prepayments from excess cash flow); (v) subject to limited exceptions, the Company will not be permitted to repay, prepay, redeem or acquire any notes; (vi) 75% of any equity proceeds raised by Media, the Company or their subsidiaries (other than from certain holders of the notes) must be applied to the mandatory prepayment of term loans; (vii) substantial limitations on reinvestment rights from the proceeds of asset dispositions or casualty events will be added which may result in more extensive prepayment requirements in respect thereof; (viii) the portion of excess cash flow that must be applied to the mandatory prepayment of term loans will increase from 50% to 75%; and (ix) the baskets for permitted indebtedness, investments, restricted payments and capital expenditures will be reduced.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following is a discussion of our financial condition and results of operations for the fiscal quarter and two fiscal quarters ended ~~June~~September 30, ~~2007~~2008. This discussion should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and the Notes thereto. The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations excludes the results of our discontinued operations for the fiscal quarter and two fiscal quarters ended ~~June~~September 30, ~~2007~~2008 and ~~2006~~2007, respectively. See Note 98, “Discontinued Operations,” in the Notes to Unaudited Condensed Consolidated Financial Statements included in Item 1 of Part I herein for a discussion regarding discontinued operations.

Executive Summary

WeAmerican ~~are~~Media ~~a leading publisher in the field of celebrity journalism and health and fitness magazines. Our publications include Star~~Operations, ~~Shape, Men~~Inc.’s ~~Fitness,~~(the ~~Fit~~“Company”) ~~Pregnancy,~~results ~~Natural~~for ~~Health,~~fiscal ~~Muscle &~~year ~~Fitness,~~2009 ~~Muscle &~~are ~~Fitness~~being ~~Hers,~~adversely ~~Flex,~~affected ~~National~~by ~~Enquirer,~~the ~~Globe,~~overall ~~Country~~market ~~Weekly,~~weakness ~~Mira!,~~due ~~Sun,~~to ~~National~~the ~~Examiner,~~current ~~and~~economic ~~other publications~~slowdown. ~~Our~~These ~~magazines~~difficult ~~comprise~~conditions ~~approximately~~have ~~22%~~impacted ~~of total U.S. and Canadian circulation for audited weekly publications. For~~ the ~~fiscal quarter~~businesses ~~ended June 30, 2007, total average newsstand~~ and ~~subscription~~results ~~circulation~~of ~~per~~operations ~~issue for all~~ of ~~our~~the ~~publications~~Company ~~that are currently published~~ and ~~have~~we ado ~~frequency~~not ofexpect ~~six~~these orconditions ~~more~~to ~~times~~improve ~~per~~in ~~year~~the near ~~is approximately 7~~term.~~8 million~~ ~~copies.~~

~~For~~We are a leading publisher in the ~~fiscal~~field ~~quarters~~of ~~ended~~celebrity ~~June 30,~~journalism ~~2007~~and health and ~~2006~~fitness magazines. Our publications include Star, ~~approximately~~Shape, Men’s ~~55%~~Fitness, ~~and~~Fit ~~57%~~Pregnancy, ~~respectively~~Natural Health, ofMuscle & ~~our~~Fitness, ~~total~~Muscle & ~~operating~~Fitness ~~revenues~~Hers, ~~were~~Flex, ~~from~~National ~~circulation. Single~~Enquirer, ~~copy~~Globe, ~~sales~~Country ~~accounted~~Weekly, ~~for~~Mira!, Sun, National Examiner and other publications. Our magazines comprise approximately 8322% of ~~such~~total U.S. and Canadian newsstand circulation ~~revenues~~for inaudited ~~each~~(by the Audited Bureau of Circulations or “ABC”) weekly publications. For the two fiscal quarters ended ~~June~~September 30, ~~2007~~2008, total average newsstand and subscription ~~2006,~~circulation ~~respectively,~~per issue for all of our publications that are currently published and ~~the~~have ~~remainder~~a frequency of six or more times per year was ~~from~~approximately ~~subscription~~7.3 million ~~sales~~copies.

~~Our~~For ~~advertising~~the ~~revenues~~two ~~are~~fiscal ~~generated~~quarters byended ~~national~~September 30, ~~advertisers~~2008 and 2007, ~~including~~approximately ~~sports~~55% ~~nutrition~~and ~~products~~54%, ~~automotive~~respectively, ~~entertainment,~~of ~~packaged~~our ~~goods,~~total ~~pharmaceutical,~~operating ~~sports apparel,~~revenues ~~beauty~~were ~~and~~from ~~cosmetics,~~circulation. ~~fashion~~Single copy sales accounted for approximately 82% and 83% ~~direct~~of ~~response.~~such ~~For~~circulation revenues in the two fiscal quarters ended ~~June~~September 30, ~~2007~~2008 and ~~2006~~2007, ~~approximately 38% and 36%,~~ respectively, ofand ~~our~~the ~~total~~remainder ~~operating~~was ~~revenues were~~ from ~~advertising~~subscription sales.

Our ~~primary~~advertising ~~operating~~revenue ~~costs~~is ~~and~~primarily ~~expenses~~generated ~~are~~by ~~comprised~~national ~~of editorial~~advertisers, ~~production~~including sports nutrition products, ~~distribution~~entertainment, ~~circulation~~packaged ~~and~~goods, ~~other~~pharmaceutical, ~~cost~~sports ofapparel, ~~sales~~beauty and ~~selling~~cosmetics, ~~general~~fashion and ~~administrative~~ ~~expenses~~direct response. ~~The~~For ~~largest~~the ~~components~~two fiscal ofquarters ~~our~~ended ~~costs are related to production~~September 30, ~~which~~2008 ~~includes printing~~ and ~~paper expenses~~2007, ~~and~~approximately ~~circulation.~~37% ~~Editorial costs include salaries~~ and ~~costs~~38%, ~~associated~~respectively, ~~with~~of ~~manuscripts~~our ~~and~~total ~~photographs.~~operating ~~Circulation costs~~revenues ~~primarily~~were ~~include~~from ~~the costs associated with subscription fulfillment, subscription postage and newsstand transportation~~advertising.

~~Following~~Our ~~the~~primary ~~announcement on~~operating ~~February 8,~~costs ~~2006 by the Company that its previously issued financial statements included or otherwise summarized in its Annual Report on Form 10-K for the fiscal year ended March 31, 2005~~ and ~~its~~expenses ~~Quarterly~~are ~~Reports~~comprised ~~on Form 10-Q for each~~ of ~~the quarters ended June 30~~editorial, ~~2005 and September 30~~production, ~~2005 should no longer be relied upon~~distribution, wecirculation ~~have obtained amendments~~ and ~~waivers~~other ofcost ~~certain provisions~~ of ~~our~~sales ~~credit agreement~~ and ~~have~~selling, ~~successfully~~general ~~completed~~and ~~consent~~administrative ~~solicitations pursuant~~expenses. toThe ~~which~~largest ~~holders~~components of ~~a majority in principal amount of each series of~~ our ~~senior~~costs ~~subordinated~~are ~~notes~~related ~~agreed~~ to ~~waive defaults under our indentures as a result of our failure to comply with our reporting obligations under the indentures. In~~ ~~addition~~production, ~~our~~which ~~credit~~includes ~~ratings~~printing ~~have been downgraded~~ and wepaper ~~have implemented cost savings initiatives and revenue enhancement opportunities (“Management Action Plan”) during the quarter ended March 31~~expenses, ~~2007 that are expected to result in $19.0 million to $20.0 million of cost savings~~ and ~~$17~~circulation.0 ~~million~~Circulation tocosts ~~$18.0~~primarily ~~million of revenue enhancements during fiscal year 2008. Cost savings~~ include the ~~rationalization~~costs ofassociated ~~unprofitable~~with ~~subscriptions~~subscription fulfillment, ~~production~~subscription ~~savings~~postage and ~~headcount~~newsstand ~~reductions~~transportation. ~~Revenue~~ ~~enhancements~~Editorial costs include ~~cover~~salaries ~~price increases on selected titles other than Star, advertising rate increases in our Tabloid, Women’s Health~~ and ~~Fitness and Celebrity Publications other than Star and certain online initiatives~~ ~~that~~costs ~~require~~associated ~~minimal~~with ~~investment. As of June 30~~freelancers, ~~2007,~~manuscripts ~~we believe that a majority of the above-mentioned cost savings initiatives~~ and ~~approximately $12~~photographs.0 ~~million of the revenue enhancement opportunities are on track to be achieved during fiscal year 2008. We may not ultimately be able to realize some or all of these initiatives.~~

OnWe ~~April 4,~~implemented ~~2006,~~initiatives ~~our~~relating ~~board~~to ofcost ~~directors~~savings ~~committed~~and torevenue aenhancements ~~plan~~opportunities (the “Management Action Plan”) toduring ~~restructure~~the ~~certain~~fiscal ofquarter ~~our~~ended ~~operations.~~June 30, ~~The~~2008 ~~Plan~~that ~~was~~we ~~adopted~~currently toexpect ~~improve~~will ~~our~~result ~~profitability~~in ~~and~~approximately ~~future~~$25.9 ~~net~~million ~~cash~~of ~~flows,~~cost savings and ~~includes:~~approximately ~~discontinuing~~$7.7 ~~the~~million ~~publication~~ of ~~Celebrity~~revenue ~~Living~~enhancements ~~Weekly,~~during ~~MPH~~fiscal ~~and Shape En~~year ~~Espanol,~~2009 ~~the~~as ~~relocation~~compared ofto ~~the~~our ~~operations~~fiscal ~~associated~~year ~~with~~2009 ~~National~~budget. ~~Enquirer~~Costs ~~from~~savings ~~New~~primarily ~~York~~include ~~City~~cost ~~back~~reductions related to ~~Boca~~employee-related ~~Raton,~~expenses ~~Florida, centralizing certain operations,~~ and ~~reducing certain other operating~~selling, general and administrative expenses., ~~The Company’s~~as ~~relocation~~well ~~plan~~as ~~involved~~production ~~the~~and ~~termination~~subscription ~~of approximately 50 employees~~expenses. ~~This~~Revenue enhancements ~~activity~~include ~~resulted~~certain incover aprice ~~charge~~increases ofand ~~$3.9 million for~~ the ~~fiscal~~publishing ~~quarter~~of ~~ended~~an ~~June 30,~~additional ~~2006,~~issue ~~which~~of ~~included~~seven ~~$2.3~~of ~~million~~our ~~for termination benefits~~publications, ~~$0.1 million~~as ~~for~~well ~~costs~~as ~~associated with~~ the ~~relocation~~publication of ~~employees,~~four ~~$0.6~~special ~~million~~interest ~~for~~publications ~~facility~~during ~~closures and $0.9 million for deferred rack cost write-offs. During the fourth quarter of~~ fiscal year ~~2007,~~2009. weWe ~~discontinued~~may ~~the~~not ~~publication~~ultimately ofbe ~~Looking~~able ~~Good~~to ~~Now.~~realize ~~The~~some ~~total~~or ~~loss~~any ~~from discontinued operations was $0.1 million and $1.6 million, net~~ of ~~taxes, for~~ the ~~fiscal~~benefits ~~quarters ended June 30, 2007 and 2006, respectively. Operating results~~ of these ~~publications have been classified as discontinued operations for all periods presented~~initiatives. ~~See Note 9, “Discontinued Operations,” for a discussion regarding discontinued operations.~~

18During the fiscal quarter ended September 30, 2008, we believed that the fair value of goodwill and other intangible assets for certain of our reporting units may have declined below its carrying value based on management’s expectations of long-term cash flows resulting from declining profitability as a result of the overall market weakness due to the current economic slowdown. We concluded that we were required to perform an interim impairment test in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). Based on the results of the interim impairment test, we concluded that our goodwill and other intangible assets were not impaired as of September 30, 2008; however, there can be no assurances that they will not be impaired in future periods. If adverse events were to occur or circumstances were to change indicating that the carrying amount of such assets may not be fully recoverable, the assets would be reviewed for impairment and the assets may become impaired.

The bank credit agreement entered into by us on January 30, 2006 (as amended, the “2006 Credit Agreement”) includes a $60.0 million revolving credit facility (the “Revolving Facility”) and a $450.0 million term loan commitment (the “Term Facility”). As of September 30, 2008, there was $20.0 million outstanding on the Revolving Facility and $439.6 million outstanding on the Term

Facility. We subsequently borrowed an additional $40.0 million on the Revolving Facility on October 1, 2008. The Revolving Facility matures in January 2012 and the Term Facility matures in January 2013. The Revolving Facility and the Term Facility both will mature on February 1, 2009 if we have more than $25.0 million of the 10.25% Series B Senior Subordinated Notes due May 1, 2009 (the “2009 Notes”) outstanding on February 1, 2009. In addition, the Revolving Facility and the Term Facility both will mature on October 15, 2010 if we have more than $10.0 million of the 8.875% Senior Subordinated Notes due January 15, 2011 (the “2011 Notes” and, together with the 2009 Notes, the “Notes”) outstanding on October 15, 2010. We have classified the entire balance of the 2006 Credit Agreement as a current liability on our September 30, 2008 balance sheet as the 2006 Credit Agreement may mature within twelve months of September 30, 2008. We have also classified the entire balance of the 2009 Notes of $413.7 million as a current liability on our September 30, 2008 balance sheet as the 2009 Notes mature within twelve months of September 30, 2008.

In order to refinance the Notes, on August 26, 2008, we commenced tender offers to purchase and consent solicitations with respect to all of the Notes. On January 9, 2009, we amended our tender offers and consent solicitations. To finance the purchase of the Notes in the tender offers and the payment for consents in the consent solicitations, simultaneous with the tender offers and consent solicitations, we are offering (a) $21,245,380 aggregate principal amount of our 9% senior PIK notes due 2013 (the “Senior PIK Notes”) and (b) $300,000,000 aggregate principal amount of our 14% senior subordinated notes due 2013 (the “Senior Subordinated Notes” and, together with the Senior PIK Notes, the “New Notes”). We are a wholly owned subsidiary of American Media, Inc. (“Media”). Together with the New Notes, Media is also offering 5,700,000 shares of Media’s common stock (the “Shares” and, together with the New Notes, the “Offered Securities”), representing 95% of Media’s outstanding shares of common stock. In order to tender Notes in the tender offers, a tendering holder must agree to purchase Offered Securities for a purchase price equal to the consideration such holder receives in the tender offers and consent solicitations. Among other matters, tendering holders must also deliver their consents to specified amendments to the indentures, which consents remove substantially all of the restrictive covenants and related defaults in the indentures governing the Notes. In connection with the tender offers, certain provisions of the 2006 Credit Agreement will be waived including the change of control event of default that would result from successful tender offers. For a more complete description of the tender offers and consent solicitations, see Note 7, “Senior Subordinated Indebtedness.” We cannot make any assurances that such tender offers and consent solicitations will be successful.

Given the continued weakness of the credit markets, there can be no assurance that we can refinance our existing Notes or obtain the additional capital necessary to satisfy our short-term cash needs on satisfactory terms. In the event we are unable to extend or refinance the Notes and amend or waive the 2006 Credit Agreement with respect to the change of control event of default that would result from successful tender offers, the 2006 Credit Agreement will likely mature early and we will not have sufficient funds to repay such indebtedness. In such event, we may have to liquidate assets on unfavorable terms, or be unable to continue as a going concern, and incur additional costs associated with bankruptcy.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, our consolidated financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should we be unable to continue as a going concern.

We expect to incur approximately $35.0 million of fees relating to the refinancing of the Notes and the amendment of the 2006 Credit Agreement.

We failed to make the required semi-annual interest payment with respect to the 2009 Notes when due on November 1, 2008, and on December 1, 2008, such failure resulted in an event of default pursuant to the terms of the indenture governing the 2009 Notes. We also expect to fail to make the required semi-annual interest payment with respect to the 2011 Notes when due on January 15, 2009. In addition, we failed to file this quarterly report on Form 10-Q for the period ended September 30, 2008 when due on November 14, 2008. We have also failed to comply with the requirements of the indentures governing the Notes relating to our failure to meet a specified leverage ratio as of September 30, 2008. As a result, we entered into forbearance agreements with existing holders of approximately 81% of the outstanding aggregate principal amount of 2009 Notes and approximately 69% of the outstanding aggregate principal amount of 2011 Notes, pursuant to which such holders have agreed to forbear until the earliest of (i) 5:00 p.m., New York City time, on February 4, 2009, (ii) the date upon which any of the Notes become or are declared to be due and payable, (iii) the commencement (voluntary or involuntary) of an insolvency proceeding with respect to the Company or any of its subsidiaries, (iv) the date upon which the forbearance agreement by the lenders holding more than a majority of the borrowings under the Company’s credit facility expires, terminates or is breached and (v) if the Company has not launched the tender offers and related offering of the Offered Securities on the terms that may be agreed to by the parties hereto, in the sole discretion of such parties, prior to such date, January 10, 2009, from exercising any remedies under the indentures governing the Notes as a result of the Company’s (a) failure to comply with the reporting requirements of the indentures governing the Notes, (b) deferred interest payments with respect to the Notes or (c) failure to comply with the requirements of the indentures governing the Notes relating to the Company’s failure to meet a specified leverage ratio as of September 30, 2008. We intend to satisfy our obligations to meet the specified leverage ratio as of September 30, 2008 by issuing equity in connection with the offering of Offered Securities, which will result in our satisfying such ratio on a pro forma basis. In connection with the forbearance agreements related to the Notes, we also entered

into a forbearance agreement with lenders representing a majority of outstanding amounts and commitments under the 2006 Credit Agreement and the administrative agent under the 2006 Credit Agreement, pursuant to which such lenders and the administrative agent agreed, subject to certain termination events, to forbear until the earliest of (i) February 4, 2009, (ii) the date on which any of the Existing Notes become or are declared to be due and payable and (iii) the commencement of an insolvency proceeding with respect to the Company, Media or any of their subsidiaries from exercising any rights and remedies under the 2006 Credit Agreement as a result of our failure (a) to pay the interest payment due on the 2009 Notes on November 1, 2008, (b) to comply with the reporting requirements of the 2006 Credit Agreement, (c) to comply with the corresponding requirements in the indentures governing the Notes and (d) to comply with the requirements of the indentures governing the Notes in connection with the failure to meet a specified leverage ratio.

RESULTS OF OPERATIONS

The following table presents our results of operations by segment for the periods indicated (in thousands).

	For the Fiscal Quarters Ended
	For the Fiscal Quarter EndedSeptember 30,						For the Two Fiscal Quarters EndedSeptember 30,
	June 30, 2006			June 30, 2007
	2007			2008			2007			2008
Operating Revenue
Celebrity Publications	$	2833,~~794~~375		$	3130,~~708~~440		$	65,083		$	62,444
Tabloid Publications		3436,~~612~~908			34,~~683~~775			71,591			68,967
Women’s Health and Fitness Publications		2025,~~732~~489			2224,~~356~~524			47,845			43,870
Distribution Services		78,~~319~~145			79,~~739~~239			15,884			17,369
Corporate/Other		2630,~~173~~357			2732,~~474~~039			57,124			59,292
Intersegment Eliminations		(2,~~211~~360	)		(2,~~121~~218	)		(4,481	)		(4,321	)
Total Operating Revenue	$	~~115~~131,~~419~~914		$	~~121~~128,~~839~~799		$	253,046		$	247,621
Operating Income (Loss)
Celebrity Publications	$	~~812~~9,970		$	86,~~389~~838		$	18,359		$	15,041
Tabloid Publications		1218,~~857~~325			1516,~~867~~010			34,192			31,575
Women’s Health and Fitness Publications		710,~~974~~067			96,~~016~~558			19,083			13,155
Distribution Services		12,~~490~~036			12,~~770~~668			3,806			4,662
Corporate/Other		(189,~~538~~040	)		(83,~~842~~106	)		(17,786	)		(9,913	)
Total Operating Income	$	431,~~595~~358		$	2628,~~200~~968		$	57,654		$	54,520

Comparison of Fiscal Quarter Ended ~~June~~September 30, ~~2007~~2008 vs. Fiscal Quarter Ended ~~June~~September 30, ~~2006~~ 2007

Operating Revenue

Total operating revenue was $~~121~~128.8 million and $~~115~~131.49 million for the fiscal quarters ended ~~June~~September 30, ~~2007~~2008 and ~~2006~~2007, respectively, representing ana ~~increase~~decrease in revenue of $63.41 million, or 52.64%. This ~~increase~~decrease was primarily ~~attributable~~due to aoverall ~~$2.9~~market ~~million~~weakness ~~increase~~ in ~~our~~advertising spending ~~Celebrity~~due ~~Publications~~to the current economic slowdown, awhich ~~$1.6~~triggered ~~million~~decreases ~~increase~~in advertising revenue in our Celebrity Publications, Women’s Health and Fitness Publications, and Tabloid Publications segments as well as a $1decrease in circulation revenues in our Tabloid Publications and Corporate/Other segments.3 ~~million~~These ~~increase~~decreases were partially offset by increases in advertising revenues in our Corporate/Other ~~and~~segment primarily as a ~~$0.5~~result ~~million~~of ~~increase~~the inimpact ~~net~~to operating ~~revenues~~revenue ~~relating~~of having one additional issue of Muscle & Fitness in the fiscal quarter ended September 30, 2008 when compared to the prior year, and an increase in service revenues in our ~~Distribution~~Distributions Services segment.

Single copy revenue consists of copies distributed to newsstands primarily by four wholesalers, which we estimate represent 85% of the newsstand distribution market, as well as several smaller wholesalers who represent the remaining 15%. Operating revenue generated by these wholesalers is included in the Celebrity Publications, Tabloid Publications, Women’s Health and Fitness Publications and Corporate/Other segments. In the fiscal quarter ended ~~June~~September 30, ~~2007~~2008, ~~one~~three ~~wholesaler~~wholesalers each accounted for greater than 10% of our total operating revenue and, in the aggregate, accounted for ~~12.3~~approximately 36% of our total operating revenue. In the fiscal quarter ended ~~June~~September 30, ~~2006~~ 2007, ~~two~~one ~~wholesalers~~wholesaler ~~each~~ accounted for greater than 10% of our total operating revenue and, in the aggregate, accounted for 38approximately 11% of our total operating revenue. Our operating results could be materially affected if one or more of these four wholesalers stopped distributing our publications. We have service agreements with ~~our~~these wholesalers, which provide incentives to maintain certain levels of service. ~~Three~~Two of these wholesaler service agreements require ~~at least 120 days’ prior notice of~~ ~~termination, with terms expiring on December 31, 2007. The fourth wholesaler service agreement requires at least 60 days’ prior notice of termination, with a term expiring on December 31, 2007.~~

at least 90 and 120 days’ prior notice of termination, respectively, with terms expiring on December 31, 2009. One of these wholesaler service agreements requires at least 90 days’ prior notice of termination, with a term expiring on June 30, 2009. One of these wholesaler service agreements requires at least 90 days’ prior notice of termination, with a term expiring on December 31, 2008. Notice of termination has been given and we are in the process of negotiating a further renewal of this service agreement. The levels of service under this wholesaler service agreement are expected to continue uninterrupted until a new agreement is in place.

Operating Expense

Total operating expense was $9599.68 million and $~~110~~100.86 million for the fiscal quarters ended ~~June~~September 30, ~~2007~~2008 and ~~2006~~2007, respectively, representing a decrease of $150.28 million, or 130.7%. This decrease in operating expense is primarily due to alower ~~decrease in~~ selling, general and administrative ~~expense~~ expenses due to decreases in advertising expenses as a result of ~~$8.7~~the ~~million~~aforementioned market weakness in advertising spending as well as lower personnel-related costs primarily as a result of our Management Action Plan, lower professional fees, and a $5reduction in depreciation and amortization expense primarily due to certain assets becoming fully depreciated.7 ~~million~~These ~~combined~~decreases ~~decrease~~in operating expense were partially offset by increases in editorial, production and distribution, circulation and other ~~cost~~costs of sales expenses due to higher paper costs and aone ~~$0.8~~additional ~~million~~issue ~~reduction~~of inShape ~~depreciation~~and ~~expense,~~Muscle & ~~primarily~~Fitness ~~due~~during tothe ~~certain~~quarter ~~assets~~ended ~~becoming~~September 30, ~~fully~~2008 when compared to the ~~depreciated~~prior year.

19Interest Expense

Interest expense was $22.2 million and $24.8 million for the fiscal quarters ended September 30, 2008 and 2007, respectively, representing a decrease of $2.6 million, or 10.6%. This decrease in interest expense is primarily attributable to a lower effective weighted-average interest rate on Term Facility and Revolving Facility under our 2006 Credit Agreement during the fiscal quarter ended September 30, 2008 of 6.0% as compared to 8.7% for the prior year comparable period. The decrease in the effective weighted-average interest rate is tied to the decrease in the London interbank offering rate (“LIBOR”).

Other Income (Expense), net

Other income (expense) was ($0.2) million and $0.2 million for the fiscal quarters ended September 30, 2008 and 2007, respectively, representing a decrease of $0.4 million. This decrease in other income (expense), net was due to a decrease in interest income as a result of lower interest rates.

Income Taxes

We recorded a $3.1 million income tax expense for the fiscal quarter ended September 30, 2008, which was primarily due to domestic tax expense of $2.9 million and foreign tax expense of $0.2 million. We recorded a $3.9 million income tax expense for the fiscal quarter ended September 30, 2007, which was primarily due to domestic tax expense of $3.7 million and foreign tax expense of $0.2 million.

Celebrity Publications Segment

Operating Revenue

Total operating revenue in the Celebrity Publications segment was $30.4 million for the fiscal quarter ended September 30, 2008, representing a decrease of $2.9 million, or 8.8%, from the prior year comparable period. This decrease in revenue was primarily attributable to decreases in Star and Country Weekly advertising revenue due to the aforementioned market weakness in advertising spending and the additional impact to operating revenue of having one less issue of Country Weekly during the fiscal quarter ended September 30, 2008 when compared to the prior year.

Operating Income

Operating income in the Celebrity Publications segment decreased in the fiscal quarter ended September 30, 2008 from the prior year comparable period by $3.1 million, or 31.4%, to $6.8 million. This decrease in operating income is primarily attributable to the above-mentioned operating revenue decrease.

~~The~~Tabloid ~~implementation~~Publications ofSegment our Management Action Plan in the fourth quarter of fiscal year 2007 and the continuation of cost savings associated with the results of our restructuring plan implemented in the first quarter of fiscal 2006 resulted in a $6.1 million combined decrease in editorial, production and distribution, circulation and other cost of sales, partially offset by a $0.4 million increase in direct costs of services related to our Distribution Services segment, and a $0.9 million decrease in sales promotion-related costs included in selling, general and administrative expense. The decrease in selling, general and administrative expense was also attributable to a $2.8 million decrease in restructuring expense and a $4.7 million decrease in restatement-related costs.

Operating Revenue

Total operating revenue in the Tabloid Publications segment was $34.8 million for the fiscal quarter ended September 30, 2008, representing a decrease of $2.1 million, or 5.8%, from the prior year comparable period. This decrease in revenue was primarily attributable to the following:

•

a $1.0 million and $0.8 million decrease in Globe and National Enquirer newsstand revenues, respectively, due to decreases in single copies sold which were partially offset by cover price increases for each publication from $3.29 to $3.49 at the end of fiscal year 2008; and

•

a $0.6 million decrease in National Enquirer advertising revenue due to a planned rate base reduction in January 2008 and the aforementioned market weakness in advertising spending.

Operating Income

Operating income in the Tabloid Publications segment decreased in the fiscal quarter ended September 30, 2008 from the prior year comparable period by $2.3 million, or 12.6%, to $16.0 million. This decrease in operating income is primarily attributable to the above-mentioned operating revenue decrease.

Women’s Health and Fitness Publications Segment

Operating Revenue

Total operating revenue in the Women’s Health and Fitness Publications segment was $24.5 million for the fiscal quarter ended September 30, 2008, representing a decrease of $1.0 million, or 3.8%, from the prior year comparable period. This decrease in revenue was primarily attributable to a decrease in Shape advertising revenue due to reduced advertising pages and lower advertising revenue per page as a result of the aforementioned market weakness in advertising spending as well as a decrease in Shape newsstand revenue due to a reduced number of single copies sold. These decreases were partially offset by the impact to operating revenue of having one additional issue of Shape during the fiscal quarter ended September 30, 2008 when compared to the prior year.

Operating Income

Operating income in the Women’s Health and Fitness Publications segment decreased in the fiscal quarter ended September 30, 2008, from the prior year comparable period by $3.5 million, or 34.9%, to $6.6 million. This decrease in operating income was primarily attributable to the above-mentioned revenue decrease and a $3.1 million increase in editorial, production and distribution, circulation and other costs of sales expenses mainly driven by the additional issue of Shape during the fiscal quarter ended September 30, 2008 when compared to the prior year. These decreases in operating income were partially offset by a $0.6 million decrease in Shape advertising expense.

Distribution Services Segment

Operating Revenue

Total operating revenue in the Distribution Services segment, which is comprised of Distribution Services, Inc. (“DSI”), was $7.0 million, net of eliminations, for the fiscal quarter ended September 30, 2008, representing an increase of $1.2 million, or 21.4%, from the prior year comparable period. This increase in revenue was primarily attributable to an increase in services related to the installation of magazine fixtures and in-store data collection for DSI’s outside clients.

Operating Income

Operating income in the Distribution Services segment increased in the fiscal quarter ended September 30, 2008, from the prior year comparable period by $0.6 million, or 31.0%, to $2.7 million. This increase in operating income is primarily attributable to the above-mentioned revenue increase, partially offset by an increase to the direct costs of providing these services.

Corporate/Other Segment

Operating Revenue

Total operating revenue in the Corporate/Other segment was $32.0 million for the fiscal quarter ended September 30, 2008, representing an increase of $1.7 million, or 5.5%, from the prior year comparable period. This increase in revenue is primarily attributable to a combined $3.2 million increase in Flex and Muscle & Fitness advertising revenue due to an increase in advertising pages per issue and higher advertising revenue per page as well as the additional impact to operating revenue of having one additional issue of Muscle & Fitness during the fiscal quarter ended September 30, 2008 when compared to the prior year. These publications have not been as impacted by the current economic downturn due to the sport nutritional and supplement segment not being as sensitive to economic cycles. These increases were partially offset by reduced newsstand revenue related to our MiniMag publications due to lower newsstand sales and decreases in Men’s Fitness and Natural Health advertising revenues due to the aforementioned market weakness in general advertising spending.

Operating Loss

Operating loss decreased in the fiscal quarter ended September 30, 2008, from the prior year comparable period by $5.9 million, or 65.6%, to $3.1 million. This decrease in operating loss is primarily due to the above-mentioned revenue increase, a $3.8 million reduction in selling, general and administrative expenses primarily due to lower professional fees, legal, advertising and personnel-related costs primarily as a result of our Management Action Plan, and lower depreciation and amortization expense primarily due to certain assets becoming fully depreciated.

Comparison of Two Fiscal Quarters Ended September 30, 2008 vs. Two Fiscal Quarters Ended September 30, 2007

Operating Revenue

Total operating revenue was $247.6 million and $253.0 million for the two fiscal quarters ended September 30, 2008 and 2007, respectively, representing a decrease in revenue of $5.4 million, or 2.1%. This decrease was primarily due to overall market weakness in advertising spending due to the current economic slowdown, which triggered decreases in advertising revenue in our Celebrity Publications, Tabloid Publications and Women’s Health and Fitness Publications segments, partially offset by an increase in advertising revenue in our Corporate/Other segment primarily as a result of the impact to operating revenue of having one additional issue of Muscle & Fitness in the two fiscal quarters ended September 30, 2008 when compared to the prior year.

Single copy revenue consists of copies distributed to newsstands primarily by four wholesalers, which we estimate represent 85% of the newsstand distribution market, as well as several smaller wholesalers who represent the remaining 15%. Operating revenue generated by these wholesalers is included in the Celebrity Publications, Tabloid Publications, Women’s Health and Fitness Publications and Corporate/Other segments. In the two fiscal quarters ended September 30, 2008, three wholesalers each accounted for greater than 10% of our total operating revenue and in the aggregate accounted for approximately 37% of our total operating revenue. In the two fiscal quarters ended September 30, 2007, one wholesaler accounted for greater than 10% of our total operating revenue and in the aggregate accounted for approximately 12% of our total operating revenue. Our operating results could be materially affected if one or more of these four wholesalers stopped distributing our publications. We have service agreements with these wholesalers, which provide incentives to maintain certain levels of service. Two of these wholesaler service agreements require at least 90 and 120 days’ prior notice of termination, respectively, with terms expiring on December 31, 2009. One of these wholesaler service agreements requires at least 90 days’ prior notice of termination, with a term expiring on June 30, 2009. One of these wholesaler service agreements requires at least 90 days’ prior notice of termination, with a term expiring on December 31, 2008. Notice of termination has been given and we are in the process of negotiating a further renewal of this service agreement. The levels of service under this wholesaler service agreement are expected to continue uninterrupted until a new agreement is in place.

Operating Expense

Total operating expense was $193.1 million and $195.4 million for the two fiscal quarters ended September 30, 2008 and 2007, respectively, representing a decrease of $2.3 million, or 1.2%. This decrease in operating expense is primarily due to a decrease in selling, general and administrative expenses due to decreases in advertising expenses and personnel-related costs primarily as a result of our Management Action Plan, lower professional fees, and a reduction in depreciation and amortization expense, primarily due to certain assets becoming fully depreciated. These decreases in operating expense were partially offset by increases in distribution, circulation and other costs of sales mainly due to the additional issues of Shape and Muscle & Fitness in the two fiscal quarters ended September 30, 2008 when compared to the prior year.

Interest Expense

Interest expense was $2445.7 million and $2449.35 million for the two fiscal quarters ended ~~June~~September 30, ~~2007~~ 2008 and ~~2006~~2007, respectively, representing ana ~~increase~~decrease of $03.48 million, or 17.47%. This ~~increase~~decrease in interest expense is primarily attributable to a ~~higher~~lower effective weighted-average interest rate on our ~~term~~Term ~~loan~~Facility and ~~revolving~~Revolving ~~credit~~Facility ~~facility~~under our 2006 Credit Agreement during the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008 of 8.6.4% as compared to 78.76% for the prior year’s comparable period. ~~and~~The adecrease ~~higher~~in ~~average outstanding balance during~~ the ~~fiscal~~effective ~~quarter~~weighted-average ~~ended~~interest ~~June 30,~~rate ~~2007~~is ~~when~~tied ~~compared~~ to the ~~prior year’s comparable period, partially offset by a $0.5 million~~ decrease in ~~swap interest expense as~~ the ~~final settlement of the swap agreement occurred on January 24, 2007~~LIBOR.

Other Income, net

Other income, net was $0.1 million and $0.8 million for the two fiscal quarters ended September 30, 2008 and 2007, respectively, representing a decrease of $0.7 million, or 90.0%. This decrease in other income, net was due to a decrease in interest income as a result of lower interest rates.

Discontinued Operations

InWe discontinued various publications during fiscal years 2008 and 2007 in order to improve our profitability and future net cash flows,. inThe total ~~April~~income ~~2006,~~(loss) we from discontinued ~~the~~operations ~~Celebrity~~was ~~Living~~$0.5 ~~Weekly,~~million ~~MPH~~ and ~~Shape~~$(0.8) Enmillion, ~~Espanol~~net ~~publications~~of intaxes, ~~accordance~~for ~~with~~ the ~~provisions~~two offiscal ~~Statement~~quarters ofended ~~Financial~~September 30, ~~Accounting~~2008 ~~Standards~~and ~~(“SFAS”)~~2007, Norespectively. ~~144,~~ ~~“Accounting~~The ~~for~~income ~~the~~from ~~Impairment~~discontinued ~~or Disposal~~operations offor ~~Long-Lived~~the ~~Assets”~~two ~~(“SFAS~~fiscal ~~No.~~quarters ended September ~~144”).~~30, ~~During~~2008 ~~the~~related ~~fourth~~to ~~quarter~~the ofgain ~~fiscal~~on ~~year~~the ~~2007,~~sale weof ~~discontinued~~one ~~the publication~~ of ~~Looking~~the ~~Good~~discontinued ~~Now~~operations. Operating results of these publications have been classified as discontinued operations for all periods presented. These publications were previously included in the Corporate/Other segment. See Note 98, “Discontinued Operations,” in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I herein for further discussion.

Income Taxes

We recorded a $02.59 million income tax ~~benefit~~expense for the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007.~~2008, ~~This~~which ~~benefit~~was is primarily ~~the~~due ~~result~~to ofdomestic atax ~~statutory~~expense ~~change~~of in$2.4 ~~the~~million ~~effective~~and ~~state~~foreign tax ~~rate, partially offset by an~~ expense ~~for~~of an$0.5 ~~increase in the valuation allowance~~million. ~~The~~We ~~increase~~recorded ina ~~valuation~~$3.4 ~~allowance~~million isincome ~~caused~~tax byexpense for the ~~amortization~~two offiscal ~~indefinite-lived~~quarters ~~intangibles.~~ended September 30, ~~This amortization creates additional deferred tax liabilities~~2007, which ~~cannot~~was beprimarily ~~considered~~due ~~a future source of taxable income~~ to ~~support~~domestic ~~the realization of deferred~~ tax ~~assets~~expense ~~within~~of ~~the~~$3.0 ~~net~~million ~~operating~~and ~~loss~~foreign ~~carryforward~~tax ~~period,~~expense ~~thus~~of ~~requiring~~$0.4 ~~an increase to the valuation allowance~~million.

Celebrity Publications Segment

Operating Revenue

Total operating revenue in the Celebrity Publications segment was $3162.74 million for the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008, representing ana ~~increase~~decrease of $2.96 million, or 104.1%, from the prior year’s comparable period. This ~~increase~~decrease in revenue was primarily attributable to andecreases ~~increase~~in Star and Country Weekly advertising revenue due to the aforementioned market weakness in ~~operating~~advertising spending and the additional impact to operating revenue ~~for~~of ~~Star~~having one less issue of ~~$2.8~~Country ~~million~~Weekly during the two fiscal quarters ended September 30, ~~primarily~~2008 ~~due~~when compared to ~~increases~~the prior year. These decreases were partially offset by an increase in ~~advertising~~Star newsstand revenue attributable ~~and~~to ~~circulation~~a ~~revenue~~cover ofprice increase from $13.849 ~~million~~to ~~and~~ $13.099 ~~million~~at the end of fiscal year 2008, ~~respectively~~ offset, in part, by a decrease in newsstand copies sold.

Operating Income

Operating income in the Celebrity Publications segment ~~increased~~decreased in the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008 from the prior year comparable period by $73.63 million, or ~~933~~18.1%, to $815.40 million. ~~from~~This ~~the~~decrease ~~prior~~in ~~year’s~~operating ~~comparable~~income ~~period.~~is Inprimarily ~~addition~~attributable to the above -mentioned operating revenue ~~increase,~~decrease ~~the operating~~coupled ~~income~~with ~~increase~~higher ~~was~~subscription ~~also~~costs ~~attributable~~caused by initiatives to ~~rate~~maintain our base ~~reductions~~ and ~~other~~higher ~~cost~~transportation-related ~~savings~~costs ~~initiatives~~caused ~~for~~by ~~Star~~fuel ~~that~~surcharges ~~were~~directly ~~part~~related ofto the ~~Management~~increase ~~Action Plan initiated~~ in the ~~fourth~~price ~~quarter~~ of ~~fiscal~~oil ~~year~~during ~~2007.~~this ~~The Star rate base reduction resulted in decreased subscription-related costs and production-related costs of $1~~period.7 ~~million~~These ~~and $1.5 million, respectively. The other~~ cost ~~savings~~increases ~~initiatives~~were ~~resulted~~partially inoffset ~~lower~~by ~~Star~~reduced ~~editorial-related~~advertising expenses ~~and sales promotion expenses of $0~~.~~7 million and $0.4 million, respectively.~~

Tabloid Publications Segment

Operating Revenue

Total operating revenue in the Tabloid Publications segment ~~remained~~was ~~essentially unchanged at~~ $3469.70 million for the two fiscal quarters ~~quarter~~ ended ~~June~~September 30, ~~2007~~2008, asrepresenting ~~compared~~a todecrease of $2.6 million, or 3.7%, from the prior year’s comparable period. This decrease in revenue was primarily attributable to the following:

20• a $1.3 million decrease in National Enquirer advertising revenue due to a planned rate base reduction from 1.1 million to 950,000 in January 2008 coupled with the aforementioned market weakness in advertising spending; and

•

a $1.1 million and $0.6 million decrease in Globe and National Enquirer newsstand revenues, respectively, due to lower single copies sold which were partially offset by cover price increases for each publication from $3.29 to $3.49 at the end of fiscal year 2008.

These decreases in revenue were partially offset by a $0.4 million increase in National Enquirer subscription revenue due to subscription price increases.

Operating Income

Operating income in the Tabloid Publications segment ~~increased~~decreased in the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008 from the prior year comparable period by $32.06 million, or 237.47%, to $1531.96 million ~~from the prior year’s comparable period~~. This ~~increase~~decrease in operating income is primarily attributable to athe ~~$1.3~~above-mentioned ~~million~~operating ~~decrease~~revenue indecline ~~restructuring~~coupled ~~charges,~~with ahigher ~~combined~~National ~~$1.3~~Enquirer ~~million~~editorial ~~decrease in production~~ and legal ~~distribution,~~expenses. ~~circulation~~These ~~and~~decreases ~~other~~in ~~cost~~operating ofincome ~~sales~~were ~~due~~partially tooffset ~~the~~by ~~successful~~planned ~~implementation~~rate ofbase ~~our~~reductions ~~Management~~which ~~Action~~lowered ~~Plan initiated~~production expenses in ~~the~~National ~~fourth~~Enquirer ~~quarter~~and ofGlobe, ~~fiscal year 2007~~ and aadvertising ~~$0.5~~expenses ~~million decrease~~ in ~~litigation~~National ~~charges~~Enquirer.

Women’s Health and Fitness Publications Segment

Operating Revenue

Total operating revenue in the Women’s Health and Fitness Publications segment was $2243.49 million for the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008, representing ana ~~increase~~decrease of $14.60 million, or 7.8.3%, from the prior year’s comparable period. This ~~increase~~decrease in revenue was primarily attributable to a ~~$2.1~~reduction ~~million increase~~ in Shape advertising revenue ~~partially~~due ~~offset~~to byfewer advertising pages and lower revenue per page as a ~~$0.2~~result ~~million~~of ~~decrease~~the inadvertising market softness coupled with lower Shape newsstand revenue. ~~and~~These adecreases ~~$0.1~~were partially ~~million~~offset ~~decrease~~by inthe ~~Shape~~impact ~~subscription~~ to operating revenue of having one additional issue of Shape during the two fiscal quarters ended September 30, 2008 when compared to the prior year.

Operating Income

Operating income in the Women’s Health and Fitness Publications segment ~~increased~~decreased in the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008, from the prior year comparable period by $15.09 million, or 1331.1%, to $913.02 million. ~~from~~This ~~the~~decrease ~~prior~~in ~~year’s~~operating ~~comparable~~income ~~period. This increase~~ was primarily attributable to the above -mentioned revenue ~~increase~~decrease ~~and~~coupled ~~was~~with ~~partially offset by~~ a $02.36 million increase in editorial, production~~-related~~ ~~costs~~and ~~resulting~~distribution, ~~from~~circulation ~~production~~and other cost of ~~larger~~sales ~~book~~expenses ~~sizes~~associated toprimarily ~~accommodate~~with the ~~increased~~additional ~~advertising~~issue ~~pages~~of ~~that~~Shape ~~resulted~~during in the ~~above~~two ~~mentioned~~fiscal ~~advertising~~quarters ~~revenue~~ended ~~increase~~September 30, 2008 when compared to the prior year. These items were partially offset by a decrease of $0.8 million in Shape advertising expenses.

Distribution Services Segment

Operating Revenue

Total operating revenue in the Distribution Services segment, which is comprised of DSI, was $513.60 million, net of eliminations, for the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008, representing an increase of $01.56 million, or 1014.04%, from the prior year’s comparable period. This increase in revenue was primarily attributable to an increase in services related to the ~~racking~~ installation of magazine fixtures ~~for~~and ~~certain~~in-store ~~customers~~data ~~during~~collection ~~the~~for ~~fiscal~~DSI’s ~~quarter~~outside ~~ended June 30, 2007~~clients.

Operating Income

Operating income in the Distribution Services segment increased in the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008, from the prior year comparable period by $0.3 9 million, or 1822.85%, to $14.87 million ~~from the prior year’s comparable period~~. This increase in operating income is primarily attributable to the above -mentioned revenue increase ~~and a $0.2 million decrease in restructuring charges~~, partially offset by an increase ofto ~~$0.4~~the ~~million in~~ direct costs of ~~the~~providing these services.

Corporate/Other Segment

Operating Revenue

Total operating revenue in the Corporate/Other segment was $2759.53 million for the two fiscal ~~quarter~~ quarters ended ~~June~~September 30, ~~2007~~2008, representing an increase of $12.32 million, or 53.08%, from the prior year’s comparable period. This increase in revenue is primarily attributable to a combined $03.5 7 million increase in ~~Men’s~~Flex and Muscle & Fitness advertising revenue due to an increase in advertising pages per issue and ahigher $0advertising revenue per page as well as the additional impact to operating revenue of having one additional issue of Muscle & Fitness during the two fiscal quarters ended September 30, 2008 when compared to the prior year.3 These publications have not been as impacted by the current economic downturn due to the sport ~~million~~nutritional ~~increase~~and supplement segment not being as sensitive to economic cycles. These increases were partially offset by decreases in ~~operating~~newsstand revenues ~~associated~~related ~~with~~to ~~reductions~~our ofMiniMag publications due to lower newsstand sales ~~taxes~~and a decrease in Men’s Fitness and Natural Health advertising revenues due to the aforementioned market weakness in advertising spending.

Operating Loss

Operating loss decreased in the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008, from the prior year comparable period by $9.7.9 million, or 52 44.3%, to $89.89 million~~, from the prior year’s comparable period~~. This decrease in operating loss is primarily due to the above -mentioned revenue increase, ~~as well as~~ a $12.4 0 million ~~decrease~~reduction in ~~restructuring~~editorial ~~charges,~~and aproduction ~~$4.7~~costs ~~million~~primarily ~~decrease~~due into ~~restatement-related~~reduced ~~costs~~print orders, a ~~combined~~ $1.41 million decrease in ~~editorial,~~ ~~production~~depreciation and ~~distribution~~amortization expense, ~~circulation~~primarily due to certain assets becoming fully depreciated, and ~~other~~a ~~cost~~$3.0 ofmillion ~~sales~~combined ~~due~~reduction toin ~~the~~personnel-related ~~successful~~costs ~~implementation~~primarily as a result of our Management Action Plan, ~~initiated~~lower inprofessional ~~the~~fees ~~fourth~~and legal ~~quarter~~costs. ofThese ~~fiscal~~decreases ~~year~~to ~~2007,~~operating asloss ~~well~~were aspartially ~~the~~offset ~~continuation~~by ofan ~~cost~~investment ~~savings~~in ~~associated~~sales ~~with~~promotions ~~the results~~expenses offor ~~our~~Men’s ~~restructuring~~Fitness, ~~plan~~which ~~implemented~~we inexpect ~~the~~will ~~first~~generate ~~quarter~~advertising ofrevenue ~~fiscal~~in ~~2006~~upcoming issues, and aan ~~$0.6~~increase ~~million reduction~~ in ~~depreciation~~subscription costs ~~expense~~caused ~~primarily~~by ~~due~~initiatives to ~~certain~~maintain ~~assets~~our ~~becoming~~subscription ~~fully depreciated~~base.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash generated from operations, cash on hand and amounts available to be borrowed under our ~~credit~~2006 ~~agreement~~Credit ~~dated~~Agreement. asSee ofNote ~~January 30~~6, “Credit ~~2006 (as amended~~Agreement,” in the ~~“2006~~Notes ~~Credit Agreement”)~~to Unaudited Condensed Consolidated Financial Statements included in Item 1 of Part I herein.

As of ~~June~~ September 30, ~~2007~~2008, we had cash and cash equivalents of $3821.34 million, and $6020.0 million outstanding on ~~the~~our ~~revolving~~Revolving ~~credit~~Facility, ~~facility under~~and ~~the~~a ~~2006~~working ~~Credit~~capital ~~Agreement~~deficit ~~(which~~of ~~represents~~$921.5 ~~the~~million. ~~full~~On ~~amount~~September 30, ~~available~~2008, towe bepaid ~~borrowed~~down ~~under~~$40.0 ~~the~~million ~~revolving~~of ~~credit~~Revolving Facility ~~facility),~~ and asubsequently ~~working~~borrowed ~~capital deficit of~~ $1140.40 million on October 1, 2008. The ~~decrease~~increase in working capital deficit of $6899.43 million from $1722.8 2 million at March 31, ~~2007~~2008 ~~to $11.4 million at June 30, 2007,~~ primarily resulted from: (i) aan additional $14447.30 million ~~decrease~~related ~~in accrued interest, which occurred because~~ to our ~~2006~~Term ~~Credit~~Facility ~~Agreement~~and ~~requires~~Revolving usFacility tobeing ~~pay~~classified ~~interest~~as ata ~~least~~current ~~every 90 days~~liability, or(ii) $413.7 ~~sooner~~million ifrelated to our ~~interest~~2009 ~~lock-in~~Notes ~~period~~being isclassified ~~less~~as ~~than~~a 90current ~~days~~liability, ~~which~~and ~~increased~~(iii) a ~~the~~$42.8 ~~amount~~million ofdecrease in cash ~~interest~~and ~~paid~~cash ~~during~~equivalents primarily ~~the~~due ~~fiscal~~to ~~quarter ended June 30, 2007, (ii)~~ a net $640.30 million ~~increase~~payment intowards ~~trade~~our ~~receivables~~Revolving Facility, ~~(iii)~~ a ~~$4.1 million~~fiscal ~~decrease~~year in2008 ~~current~~Excess ~~accrued~~Cash ~~expenses~~Flow ~~and~~payment ~~other liabilities,~~ (~~iv) a~~as ~~$1.4~~defined ~~million decrease~~ in ~~accounts~~the ~~payable,~~2006 ~~and~~Credit (vAgreement) a of $18.41 million ~~increase~~and inrequired ~~prepaid~~quarterly ~~expenses~~principal ~~and~~payments ~~other~~on ~~current~~our ~~assets~~Term Facility borrowing totaling $2.3 million. These items were partially offset by a an $2211.16 million decrease in ~~cash~~accounts ~~and~~payable ~~cash~~primarily ~~equivalents~~due to timing of vendor payments.

WeIn ~~currently~~order ~~believe~~to ~~that~~refinance ~~available~~the ~~funds~~Notes, on August 26, 2008, we commenced tender offers to purchase and ~~cash~~consent ~~flows~~solicitations ~~generated~~with byrespect ~~operations,~~to ifall ~~any~~of the Notes. On January 9, ~~will~~2009, bewe amended the tender offers and consent solicitations. To ~~sufficient~~finance tothe ~~fund~~purchase ~~our~~of ~~working~~the ~~capital~~Notes ~~and~~in ~~capital~~the ~~expenditure~~tender ~~requirements~~offers and the payment for atconsents ~~least~~in the ~~next~~consent 12solicitations, ~~months~~simultaneous with the tender offers and consent solicitations, we are offering the New Notes. WeTogether ~~believe~~with ~~that~~the ~~available~~New ~~cash~~Notes, atMedia ~~June 30~~is offering 5,700,000 ~~2007~~Shares, ~~should~~representing ~~help~~95% ~~mitigate~~of ~~future~~Media’s ~~possible~~outstanding ~~cash~~shares ~~flow~~of ~~requirements~~common stock. ~~Our~~In ~~revolving~~order ~~credit commitment~~to ~~matures~~tender Notes in ~~January~~the ~~2012~~tender ~~and~~offers, ~~our~~a ~~term~~tendering ~~loan~~holder ~~matures~~must inagree ~~January~~to ~~2013~~purchase ~~but~~Offered ~~both~~Securities ~~may~~for ~~mature~~a ~~sooner~~purchase ifprice weequal doto ~~not~~the consideration ~~refinance~~being ~~our~~received ~~outstanding~~by 10such holder in the tender offers and consent solicitations.~~25%~~ ~~senior~~Among ~~subordinated~~other ~~notes~~matters, ~~due~~tendering ~~2009~~holders ~~(the~~must ~~“2009~~also ~~Notes”)~~deliver ontheir orconsents ~~prior~~to specified amendments to ~~February 1~~the indentures, which consents remove substantially all of ~~2009~~the restrictive covenants and related defaults in ~~accordance~~the ~~with~~indentures governing the ~~requirements~~Notes. ofWe cannot make any assurances that such tender offers and consent solicitations will be successful. If we are not able to refinance the Notes in the tender offers, the 2006 Credit Agreement ~~(in~~will ~~which~~likely ~~case~~mature ~~the~~early ~~maturity~~and ~~date~~we will benot ~~February 1~~have sufficient funds to repay such indebtedness. In such event, ~~2009)~~we may have to liquidate assets on unfavorable terms, or webe dounable ~~not~~to ~~refinance~~continue ~~our~~as ~~outstanding~~a 8going concern, and incur additional costs associated with bankruptcy.~~875%~~ ~~senior~~Assuming ~~subordinated~~we ~~notes~~are ~~due~~able ~~2011~~to ~~(the~~successfully ~~“2011~~refinance the Notes” as described herein, we currently believe that available funds and cash flows generated by operations, if any, will be sufficient to fund our ~~together~~working ~~with~~capital ~~the~~and ~~2009~~capital ~~Notes,~~expenditure requirements for at least the ~~“Notes”)~~next on12 ormonths. ~~prior~~We tobelieve ~~October~~that available cash at September 1530, ~~2010~~2008 inand ~~accordance~~amounts ~~with~~available ~~the~~under our Revolving Facility should help mitigate future possible cash flow requirements. ofTo the ~~2006~~extent ~~Credit~~we ~~Agreement~~make ~~(in~~future ~~which~~acquisitions, ~~case~~we ~~the~~may ~~maturity~~require ~~date~~new sources of funding, including additional debt, equity financing or some combination thereof. There can be no assurances that we will be ~~October 15,~~able ~~2010)~~to secure additional sources of funding or that such additional sources of funding will be available to us on acceptable terms or at all.

On32 June 14, 2006, we announced that we were implementing a strategy to refocus the Company and devote its full resources to growing its core brands. As part of this strategy we announced that we will explore the sale of our five market leading special interest titles – Muscle & Fitness, Flex, Muscle & Fitness Hers, Country Weekly, and Mira!. These publications collectively represented total revenues and operating income of $20.7 million and $7.3 million, respectively, for the fiscal quarter ended June 30, 2007. The sale of these titles would also provide the Company additional liquidity. As a result of the restatement of the Company’s financial statements for the fiscal year ended March 31, 2005 and the fiscal quarters ended June 30, 2005 and September 30, 2005 (the “Restatement”) and until the Company becomes current with its filings with the Securities and Exchange Commission (the “SEC”), the implementation of this strategy has been delayed.

At June 30,Table 2007, our outstanding indebtedness totaled $1.1 billion, of which $510.0 million represented borrowings under the 2006 Credit Agreement and $550.0 million represented our senior subordinated notes. See “Risk Factors” in our March 31, 2007 10-K for risks associated with our indebtedness. Contents

At September 30, 2008, our outstanding indebtedness totaled $1.0 billion, of which $459.6 million represented borrowings under the 2006 Credit Agreement and $568.4 million represented the Notes. At November 30, 2008, we had cash and cash equivalents of approximately $43.3 million and borrowings of $499.6 million under the 2006 Credit Agreement. See “Risk Factors” in our March 31, 2008 10-K and the discussion that follows under “Credit Agreement and Senior Subordinated Indebtedness” for risks associated with our indebtedness.

The effectiveness of the amendment to the 2006 Credit Agreement is conditioned upon the consummation of the tender offers and offerings (the “Offerings”) currently being conducted by the Company and Media to holders of the Company’s existing notes as well as the satisfaction of other customary conditions. The amended 2006 Credit Agreement will permit the issuance of the notes currently being offered by us in the Offerings and will result in certain other changes to the 2006 Credit Agreement, including without limitation, the following: (i) The maximum senior secured leverage ratio and the minimum interest expense coverage ratio levels will be changed; (ii) the variable component of applicable interest rates will be subject to a floor equal to, in the case of Eurodollar loans, 3.5% and, in the case of alternate base rate loans, 4.5%; (iii) interest rate margins will increase to 5.5% in the case of alternate base rate loans and 6.5% in the case of Eurodollar loans; (iv) the term loans will be subject to hard call protection for three years following the amendment and restatement of the 2006 Credit Agreement (excluding mandatory prepayments from excess cash flow); (v) subject to limited exceptions, we will not be permitted to repay, prepay, redeem or acquire any notes; (vi) 75% of any equity proceeds raised by Media, the Company or their subsidiaries (other than from certain holders of the notes) must be applied to the mandatory prepayment of term loans; (vii) substantial limitations on reinvestment rights from the proceeds of asset dispositions or casualty events will be added which may result in more extensive prepayment requirements in respect thereof; (viii) the portion of excess cash flow that must be applied to the mandatory prepayment of term loans will increase from 50% to 75%; and (ix) the baskets for permitted indebtedness, investments, restricted payments and capital expenditures will be reduced.

Cash Flows

Net cash ~~used~~provided inby operating activities was $209.85 million for the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008, as compared to cash used in operating activities of $94.03 million for the two fiscal ~~quarter~~quarters ended ~~June~~ September 30, ~~2006~~2007. During the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008, net cash ~~used~~provided inby operating activities was primarily attributable to a $015.14 million ~~net~~of ~~loss~~non-cash expenses (excluding amortization of deferred rack costs), a $145.31 million ~~decrease~~increase in ~~accrued~~deferred ~~interest,~~revenues ~~which~~primarily ~~occurred~~due ~~because~~to ~~our~~the ~~2006~~timing ~~Credit Agreement~~of ~~requires~~advances usrelated to ~~pay~~single ~~interest~~copy atsales, ~~least~~an ~~every~~increase 90in ~~days,~~management orfee ~~sooner~~payable ifof ~~our~~$2.0 ~~interest~~million, ~~lock-~~a $1.8 million decrease in inventories, ~~period~~a is$1.6 ~~less~~million ~~than~~increase 90in ~~days,~~accrued ~~which~~expenses ~~increased~~and ~~the~~other ~~amount~~liabilities ofand ~~cash~~$1.0 ~~interest~~million ~~paid~~of ~~during~~net ~~the~~income. ~~fiscal~~These ~~quarter~~items ~~ended~~were ~~June 30,~~partially ~~2007,~~offset aby an $611.76 million ~~increase~~ decrease in ~~trade~~accounts ~~receivables~~payable (primarily asdue ato ~~result~~timing of ~~the~~vendor payments, a $2.9 million increase in ~~our~~trade ~~advertising revenues)~~receivables, a $41.31 million net decrease in ~~accrued~~deferred ~~expenses~~rack ~~and other liabilities~~costs, a $1.40 million increase in prepaid expenses and other current assets, and a $10.47 million decrease in ~~accounts~~accrued ~~payable~~interest. ~~and~~During the two fiscal quarters ended September 30, 2007, net cash used in operating activities was primarily attributable to a $117.09 million ~~decrease~~net inloss, ~~deferred~~a ~~revenues~~$7.2 ~~These~~million ~~items~~decrease ~~were~~in ~~partially~~accrued ~~offset~~interest, bywhich ~~$5.4~~occurred ~~million~~because ofour ~~non-cash~~2006 ~~expenses~~Credit ~~(excluding~~Agreement ~~amortization~~requires ofus ~~deferred~~to ~~rack~~pay ~~costs)~~interest ~~and~~at aleast every ~~$1.5~~90 ~~million~~days, ~~net~~or ~~decrease~~sooner, if our interest lock-in ~~deferred~~period ~~rack costs.~~is ~~During~~less than 90 days, which increased the amount of cash interest paid during the fiscal quarter ended ~~June~~September 30, ~~2006~~2007, ~~net~~a ~~cash~~$6.7 ~~used~~million increase in ~~operating~~trade ~~activities~~receivables ~~was~~ (primarily ~~attributable~~as to a result ~~$27.5~~of ~~million~~the ~~net~~increase ~~loss~~in our advertising revenues), a $24.74 million decrease in ~~accounts~~accrued ~~payable~~expenses and other liabilities, a $41.58 million ~~decrease~~increase in ~~accrued~~prepaid expenses and other current ~~liabilities~~assets, a $1.3 million decrease in accounts payable and a $21.7 2 million decrease in ~~accrued~~deferred ~~interest~~revenues. These items were partially offset by $1132.68 million of non-cash expenses (excluding amortization ~~and write-off~~ of deferred rack costs), a $2.3 million net decrease in deferred rack costs of ~~$5.7 million,~~ and a $92.50 million ~~decrease~~increase in ~~inventory~~the management ~~(resulting~~fee ~~from our efforts to more efficiently manage our inventory levels)~~payable.

Net cash used in investing activities was $01.40 million for the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~2008 as compared to $0.97 million for the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2006~~2007. Net cash used in investing activities for the two fiscal ~~quarter~~quarters ended ~~June~~September 30, ~~2007~~ 2008 was primarily attributable to $1.2 million for purchases of property and equipment and $0.3 million related to the investment in Mr. Olympia, LLC, partially offset by $0.5 million related to proceeds from the sale of discontinued operations. The use of cash for investing activities for the two fiscal quarters ended September 30, 2007 was primarily attributable to $0.8 million for purchases of property and equipment and $0.3 million related to the investment in Mr. Olympia, LLC, partially offset by $0.4 million related to proceeds from the sale of fixed assets.

22Net cash used in financing activities was $50.8 million for the two fiscal quarters ended September 30, 2008, as compared to $0.9 million for the two fiscal quarters ended September 30, 2007. Net cash used in financing activities for the two fiscal quarters ended September 30, 2008 primarily consisted of net repayments on the Revolving Facility of $40 million, a fiscal year 2008 Excess Cash Flow payment of $8.1 million, required quarterly principal payments on the Term Facility totaling $2.3 million and payments of $0.4 million related to deferred debt costs. Net cash used in financing activities for the two fiscal quarters ended September 30, 2007 consisted of payments of $0.9 million related to deferred debt costs.

~~partially~~Credit ~~offset~~Agreement by $0.4 million related to proceeds from the sale of fixed assets. The uses of cash for investing activities for the fiscal quarter ended June 30, 2006 were primarily attributable to $0.6 million for purchases of property and ~~equipment~~Senior ~~and~~Subordinated ~~$0.3~~Indebtedness ~~million related to the investment in Mr. Olympia, LLC partially offset by $0.1 million related to proceeds from the sale of an investment.~~

~~Net~~Our ~~cash~~Revolving ~~used~~Facility matures in ~~financing~~January ~~activities~~2012 ~~was~~and ~~$0.9~~our ~~million~~Term ~~for~~Facility ~~the~~matures ~~fiscal~~in ~~quarter~~January ~~ended~~2013, ~~June~~but both will mature on February 301, ~~2007,~~2009 asif ~~compared~~we tohave more than $125.3 0 million ~~for~~of ~~the fiscal~~our ~~quarter~~2009 ~~ended~~Notes ~~June~~outstanding on February 301, ~~2006~~2009. ~~Net~~In ~~cash~~addition, ~~used~~the inRevolving ~~financing~~Facility ~~activities~~and ~~for~~ the ~~fiscal~~Term ~~quarter~~Facility ~~ended~~both ~~June~~will mature on October 3015, ~~2007~~2010 ~~consisted~~if ofwe ~~payments~~have ofmore than $010.90 million ~~related~~of toour ~~deferred~~2011 ~~debt~~Notes ~~costs.~~outstanding ~~Net~~on ~~cash~~October 15, 2010. ~~used~~We inhave ~~financing~~classified ~~activities for~~ the ~~fiscal quarter~~entire ~~ended~~balance ~~June 30,~~of the 2006 ~~primarily~~Credit ~~consisted~~Agreement ofas ~~repayments~~a ofcurrent ~~$40.0~~liability ~~million~~ on ~~the~~our ~~revolving~~September 30, ~~credit~~2008 ~~facility~~balance ~~and~~sheet ~~$1.3~~as ~~million relating to~~ the ~~payment~~2006 ofCredit ~~deferred~~Agreement ~~debt~~may ~~costs~~mature ~~partially~~within ~~offset~~twelve bymonths ~~borrowings~~ of ~~$40.0~~September 30, ~~million on the revolving credit facility~~2008.

In order to refinance the Notes, on August 26, 2008, we commenced tender offers to purchase and consent solicitations with respect to all of the Notes. On January 9, 2009, we amended the tender offers and consent solicitations. To finance the purchase of the Notes in the tender offers and the payment for consents in the consent solicitations, simultaneous with the tender offers and consent solicitations, we are offering (a) $21,245,380 aggregate principal amount of our Senior PIK Notes, and (b) $300,000,000 aggregate principal amount of our Senior Subordinated Notes. We are a wholly owned subsidiary of Media. Together with the New Notes, Media is offering 5,700,000 Shares, representing 95% of Media’s outstanding shares of common stock. In order to tender Notes in the tender offers, a tendering holder must agree to purchase Offered Securities for a purchase price equal to the consideration such holder receives in the tender offers and consent solicitations. Among other matters, tendering holders must also deliver their consents to specified amendments to the indentures, which consents remove substantially all of the restrictive covenants and related defaults in the indentures governing the Notes. In connection with the tender offers, certain provisions of the 2006 Credit Agreement will be waived including the change of control event of default that would result from successful tender offers. For a more complete description of the tender offers and consent solicitations, see Note 7, “Senior Subordinated Indebtedness.” We cannot make any assurances that such tender offers and consent solicitations will be successful.

OnIf ~~January 30,~~we ~~2006,~~are wenot ~~entered~~able ~~into~~to refinance the Notes in the tender offers, the 2006 Credit Agreement will likely mature early and we will not have sufficient funds to repay such indebtedness. In such event, ~~replacing~~we ~~the~~may ~~then~~have ~~existing~~to ~~Amended~~liquidate ~~and~~assets ~~Restated~~on ~~Credit~~unfavorable ~~Agreement~~terms, ~~dated~~or be unable to continue as ofa ~~January 23~~going concern, ~~2003~~and ~~(the~~incur ~~“2003~~additional ~~Credit~~costs ~~Agreement”)~~associated with bankruptcy.

~~The~~We ~~2006~~expect ~~Credit~~to ~~Agreement~~incur ~~allows~~approximately ~~for revolving loans, term loans, swingline loans and letters of credit in an aggregate principal amount of up to~~ $~~510~~35.0 million. Weof ~~have~~fees ~~the~~relating ~~option~~ to ~~pay interest at~~ the JPrefinancing ~~Morgan Chase Bank N.A. (“JP Morgan”) prime rate plus 2.25% or at the London interbank offering rate (“LIBOR”) plus 3.25%. As~~ of ~~June 30, 2007, all of our borrowings were based on LIBOR. Our effective weighted-average interest rate on our term loan and revolving credit facility during~~ the ~~fiscal~~Notes ~~quarter ended June 30, 2007 was 8.6%. The 2006 Credit Agreement includes certain representations~~ and warranties, conditions precedent, affirmative covenants, negative covenants and events of default. The negative covenants include financial maintenance covenants comprised of a leverage ratio, a senior secured leverage ratio, a consolidated interest expense coverage ratio, and capital expenditure limits. The 2006 Credit Agreement also contains certain covenants that, subject to certain exceptions, restrict paying cash dividends, incurring additional indebtedness, creating liens, making acquisitions or other investments, entering into certain mergers or consolidations and selling or otherwise disposing of assets. The Company has obtained a number of waivers and amendments to the ~~2006~~amendment ~~Credit Agreement since January 30, 2006. As~~ of ~~June 30,~~ ~~2007,~~ the Company was in compliance with these covenants, as so amended. Although there can be no assurances, the Company anticipates that, based on current projections, its operating results for the remainder of fiscal year 2008 will be sufficient to satisfy the financial covenants, as amended, under the 2006 Credit Agreement.

~~The~~During ~~indebtedness under~~ the ~~2006~~two ~~Credit~~fiscal ~~Agreement~~quarters isended ~~secured by~~September 30, ~~substantially~~2008, ~~all~~we ofmade the ~~parent~~required ~~company’s~~quarterly ~~assets~~principal ~~and~~payments ~~the~~on ~~assets~~our ofTerm ~~its~~Facility ~~domestic~~borrowing ~~subsidiaries~~totaling $2.3 Inmillion. ~~addition,~~We also ~~the~~made ~~Company’s~~a ~~obligations~~fiscal ~~are~~year ~~secured~~2008 byExcess aCash ~~pledge~~Flow payment of ~~all~~$8.1 ofmillion ~~the~~on ~~issued~~June 30, ~~and~~2008. ~~outstanding~~We ~~shares~~paid down $34.0 million of our Revolving Facility on June 30, or2008, ~~other~~and ~~equity~~subsequently ~~interests~~borrowed in$34.0 million on July 1, 2008. We then paid down ~~substantially~~$40.0 ~~all~~million of ~~its~~our ~~existing~~Revolving orFacility on September 30, 2008, and subsequently ~~acquired~~borrowed or$40.0 ~~organized~~million ~~domestic~~on ~~subsidiaries~~October 1, ~~and~~2008. aCommitment ~~percentage~~fee ofpayments during the ~~capital~~two ~~stock~~fiscal ofquarters ended September 30, or2008 ~~other~~were ~~equity~~insignificant ~~interests~~as ~~in,~~the Revolving ~~certain~~Facility was fully drawn during the entire two fiscal quarters with the exception of ~~its~~a ~~subsequently~~few ~~acquired~~days ornear ~~organized~~each ~~subsidiaries~~quarter end.

WeThe ~~are~~effective ~~required~~interest rate tounder ~~meet~~the ~~specified~~2006 ~~leverage~~Credit ~~ratios~~Agreement, including amounts borrowed under the Term Facility and Revolving Facility, as of September 30, 2008, was 6.0%. The effective weighted-average interest rates under the 2006 Credit Agreement for the fiscal quarters ended September 30, 2007 and 2008 ~~relating~~were 8.7% and 6.0%, respectively. The effective weighted-average interest rates under the 2006 Credit Agreement for the two fiscal quarters ended September 30, 2007 and 2008 were 8.6% and 6.4%, respectively. The decrease in the effective weighted-average interest rate between fiscal quarters ended September 30, 2007 and 2008 and two fiscal quarters ended September 30, 2007 and 2008 is tied to ~~our~~the ~~Notes~~decrease in LIBOR.

IfThe we2006 ~~fail~~Credit toAgreement ~~meet~~includes ~~the~~certain ~~specified~~representations ~~leverage~~and ~~ratio~~warranties, conditions precedent, affirmative covenants, negative covenants and events of ~~8:1~~default. asThe negative covenants include financial maintenance covenants comprised of ~~September 30~~a leverage ratio, ~~2007~~a senior secured leverage ratio, wea ~~will~~consolidated beinterest ~~required~~expense tocoverage ~~make~~ratio, ~~one~~and ofcapital ~~three~~expenditure ~~elections~~limits. ~~which~~The ~~are~~2006 asCredit ~~follows:~~Agreement also contains ~~(1) issue~~certain ancovenants ~~additional~~that, ~~$20.0~~subject ~~million~~to ofcertain ~~senior~~exceptions, ~~subordinated~~restrict ~~notes~~paying todividends, ~~the~~incurring ~~existing~~additional ~~holders~~indebtedness, ofcreating ~~the~~liens, ~~Notes~~making acquisitions or other investments, entering into certain mergers or ~~(2) issue~~consolidations aand ~~cash~~selling ~~payment~~or otherwise disposing of ~~$20~~assets.0 ~~million~~Concurrently towith the ~~holders~~successful completion of the offering of the New Notes, orwe ~~(3) issue~~expect ~~equity~~to oramend ~~receive~~and arestate ~~cash~~the ~~equity contribution~~2006 inCredit ~~such~~Agreement. ~~amount~~The asproposed ~~will~~amendments ~~result~~include revised financial covenant levels, an increase in ~~net~~interest rate ~~proceeds~~margins, the introduction of an interest rate floor, a broadening of the circumstances that would give rise to prepayment of the ~~Company~~loans and the introduction of nomore ~~less~~restrictive ~~than~~covenants, ~~$40~~particularly relating to indebtedness, investments, restricted payments and capital expenditures.0 ~~million~~Although orthere incan ~~such~~be ~~lesser~~no ~~amount~~assurances, we anticipate that, based on current projections (including projected borrowings and repayments under the Revolving Facility), our operating results for fiscal year 2009 will be sufficient to ~~permit~~satisfy usthe tofinancial ~~achieve~~covenants under the ~~specified~~2006 ~~leverage~~Credit ~~ratio~~Agreement (after giving ~~pro forma~~ effect to the ~~reduction~~proposed ~~of indebtedness~~amendments. ~~that~~If ~~shall~~the beproposed ~~effected~~amendments ~~with~~do ~~such~~not ~~proceeds).~~become Weeffective, ~~anticipate~~based ~~that~~on our calculations, we ~~will~~do not ~~meet~~expect to be in compliance with the ~~specified~~senior secured leverage ~~test~~ratio financial covenant as of December 31, 2008 and in certain future periods. Our ability to satisfy such financial covenants is dependent on our business performing in accordance with our projections. If ~~this~~the ~~occurs~~performance of our business deviates from our projections, we ~~expect~~may not be able to ~~issue~~satisfy ~~$20.0~~such ~~million~~financial ofcovenants, including the senior ~~subordinated~~secured ~~notes~~leverage ratio. Our projections are subject to ~~the~~a ~~existing~~number ~~holders~~of factors, many of ~~the~~which ~~Notes~~are events beyond our control, which could cause our actual results to differ materially from our projections. If we do

If34 we fail to meet the specified leverage ratio of 7.25:1 as of September 30, 2008, we will be required to make one of three elections which are as follows: (1) issue an additional $35.0 million of senior subordinated notes to the existing holders of the Notes, or (2) issue a cash payment of $20.0 million to the holders of the Notes or (3) issue equity or receive a cash equity contribution in such amount as will result in net proceeds to the Company of no less than $50.0 million or in such lesser amount sufficient to permit us to achieve the specified leverage ratio (after giving pro forma effect to the reduction of indebtedness that shall be effected with such proceeds).

For a description of the amendment and waiver agreement entered into by the Company subsequent to March 31, 2007 with respect to, and affecting, the 2006 Credit Agreement, see Note 6, “Credit Agreement,” in the Notes to Unaudited Condensed Consolidated Financial Statements in this Form 10-Q.

For a description of the waiver and consent agreement entered into by the Company subsequent to March 31, 2007 with respect to, and affecting, the Notes, see Note 7, “Senior Subordinated Indebtedness,” in the Notes to Unaudited Condensed Consolidated Financial Statements in this Form 10-Q.

~~The~~ not ~~Notes~~comply ~~are~~with ~~unconditionally~~these ~~guaranteed,~~or onother acovenants ~~senior~~and ~~subordinated~~restrictions ~~basis,~~contained byin ~~substantially~~the ~~all~~2006 ofCredit ~~our~~Agreement, ~~domestic subsidiaries.~~we ~~The~~could ~~indentures~~default under ~~which~~ the ~~Notes~~2006 ~~were~~Credit ~~issued~~Agreement. ~~require~~The outstanding ~~that~~debt ~~each~~under ~~domestic subsidiary that will be organized in~~ the ~~future~~2006 byCredit ~~us,~~Agreement ~~unless~~could ~~such~~then ~~subsidiary~~be isdeclared ~~designated~~immediately asdue anand ~~unrestricted~~payable. ~~subsidiary~~Moreover, ~~will jointly, severally, fully and unconditionally guarantee~~ the ~~Notes~~instruments ongoverning aalmost ~~senior~~all ~~subordinated~~of ~~basis.~~our ~~Subordinated~~other ~~note~~debt ~~guarantees~~contain ~~are~~cross-acceleration ~~joint~~provisions ~~and~~so ~~several,~~that ~~full~~an ~~and~~acceleration ~~unconditional~~under ~~and~~any ~~general unsecured obligations~~ of ~~the~~our ~~note~~debt may ~~guarantors.~~result ~~Subordinated note guarantees are subordinated~~ in ~~right~~ ofa ~~payment~~default tounder ~~all~~our ~~existing~~other ~~and future senior~~ debt. ofIf ~~the~~a ~~note~~cross-acceleration ~~guarantors~~occurs, ~~including~~ the ~~2006~~maturity ~~Credit Agreement, and are also effectively subordinated to all secured obligations~~ of ~~note~~our ~~guarantors~~other todebt ~~the~~could ~~extent~~be ofaccelerated ~~the~~and ~~assets~~become ~~securing~~immediately ~~such obligations,~~due ~~including~~and ~~the~~payable. ~~2006~~If ~~Credit~~that ~~Agreement. Furthermore~~happens, ~~the~~we ~~indentures~~may ~~permit~~not ~~note~~be ~~guarantors~~able to ~~incur~~satisfy ~~additional~~our ~~indebtedness, including senior~~ debt, ~~subject to certain limitations. See Note 12~~obligations, ~~“Supplemental Condensed~~which ~~Consolidating~~would ~~Financial~~have ~~Information,”~~a insubstantial ~~the~~adverse ~~Notes~~effect toon ~~Unaudited~~our ~~Condensed~~ability ~~Consolidated~~to ~~Financial~~continue ~~Statements~~as ina ~~this~~going ~~Form 10-Q~~concern.

~~Contractual~~On January 7, 2009, we and Media entered into a forbearance ~~Obligations~~agreement with lenders representing a majority of outstanding amounts and commitments under the 2006 Credit Agreement and the administrative agent under the 2006 Credit Agreement, pursuant to which such lenders and the administrative agent agreed, subject to certain termination events, to forbear until the earliest of (i) February 4, 2009, (ii) the date on which any of the Existing Notes become or are declared to be due and payable and (iii) the commencement of an insolvency proceeding with respect to the Company, Media or any of their subsidiaries from exercising any rights and remedies under the 2006 Credit Agreement as a result of our failure (a) to pay the interest payment due on the 2009 Notes on November 1, 2008, (b) to comply with the reporting requirements in the senior secured credit agreement, (c) to comply with the corresponding requirements in the indentures governing the Notes and (d) to comply with the requirements of the indentures governing the Notes in connection with its failure to meet a specified leverage ratio.

The ~~Company~~2009 ~~adopted~~Notes mature on May 1, 2009. We have classified the ~~provisions~~entire balance of ~~FASB~~the ~~Interpretation~~2009 NoNotes of $413.7 million as a current liability on our September 4830, 2008 balance sheet as the 2009 Notes mature within twelve months of September 30, 2008. We have not currently entered into a financing agreement that permits us to refinance the 2009 Notes on a long-term basis. However, we are conducting, with respect to holders that are either “~~Accounting~~qualified ~~for~~institutional ~~Uncertainty~~buyers” (as defined in ~~Income~~Rule ~~Taxes:~~144A Anof the ~~Interpretation~~Securities Act of ~~FASB~~1933, ~~Statement~~as ~~No. 109”~~amended (the “~~FIN~~Securities 48Act”)) or persons outside the United States (in accordance with Regulation S of the Securities Act), on(1) tender ~~April~~offers to purchase for cash any and all of our outstanding Notes and (2) 1,related ~~2007~~solicitations of consents from such holders of Notes to certain proposed amendments to the indentures governing the Notes (the “Proposed Amendments”). As In addition, we are conducting a ~~result~~related solicitation of consents to the ~~implementation~~Proposed Amendments from all holders of ~~FIN~~Notes 48who wedo ~~have~~not, ~~recorded~~or ~~$3.7~~are ~~million~~not aseligible, ato ~~current~~participate ~~liability~~in the applicable tender offer.

24In connection with the consent agreements we entered into in March 2006 with holders of a majority of the outstanding principal amount of each series of the Notes, we entered into supplemental indentures, the purpose of which was to amend the indentures relating to the Notes to, among other things, require us to meet a specified leverage ratio as of September 30, 2008. We failed to meet the specified leverage ratio of 7.25:1 required under the indentures as of September 30, 2008. As a result, on or prior to December 15, 2009, we were required to issue either $50.0 million of new equity or a sufficient amount of equity such that after giving pro forma effect to the reduction of indebtedness, we would have met the required specified leverage ratio. Alternatively, we could have issued an additional $36.3 million of Notes or made a cash payment of $20.7 million to existing holders of Notes. We intend to satisfy our obligations to meet the specified leverage ratio as of September 30, 2008 by issuing equity in connection with the offering of Offered Securities, which will result in our satisfying such ratio on a pro forma basis.

We failed to make the required semi-annual interest payment with respect to the 2009 Notes when due on November 1, 2008, and on December 1, 2008, such failure resulted in an event of default pursuant to the terms of the indenture governing the 2009 Notes. We also expect to fail to make the required semi-annual interest payment with respect to the 2011 Notes when due on January 15, 2009. In addition, we failed to file this quarterly report on Form 10-Q for the period ended September 30, 2008 when due on November 14, 2008. We have also failed to comply with the requirements of the indentures governing the Notes relating to our failure to meet a specified leverage ratio as of September 30, 2008. As a result, we entered into forbearance agreements with existing holders of approximately 81% of the outstanding aggregate principal amount of 2009 Notes and approximately 69% of the outstanding aggregate principal amount of 2011 Notes, pursuant to which such holders have agreed to forbear until the earliest of (i) 5:00 p.m., New York City time, on February 4, 2009, (ii) the date upon which any of the Notes become or are declared to be due and payable, (iii) the commencement (voluntary or involuntary) of an insolvency proceeding with respect to the Company or any of its subsidiaries, (iv) the date upon which the forbearance agreement by the lenders holding more than a majority of the borrowings under the Company’s credit facility expires, terminates or is breached and (v) if the Company has not launched the tender offers and related offering of the Offered Securities on the terms that may be agreed to by the parties hereto, in the sole discretion of such parties, prior to such date, January 10, 2009, from exercising any remedies under the indentures governing the Notes as a result of the Company’s (a) failure to comply with the reporting requirements of the indentures governing the Notes, (b) deferred interest payments with respect to the Notes or (c) failure to comply with the requirements of the indentures governing the Notes relating to the Company’s failure to meet a specified leverage ratio as of September 30, 2008. We intend to satisfy its obligations to meet the specified leverage ratio as of September 30, 2008 by issuing equity in connection with the offering of Offered Securities, which will result in our satisfying such ratio on a pro forma basis.

~~Item~~New 3.Accounting ~~Quantitative~~Pronouncements ~~and Qualitative Disclosures about Market Risk~~

~~During~~In September 2006, the ~~fiscal~~Financial ~~quarter~~Accounting ~~ended~~Standards ~~June~~Board (“FASB”) issued SFAS No. 30157, ~~2007~~“Fair Value Measurements” (“SFAS No. 157”), which enhances existing guidance for measuring assets ~~there~~and liabilities at fair value. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. The provisions of SFAS No. 157 were noeffective ~~significant~~for ~~changes~~us ~~related~~on April 1, 2008. The adoption of this statement did not have a material impact on our results of operations, financial position, cash flows or disclosures. In February 2008, the FASB issued FASB Staff Position No. 157-2, which delays the effective date of SFAS No. 157 for non-financial assets and liabilities to fiscal years beginning after November 15, 2008. With this deferral, we have not applied the ~~Company’s~~provisions ~~market~~of ~~risk~~SFAS ~~exposure~~No. 157 ~~since~~to ~~March~~non-financial assets and liabilities. We are still assessing the impact the adoption of SFAS No. 31157 for non-financial assets and liabilities will have on our results of operations, ~~2007~~financial position or cash flows.

~~Item~~In 4December 2007, the FASB issued SFAS No. 160, ~~Controls~~“Noncontrolling Interests in Consolidated Financial Statements, An Amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 amends Accounting Research Bulletin No. 51 (“ARB 51”) to establish accounting and ~~Procedures~~reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of FASB Statement No. 141(R). We are currently evaluating the impact of the adoption of SFAS No. 160 on our financial statements, which is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The statement must be applied prospectively as of the beginning of the fiscal year in which the statement is initially adopted.

~~Pursuant~~In toApril ~~Rule~~2008, ~~15d-15(b) of~~ the ~~Securities~~FASB ~~Exchange~~issued ~~Act~~FASB ofStaff ~~1934,~~Position ~~as amended~~ (~~the~~ “~~Exchange Act~~FSP”), ~~as of March~~No. 31142-3, ~~2005,~~“Determination of the ~~Company’s~~Useful ~~management~~Life ~~performed~~of ~~an evaluation~~Intangible Assets,” ~~under~~(“FSP ~~the~~No. 142-3”). ~~supervision~~FSP ~~and~~No. 142-3 ~~with~~amends the ~~participation~~factors ofthat ~~the~~should ~~Company’s~~be ~~principal~~considered ~~executive~~in ~~officer~~developing ~~and~~renewal ~~principal~~or ~~financial~~extension ~~officer,~~assumptions ofused ~~the effectiveness~~to ofdetermine the ~~design~~useful ~~and~~life ~~operation~~ of ~~our~~a ~~disclosure~~recognized ~~controls~~intangible ~~and~~asset ~~procedures~~under ~~(as defined in Exchange Act Rule 15d-15(e))~~SFAS No. ~~Disclosure~~142, ~~controls~~in ~~and~~order ~~procedures are designed~~ to ~~ensure~~improve ~~that~~ the ~~information~~consistency ~~required~~between tothe beuseful ~~disclosed~~life inof ~~our reports~~a ~~that~~recognized weintangible ~~file~~asset ~~or submit~~ under ~~the~~SFAS ~~Exchange Act is (i)~~No. ~~accumulated~~142 and ~~communicated to our management (including~~ the ~~principal~~period ~~executive~~of ~~officer~~expected ~~and~~cash ~~principal~~flows ~~financial~~used ~~officer) as appropriate~~ to ~~allow~~measure ~~timely decisions regarding required disclosures, and (ii) recorded, processed, summarized and reported within~~ the ~~time~~fair ~~periods~~value ~~specified~~of in the ~~SEC’s~~asset ~~rules~~under ~~and~~SFAS ~~forms~~No. 141R, “Business ~~Based~~Combinations” ~~upon~~(revised ~~that evaluation~~2007), ~~our principal executive officer~~ and ~~principal~~other ~~financial~~U.S. ~~officer~~generally ~~concluded~~accepted ~~that~~accounting ~~a material~~principles. ~~weakness~~FSP ~~existed in our internal control over financial reporting as of March 31, 2005~~No. It142-3 ~~was~~is ~~determined~~effective ~~that~~for ~~the~~us ~~material weakness in internal control over financial reporting~~ as of ~~March~~April 311, ~~2005~~2009, ~~related~~and towill ~~the~~be ~~fact~~applied ~~that we~~prospectively ~~lacked a sufficient complement of personnel with a level of financial reporting expertise commensurate with our financial reporting requirements~~ to ~~resolve~~intangible ~~non-routine~~assets oracquired ~~complex~~after the ~~accounting~~effective ~~matters~~date. ~~This material weakness continued to exist as of June 30, 2007.~~

~~Subsequent~~In toMay ~~March 31~~2008, ~~2005,~~ the ~~Company’s~~FASB ~~board~~issued ofSFAS ~~directors~~No. 162, ~~and~~“The ~~management~~Hierarchy ~~took~~of ~~steps~~Generally toAccepted ~~remediate~~Accounting ~~the~~Principles” (“SFAS ~~material~~No. 162”). ~~weakness described~~SFAS ~~above,~~No. 162 ~~including~~identifies the ~~hiring~~sources inof ~~December~~accounting ~~2005~~principles ofand athe ~~new~~framework ~~chief~~for ~~financial~~selecting ~~officer~~the ~~who~~principles ~~served~~used ~~from~~in ~~January~~the ~~2006~~preparation toof ~~August~~financial ~~2006~~statements. ~~That~~ ~~chief~~SFAS ~~financial~~No. 162 ~~officer,~~will asbe ~~part~~effective of60 ~~his~~days ~~review~~following the ofSecurities ~~the~~and ~~Company~~Exchange Commission’s ~~accounting~~approval ~~practices, found a number~~ of ~~issues which he brought to~~ the ~~attention~~Public ofCompany ~~the~~Accounting ~~Company’s~~Oversight ~~board~~Board ofamendments ~~directors~~to ~~and~~United ~~senior~~States ~~management. Consequently,~~Auditing onStandards ~~February~~Section 8411, ~~2006,~~“The ~~the~~Meaning ~~board~~ of ~~directors~~Present ~~concluded~~Fairly ~~that~~in ~~the~~Conformity ~~Company’s~~with ~~previously~~Generally ~~issued financial statements~~Accepted ~~included~~Accounting orPrinciples.” ~~otherwise~~We ~~summarized~~are incurrently ~~its~~evaluating ~~Annual Report on Form 10-K for~~ the ~~fiscal~~impact, ~~year~~if ~~ended March 31~~any, ~~2005~~that ~~(including~~ the ~~accompanying~~adoption ~~report~~ of ~~the~~SFAS ~~Company’s~~No. 162 ~~independent~~will ~~registered~~have ~~public accounting firm) and its Quarterly Reports~~ on ~~Form~~ ~~10-Q~~our ~~for~~results ~~each~~ of ~~the quarters ended June 30~~operations, ~~2005~~financial ~~and~~position ~~September 30,~~or ~~2005~~cash ~~should no longer be relied upon~~flows.

In36 connection with the then chief financial officer’s review, and the continued review by a new chief financial officer hired in August 2006, a number of errors were found in the Company’s previously issued financial statements. In addition, the audit committee of the Company’s board of directors, aided by an independent law firm and forensic accountants, conducted an inquiry.

Based on further evaluations performed by management with assistance from its consultants, and based on information obtained in connection with the audit committee’s inquiry, management identified additional deficiencies related to the internal control system, including deficiencies in the controls related to the Company’s monthly financial close and financial reporting processes and accounting systems. Specifically, the deficiencies resulted from the absence of the following controls: (i) oversight of accounting and financial reporting personnel; (ii) certain key reconciliation controls; (iii) controls over the appropriate application of generally accepted accounting principles including accounting for income taxes; (iv) review procedures; (v) controls over the ability of financial management to override financial reporting and accounting systems; (vi) controls over information technology system development, program changes, system access and end-user computing; and (vii) an effective control environment. Management evaluated the impact of the deficiencies and has concluded that each of the control deficiencies described above represents a material weakness as of June 30, 2007.

Based on the inquiry commenced by the audit committee and on recommendations made by the audit committee and its advisors, the Company’s board of directors and its senior management implemented a number of remedial actions, including the hiring of a new chief accounting officer, a senior vice president of process improvement, a senior vice president of tax, a vice president of internal audit, a corporate controller and an assistant controller, as well as a new executive vice president of consumer marketing responsible for subscription circulation data and processes. Other remedial actions are also being implemented.

The Company also has taken steps to improve its financial close process and financial reporting system including the: (i) preparation and review of key and certain other reconciliations, (ii) development of proper accounting policies and procedures to ensure compliance with generally accepted accounting principles, (iii) implementation of appropriate review procedures related to the work product provided by members of the accounting department; and (iv) implementation of certain initiatives to improve our processes and controls around our financial systems. These improvements are not yet sufficiently effective and, based on the evaluation thereof by our Company’s management, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are not operating effectively. As of June 30, 2007, therefore, our disclosure controls and procedures were not effective.

OnItem ~~August 20,~~3. ~~2007,~~Quantitative ~~the audit committee of the board of directors of the Company concluded that the Company’s previously issued financial statements for fiscal year 2006~~ and ~~the~~Qualitative ~~subsequent~~Disclosures ~~three~~about ~~quarters~~Market should no longer be relied upon because of the omission of certain footnote disclosure. See Note 12, “Supplemental Condensed Consolidating Financial Information,” in the Notes to Unaudited Condensed Consolidated Financial Statements in this Form 10-Q. Risk

~~In light of the material weaknesses~~During ~~described above,~~ the ~~Company~~fiscal ~~performed~~quarter ~~additional~~ended ~~procedures~~September 30, to2008, ~~ensure~~there ~~that~~were ~~its~~no ~~Unaudited~~significant ~~Condensed~~changes ~~Consolidated~~related ~~Financial~~to ~~Statements are prepared in accordance with generally accepted accounting principles. Accordingly, management has concluded that~~ the Company’s ~~Unaudited~~market ~~Condensed~~risk ~~Consolidated~~exposure ~~Financial~~since ~~Statements~~March 31, ~~for the periods covered in this Form 10-Q are fairly stated in all material respects in accordance with generally accepted accounting principles~~2008.

Item 4T.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, 2008, the end of the period covered by this Form 10-Q, our management performed, under the supervision and with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2008, our disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting

No changes were made in our internal control over financial reporting during the quarter ended September 30, 2008, that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

Because the focus of some of our publications often involves celebrities or controversial subjects, the risk of defamation or invasion of privacy litigation exists. Our experience indicates that the claims for damages made in such lawsuits are usually defensible and heavily inflated and, in any event, any reasonably foreseeable material liability or settlement would likely be covered by insurance. There are currently no claims pending that we believe would have a material adverse effect on our operations.

Item 1A.

Risk Factors

There have been no material changes to the Company’s risk factors, as previously disclosed in the Company’s March 31, ~~2007~~2008 10-K in response to Item 1A thereof, during the fiscal quarter ended ~~June~~September 30, ~~2007~~2008.

Item 6.

Exhibits

Exhibit 31.1 Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a).


3.1		Amended and Restated By-laws of the Company.

10.1		American Media, Inc. EBITDA Incentive Plan for Michael Porche, effective for fiscal year 2009. **

10.2		American Media, Inc. Newsstand Net Profit Plan for Michael Porche, effective for fiscal year 2009. **

31.1		Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a).

31.2		Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a).

32		Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~Exhibit~~** ~~31.2~~Portions ~~Certification~~ of ~~principal~~the ~~financial~~above ~~officer~~exhibits have been omitted pursuant to ~~Rule 13a-14(~~a~~)/15d-14(a).~~ request for confidential treatment filed with the Securities and Exchange Commission.

~~Exhibit~~37 ~~32 Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

SIGNATURES

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

		AMERICAN MEDIA OPERATIONS, INC. Registrant
	AMERICAN MEDIA OPERATIONS, INC.
Date: October 1, 2007
	Registrant
		/s/ DAVID J. PECKER
Date: January 9, 2009
		David J. Pecker Chief Executive Officer (principal executive officer)
	/s/ DAVID J. PECKER
Date: October 1, 2007
	David J. Pecker
		/s/ JOHN F. CRAVEN
	Chief Executive Officer
		John F. Craven Chief Financial Officer (principal financial officer)
	(principal executive officer)
Date: January 9, 2009	/s/ DEAN D. DURBIN
	Dean D. Durbin
	Chief Financial Officer and Chief Operating Officer
	(principal financial officer)

2738

~~Exhibit~~Exhibits ~~Index~~

Exhibit Number		Description
Exhibit No.		Description
Exhibit 31.1		Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a).
3.1		Amended and Restated By-laws of the Company.
Exhibit 31.2		Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a).
10.1		American Media, Inc. EBITDA Incentive Plan for Michael Porche, effective for fiscal year 2009.**
Exhibit 32		Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
10.2		American Media, Inc. Newsstand Net Profit Plan for Michael Porche, effective for fiscal year 2009.**
31.1		Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2		Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a).
32		Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

28** Portions of the above exhibits have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

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Filing Compare · AMERICAN MEDIA OPERATIONS INC