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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the Quarterly Period Ended September 27, 2004



OR



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



Commission file number(s)  1-11112



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AMERICAN MEDIA OPERATIONS, INC.

(Exact name of the registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 59-2094424                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employee Identification No.)



|                                             |  |           
|-------------------------------------------- |  | ----------
|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



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



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



As of November 10, 2004 there
were 7,507 shares of common stock outstanding.



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##### Table of Contents

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

September 27, 2004



|                                                                                              |  |        
|--------------------------------------------------------------------------------------------- |  | -------
|                                                                                              |  | Page(s)
|PART I. FINANCIAL INFORMATION                                                                 |  |        
|                                                                                              | 
|Item 1. Financial Statements (Unaudited) -                                                    |  |        
|Condensed Consolidated Balance Sheets                                                         |  | 3      
|Condensed Consolidated Statements of Income                                                   |  | 4-5    
|Condensed Consolidated Statements of Comprehensive Income                                     |  | 6-7    
|Condensed Consolidated Statements of Cash Flows                                               |  | 8      
|Notes to Condensed Consolidated Financial Statements                                          |  | 9-16   
|                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 1722  
|                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |  | 22     
|                                                                                              | 
|Item 4. Controls and Procedures                                                               |  | 23     
|                                                                                              | 
|PART II. OTHER INFORMATION                                                                    |  |        
|                                                                                              | 
|Item 1. Legal Proceedings                                                                     |  | 24     
|Item 6. Exhibits                                                                              |  | 24     
|                                                                                              | 
|Signature                                                                                     |  | 25     



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in 000s, except share information)



|                                                                  |  |               |           |   |                    |   |           |  
|----------------------------------------------------------------- |  | ------------- | --------- | - | ------------------ | - | --------- | -
|                                                                  |  | March 29,2004 |           |   | September 27, 2004 |  
|ASSETS                                                            |  |               |           |   |                    |   |           |  
|CURRENT ASSETS:                                                   |  |               |           |   |                    |   |           |  
|Cash and cash equivalents                                         |  | $             | 22,192    |   |                    | $ | 15,642    |  
|Receivables, net                                                  |  |               | 66,907    |   |                    |   | 64,774    |  
|Inventories                                                       |  |               | 34,518    |   |                    |   | 20,904    |  
|Prepaid expenses and other                                        |  |               | 11,391    |   |                    |   | 16,058    |  
|                                                                  |  |               |           |   |                    |   |           |  
|Total Current Assets                                              |  |               | 135,008   |   |                    |   | 117,378   |  
|                                                                  |  |               |           |   |                    |   |           |  
|PROPERTY AND EQUIPMENT, at cost:                                  |  |               |           |   |                    |   |           |  
|Land and buildings                                                |  |               | 4,580     |   |                    |   | 4,313     |  
|Machinery, fixtures and equipment                                 |  |               | 41,003    |   |                    |   | 42,684    |  
|Display racks                                                     |  |               | 46,810    |   |                    |   | 46,644    |  
|                                                                  |  |               |           |   |                    |   |           |  
|                                                                  |  |               | 92,393    |   |                    |   | 93,641    |  
|Less  accumulated depreciation                                   |  |               | (47,340   | ) |                    |   | (52,112   | )
|                                                                  |  |               |           |   |                    |   |           |  
|                                                                  |  |               | 45,053    |   |                    |   | 41,529    |  
|                                                                  |  |               |           |   |                    |   |           |  
|LONG TERM NOTE RECEIVABLE, net                                    |  |               | 1,384     |   |                    |   | 1,384     |  
|                                                                  |  |               |           |   |                    |   |           |  
|DEFERRED DEBT COSTS, net                                          |  |               | 24,996    |   |                    |   | 23,238    |  
|                                                                  |  |               |           |   |                    |   |           |  
|OTHER LONG TERM ASSETS                                            |  |               | 1,459     |   |                    |   | 2,130     |  
|                                                                  |  |               |           |   |                    |   |           |  
|GOODWILL, net of accumulated amortization of $74,757              |  |               | 661,639   |   |                    |   | 661,639   |  
|                                                                  |  |               |           |   |                    |   |           |  
|OTHER INTANGIBLES                                                 |  |               | 627,937   |   |                    |   | 620,835   |  
|                                                                  |  |               |           |   |                    |   |           |  
|                                                                  |  | $             | 1,497,476 |   |                    | $ | 1,468,133 |  
|                                                                  |  |               |           |   |                    |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                              |  |               |           |   |                    |   |           |  
|CURRENT LIABILITIES:                                              |  |               |           |   |                    |   |           |  
|Current portion of term loan                                      |  | $             | 5,734     |   |                    | $ | 5,731     |  
|11.625% Senior Subordinated Notes Due 2004                        |  |               | 740       |   |                    |   | 740       |  
|Accounts payable                                                  |  |               | 42,076    |   |                    |   | 35,930    |  
|Accrued expenses                                                  |  |               | 59,395    |   |                    |   | 53,558    |  
|Deferred revenues                                                 |  |               | 39,614    |   |                    |   | 29,237    |  
|                                                                  |  |               |           |   |                    |   |           |  
|Total current liabilities                                         |  |               | 147,559   |   |                    |   | 125,196   |  
|                                                                  |  |               |           |   |                    |   |           |  
|TERM LOAN AND REVOLVING CREDIT COMMITMENT, net of current portion |  |               | 433,918   |   |                    |   | 421,087   |  
|                                                                  |  |               |           |   |                    |   |           |  
|SUBORDINATED INDEBTEDNESS:                                        |  |               |           |   |                    |   |           |  
|10.25% Senior Subordinated Notes Due 2009                         |  |               | 400,000   |   |                    |   | 400,000   |  
|Bond Premium on 10.25% Senior Subordinated Notes Due 2009         |  |               | 530       |   |                    |   | 478       |  
|8.875% Senior Subordinated Notes Due 2011                         |  |               | 150,000   |   |                    |   | 150,000   |  
|                                                                  |  |               |           |   |                    |   |           |  
|                                                                  |  |               | 550,530   |   |                    |   | 550,478   |  
|                                                                  |  |               |           |   |                    |   |           |  
|DEFERRED INCOME TAXES                                             |  |               | 158,323   |   |                    |   | 160,930   |  
|                                                                  |  |               |           |   |                    |   |           |  
|STOCKHOLDERS EQUITY:                                             |  |               |           |   |                    |   |           |  
|Common stock, $.20 par value; 7,507 shares issued and outstanding |  |               | 2         |   |                    |   | 2         |  
|Additional paid-in capital                                        |  |               | 281,857   |   |                    |   | 281,757   |  
|Accumulated other comprehensive income (loss)                     |  |               | (28       | ) |                    |   | (53       | )
|Accumulated deficit                                               |  |               | (74,685   | ) |                    |   | (71,264   | )
|                                                                  |  |               |           |   |                    |   |           |  
|TOTAL STOCKHOLDERS EQUITY                                        |  |               | 207,146   |   |                    |   | 210,442   |  
|                                                                  |  |               |           |   |                    |   |           |  
|                                                                  |  | $             | 1,497,476 |   |                    | $ | 1,468,133 |  
|                                                                  |  |               |           |   |                    |   |           |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN 000s)



|                                                  |  |                                      |         |   |                                        |   |         |  
|------------------------------------------------- |  | ------------------------------------ | ------- | - | -------------------------------------- | - | ------- | -
|                                                  |  | Two FiscalQuartersEndedSept. 29,2003 |         |   | Two Fiscal QuartersEnded Sept. 27,2004 |  
|OPERATING REVENUES:                               |  |                                      |         |   |                                        |   |         |  
|Circulation                                       |  | $                                    | 159,816 |   |                                        | $ | 169,087 |  
|Advertising                                       |  |                                      | 76,168  |   |                                        |   | 85,448  |  
|Other                                             |  |                                      | 15,863  |   |                                        |   | 15,474  |  
|                                                  |  |                                      |         |   |                                        |   |         |  
|                                                  |  |                                      | 251,847 |   |                                        |   | 270,009 |  
|                                                  |  |                                      |         |   |                                        |   |         |  
|OPERATING EXPENSES:                               |  |                                      |         |   |                                        |   |         |  
|Editorial                                         |  |                                      | 29,107  |   |                                        |   | 29,186  |  
|Production                                        |  |                                      | 64,922  |   |                                        |   | 81,127  |  
|Distribution, circulation and other cost of sales |  |                                      | 38,677  |   |                                        |   | 39,877  |  
|Selling, general and administrative expenses      |  |                                      | 40,077  |   |                                        |   | 50,676  |  
|Loss on insurance settlement                      |  |                                      | 200     |   |                                        |   |        |  
|Restructuring expense                             |  |                                      | 2,705   |   |                                        |   |        |  
|Depreciation and amortization                     |  |                                      | 20,211  |   |                                        |   | 22,075  |  
|                                                  |  |                                      |         |   |                                        |   |         |  
|                                                  |  |                                      | 195,899 |   |                                        |   | 222,941 |  
|                                                  |  |                                      |         |   |                                        |   |         |  
|OPERATING INCOME                                  |  |                                      | 55,948  |   |                                        |   | 47,068  |  
|                                                  |  |                                     
|INTEREST EXPENSE, net                             |  |                                      | (37,689 | ) |                                        |   | (40,975 | )
|OTHER INCOME (EXPENSE), net                       |  |                                      | (60     | ) |                                        |   | (101    | )
|                                                  |  |                                      |         |   |                                        |   |         |  
|INCOME BEFORE PROVISION FOR INCOME TAXES          |  |                                      | 18,199  |   |                                        |   | 5,992   |  
|                                                  |  |                                     
|PROVISION FOR INCOME TAXES                        |  |                                      | 6,879   |   |                                        |   | 2,571   |  
|                                                  |  |                                      |         |   |                                        |   |         |  
|NET INCOME                                        |  | $                                    | 11,320  |   |                                        | $ | 3,421   |  
|                                                  |  |                                      |         |   |                                        |   |         |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN 000s)



|                                                  |  |                                   |         |   |                                     |   |         |  
|------------------------------------------------- |  | --------------------------------- | ------- | - | ----------------------------------- | - | ------- | -
|                                                  |  | FiscalQuarter EndedSept. 29, 2003 |         |   | Fiscal Quarter Ended Sept. 27, 2004 |  
|OPERATING REVENUES:                               |  |                                   |         |   |                                     |   |         |  
|Circulation                                       |  | $                                 | 80,472  |   |                                     | $ | 86,959  |  
|Advertising                                       |  |                                   | 38,475  |   |                                     |   | 42,373  |  
|Other                                             |  |                                   | 7,926   |   |                                     |   | 7,230   |  
|                                                  |  |                                   |         |   |                                     |   |         |  
|                                                  |  |                                   | 126,873 |   |                                     |   | 136,562 |  
|                                                  |  |                                   |         |   |                                     |   |         |  
|OPERATING EXPENSES:                               |  |                                   |         |   |                                     |   |         |  
|Editorial                                         |  |                                   | 15,395  |   |                                     |   | 14,487  |  
|Production                                        |  |                                   | 32,979  |   |                                     |   | 40,114  |  
|Distribution, circulation and other cost of sales |  |                                   | 20,085  |   |                                     |   | 21,456  |  
|Selling, general and administrative expenses      |  |                                   | 18,258  |   |                                     |   | 27,269  |  
|Loss on insurance settlement                      |  |                                   | 200     |   |                                     |   |        |  
|Restructuring expense                             |  |                                   | 2,705   |   |                                     |   |        |  
|Depreciation and amortization                     |  |                                   | 10,193  |   |                                     |   | 10,970  |  
|                                                  |  |                                   |         |   |                                     |   |         |  
|                                                  |  |                                   | 99,815  |   |                                     |   | 114,296 |  
|                                                  |  |                                   |         |   |                                     |   |         |  
|OPERATING INCOME                                  |  |                                   | 27,058  |   |                                     |   | 22,266  |  
|                                                  |  |                                  
|INTEREST EXPENSE, net                             |  |                                   | (17,639 | ) |                                     |   | (17,539 | )
|OTHER INCOME (EXPENSE), net                       |  |                                   | 95      |   |                                     |   | (45     | )
|                                                  |  |                                   |         |   |                                     |   |         |  
|INCOME BEFORE PROVISION FOR INCOME TAXES          |  |                                   | 9,514   |   |                                     |   | 4,682   |  
|                                                  |  |                                  
|PROVISION FOR INCOME TAXES                        |  |                                   | 3,576   |   |                                     |   | 1,981   |  
|                                                  |  |                                   |         |   |                                     |   |         |  
|NET INCOME                                        |  | $                                 | 5,938   |   |                                     | $ | 2,701   |  
|                                                  |  |                                   |         |   |                                     |   |         |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

(IN 000s)



|                                         |  |                                      |        |   |                                         |   |       |  
|---------------------------------------- |  | ------------------------------------ | ------ | - | --------------------------------------- | - | ----- | -
|                                         |  | Two FiscalQuartersEndedSept. 29,2003 |        |   | Two Fiscal Quarters Ended Sept. 27,2004 |  
|Net income                               |  | $                                    | 11,320 |   |                                         | $ | 3,421 |  
|                                         |  |                                      |        |   |                                         |   |       |  
|Other comprehensive income (loss)        |  |                                      |        |   |                                         |   |       |  
|                                         |  |                                     
|Foreign currency translation adjustments |  |                                      | (95    | ) |                                         |   | (25   | )
|                                         |  |                                      |        |   |                                         |   |       |  
|Other comprehensive income (loss)        |  |                                      | (95    | ) |                                         |   | (25   | )
|                                         |  |                                      |        |   |                                         |   |       |  
|Comprehensive income                     |  | $                                    | 11,225 |   |                                         | $ | 3,396 |  
|                                         |  |                                      |        |   |                                         |   |       |  



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



6



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

(IN 000s)



|                                         |  |                                  |       |   |                                     |   |      
|---------------------------------------- |  | -------------------------------- | ----- | - | ----------------------------------- | - | -----
|                                         |  | FiscalQuarterEndedSept. 29, 2003 |       |   | Fiscal Quarter Ended Sept. 27, 2004
|Net income                               |  | $                                | 5,938 |   |                                     | $ | 2,701
|                                         |  |                                  |       |   |                                     |   |      
|Other comprehensive income (loss)        |  |                                  |       |   |                                     |   |      
|                                         |  |                                 
|Foreign currency translation adjustments |  |                                  | (153  | ) |                                     |   | 217  
|                                         |  |                                  |       |   |                                     |   |      
|Other comprehensive income (loss)        |  |                                  | (153  | ) |                                     |   | 217  
|                                         |  |                                  |       |   |                                     |   |      
|Comprehensive income                     |  | $                                | 5,785 |   |                                     | $ | 2,918
|                                         |  |                                  |       |   |                                     |   |      



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN 000s)



|                                                                                   |  |                                         |         |   |                                          |   |         |  
|---------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | - | ---------------------------------------- | - | ------- | -
|                                                                                   |  | Two Fiscal QuartersEnded Sept. 29, 2003 |         |   | Two Fiscal Quarters Ended Sept. 27, 2004 |  
|Cash Flows from Operating Activities:                                              |  |                                         |         |   |                                          |   |         |  
|Net income                                                                         |  | $                                       | 11,320  |   |                                          | $ | 3,421   |  
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Adjustments to reconcile net income to net cash provided by operating activities - |  |                                         |         |   |                                          |   |         |  
|Gain on sale of fixed assets                                                       |  |                                         | (68     | ) |                                          |   | (28     | )
|Bond premium amortization                                                          |  |                                         | (52     | ) |                                          |   | (52     | )
|Depreciation of property and equipment and amortization of intangible assets       |  |                                         | 20,211  |   |                                          |   | 22,075  |  
|Deferred debt cost amortization                                                    |  |                                         | 3,197   |   |                                          |   | 3,240   |  
|Non-cash compensation charge                                                       |  |                                         | 66      |   |                                          |   |        |  
|Decrease (increase) in -                                                           |  |                                         |         |   |                                          |   |         |  
|Receivables                                                                        |  |                                         | (35     | ) |                                          |   | 2,133   |  
|Inventories                                                                        |  |                                         | (10,362 | ) |                                          |   | 13,614  |  
|Prepaid expenses and other                                                         |  |                                         | (1,358  | ) |                                          |   | (4,667  | )
|Other long term assets                                                             |  |                                         |        |   |                                          |   | (671    | )
|Increase (decrease) in -                                                           |  |                                         |         |   |                                          |   |         |  
|Accounts payable                                                                   |  |                                         | (3,740  | ) |                                          |   | (6,146  | )
|Accrued expenses                                                                   |  |                                         | (6,892  | ) |                                          |   | (2,031  | )
|Accrued interest                                                                   |  |                                         | 391     |   |                                          |   | 653     |  
|Accrued income taxes                                                               |  |                                         | (192    | ) |                                          |   | (1,852  | )
|Deferred revenues                                                                  |  |                                         | (8,700  | ) |                                          |   | (10,377 | )
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Total adjustments                                                                  |  |                                         | (7,534  | ) |                                          |   | 15,891  |  
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Net cash provided by operating activities                                          |  |                                         | 3,786   |   |                                          |   | 19,312  |  
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Cash Flows from Investing Activities:                                              |  |                                         |         |   |                                          |   |         |  
|Capital expenditures                                                               |  |                                         | (12,505 | ) |                                          |   | (11,433 | )
|Proceeds from the sale of fixed assets                                             |  |                                         | 148     |   |                                          |   | 12      |  
|Payment received on long term note receivable                                      |  |                                         | 31      |   |                                          |   |        |  
|Acquisition of business                                                            |  |                                         | (8,421  | ) |                                          |   |        |  
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Net cash used in investing activities                                              |  |                                         | (20,747 | ) |                                          |   | (11,421 | )
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Cash Flows from Financing Activities:                                              |  |                                         |         |   |                                          |   |         |  
|Term loan and revolving credit commitment principal repayments, net of borrowings  |  |                                         | (6,263  | ) |                                          |   | (12,834 | )
|Capital contribution                                                               |  |                                         | 6,138   |   |                                          |   |        |  
|Return of capital contribution                                                     |  |                                         |        |   |                                          |   | (100    | )
|Payment of deferred debt costs                                                     |  |                                         | (736    | ) |                                          |   | (1,482  | )
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Net cash provided by (used in) financing activities                                |  |                                         | (861    | ) |                                          |   | (14,416 | )
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Effect of Exchange Rate Changes on Cash                                            |  |                                         | (95     | ) |                                          |   | (25     | )
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Net Decrease in Cash and Cash Equivalents                                          |  |                                         | (17,917 | ) |                                          |   | (6,550  | )
|Cash and Cash Equivalents at Beginning of Period                                   |  |                                         | 40,475  |   |                                          |   | 22,192  |  
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Cash and Cash Equivalents at End of Period                                         |  | $                                       | 22,558  |   |                                          | $ | 15,642  |  
|                                                                                   |  |                                         |         |   |                                          |   |         |  
|Supplemental Disclosures of Cash Flow Information:                                 |  |                                         |         |   |                                          |   |         |  
|Cash paid during the period for -                                                  |  |                                         |         |   |                                          |   |         |  
|Income taxes                                                                       |  | $                                       | 2,268   |   |                                          | $ | 530     |  
|Interest                                                                           |  |                                         | 35,686  |   |                                          |   | 34,771  |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 27, 2004

(000s omitted in all tables)

(unaudited)



(1) BASIS OF PRESENTATION



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP (accounting principles generally accepted in the United
States of America) for interim financial information and with the instructions to Form 10-Q. There has been no material change in the information disclosed in the notes to consolidated financial statements included in the Annual Report on Form 10-K
of American Media Operations, Inc. (a wholly-owned subsidiary of American Media, Inc.) and subsidiaries (the Company) for the fiscal year ended March 29, 2004.



In the opinion of management, all adjustments considered necessary for a fair presentation have been included herein. Operating results for
the fiscal period ended September 27, 2004, are not necessarily indicative of the results that may be expected for future periods.



The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



(2) ACQUISITIONS



On January 23, 2003, the Company and EMP Group LLC, the owner of 100% of the common stock of American Media, Inc. (Media),
acquired Weider Publications LLC (the Weider Acquisition), a newly formed company to which the magazine business of Weider Publications, Inc. and Weider Interactive Networks, Inc. had been contributed by Weider Health and Fitness LLC and
Weider Interactive Networks, Inc. The aggregate purchase price was $357.3 million, which includes a post-closing working capital adjustment of $7.3 million.



(3) REVENUE RECOGNITION



Substantially all publication sales, except subscriptions, are made through unrelated distributors. Issues, other than special topic issues, are placed on sale approximately one week prior to the issue date for our
weekly publications. Revenues and related expenses for our weekly publications and special topic issues are recognized for financial statement purposes after delivery has occurred and all services have been rendered, which coincides with the on-sale
date. Monthly issues revenue and related expenses are recognized at the date the copies are received by our third party wholesalers. On or about the date each issue is placed on sale, we receive a percentage of the issues estimated newsstand
sales proceeds for our publications as an advance from the distributors. All of our publications are sold with full return privileges.



The two fiscal quarters ended September 27, 2004 include 27 issues of our weekly publications versus 26 issues for the prior years comparable two fiscal quarters
due to a change in the scheduled delivery dates of the weekly publications. The delivery of these publications generally moved to a pre-weekend schedule during the quarter ended September 27, 2004. Revenues from this additional issue of the
Companys weekly publications were partially offset by one less issue of Mens Fitness and Muscle and Fitness Hers in the current fiscal quarter. The net impact on operating revenues was an increase of $4.6 million.



Revenues from copy sales are net of reserves provided for expected sales
returns, which are established in accordance with GAAP, after considering such factors as sales history and available market information. We continually monitor the adequacy of the reserves and make adjustments when necessary. Revenues are also net
of product placement costs (retail display allowances) paid to the retailers.



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Subscriptions received in advance of the issue date are recognized as income over the term of the subscription as they
are fulfilled and mailed to the subscriber.



Deferred revenues are comprised of
the following:



|              |  |               |        |                    |   |       
|------------- |  | ------------- | ------ | ------------------ | - | ------
|              |  | March 29,2004 |        | September 27, 2004
|Single Copy   |  | $             | 5,590  |                    | $ |      
|Subscriptions |  |               | 32,850 |                    |   | 28,962
|Advertising   |  |               | 1,174  |                    |   | 275   
|              |  |               |        |                    |   |       
|              |  | $             | 39,614 |                    | $ | 29,237
|              |  |               |        |                    |   |       



Other revenues, primarily from
marketing services performed for third parties by Distribution Services, Inc. (DSI), a wholly-owned subsidiary, are recognized when the service is performed.



(4) INVENTORIES



Inventories are stated at the lower of cost or market. We use the first-in, first-out (FIFO) cost method of valuation. Inventories are comprised of the following:



|                                                                             |  |               |        |                    |   |       
|---------------------------------------------------------------------------- |  | ------------- | ------ | ------------------ | - | ------
|                                                                             |  | March 29,2004 |        | September 27, 2004
|Raw materials  paper                                                        |  | $             | 27,070 |                    | $ | 16,707
|Finished product - paper, production and distribution costs of future issues |  |               | 7,448  |                    |   | 4,197 
|                                                                             |  |               |        |                    |   |       
|                                                                             |  | $             | 34,518 |                    | $ | 20,904
|                                                                             |  |               |        |                    |   |       



(5) SUBSCRIPTION ACQUISITION COSTS



Subscription acquisition costs are expensed the first time the
advertising takes place, except for certain direct-response advertising, the primary purpose of which is to elicit sales from customers who can be shown to have responded specifically to the advertising and that result in probable future economic
benefits. Direct-response advertising consists of television advertising for subscriptions, product promotional mailings, magazine insert cards, telemarketing and subscription promotions. These direct-response advertising costs are capitalized as
assets and amortized over the estimated period of future benefit. The direct-response advertising costs are amortized over the related one-year subscription period. At September 27, 2004 and March 29, 2004, $3,775,000 and $1,786,000, respectively,
of subscription acquisition advertising was reported as assets. Amortization expense related to subscription acquisition advertising for the two quarters ended September 27, 2004, was $3,294,000.



(6) GOODWILL AND OTHER INTANGIBLE ASSETS



Intangible assets not subject to amortization had a carrying value of $557,365,000 as of
March 29, 2004 and September 27, 2004, and consist of tradenames with indefinite lives.



Intangible assets subject to amortization after the adoption of SFAS No. 142 consist of the following:



|                                      |  |               |  |                     |         |                         |   |         |     |  |                     |        |                         |   |         |     |   |         |   |  |   |       
|------------------------------------- |  | ------------- |  | ------------------- | ------- | ----------------------- | - | ------- | --- |  | ------------------- | ------ | ----------------------- | - | ------- | --- | - | ------- | - |  | - | ------
|                                      |  |               |  | March 29, 2004      |         | September 27, 2004     
|                                      |  | Range ofLives |  | GrossCarryingAmount |         | AccumulatedAmortization |   |         | Net |  | GrossCarryingAmount |        | AccumulatedAmortization |   |         | Net
|Covenants not to compete              |  | 5-10          |  | $                   | 22,500  |                         | $ | (7,466  | )   |  | $                   | 15,034 |                         | $ | 22,500  |     | $ | (8,923  | ) |  | $ | 13,577
|Subscriber lists                      |  | 3-15          |  |                     | 66,238  |                         |   | (24,308 | )   |  |                     | 41,930 |                         |   | 66,238  |     |   | (28,124 | ) |  |   | 38,114
|Advertising relationships             |  | 3             |  |                     | 7,750   |                         |   | (2,865  | )   |  |                     | 4,885  |                         |   | 7,750   |     |   | (4,086  | ) |  |   | 3,664 
|Non-subscriber customer relationships |  | 8             |  |                     | 10,150  |                         |   | (1,427  | )   |  |                     | 8,723  |                         |   | 10,150  |     |   | (2,035  | ) |  |   | 8,115 
|                                      |  |               |  |                     |         |                         |   |         |     |  |                     |        |                         |   |         |     |   |         |   |  |   |       
|                                      |  |               |  | $                   | 106,638 |                         | $ | (36,066 | )   |  | $                   | 70,572 |                         | $ | 106,638 |     | $ | (43,168 | ) |  | $ | 63,470
|                                      |  |               |  |                     |         |                         |   |         |     |  |                     |        |                         |   |         |     |   |         |   |  |   |       



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Amortization expense of intangible assets for the two fiscal quarters ended September 29, 2003 and September 27, 2004,
was $7.1 million and $7.1 million, respectively.



Goodwill and intangibles with
indefinite lives are tested for impairment annually or more frequently when events or circumstances indicate that an impairment may have occurred. The Company uses the beginning of its fiscal fourth quarter as the date for its annual impairment
tests. The Company performed its annual impairment test for fiscal 2004 as of the beginning of the fourth quarter of fiscal 2004 and found no impairment.



Based on the carrying value of identified intangible assets recorded at September 27, 2004, and assuming no subsequent impairment of the underlying assets, annual
amortization expense for the next five fiscal years is expected to be as follows:



|            |  |   |       
|----------- |  | - | ------
|Fiscal Year |  |  
|2005        |  | $ | 14,204
|2006        |  |   | 12,122
|2007        |  |   | 8,269 
|2008        |  |   | 8,114 
|2009        |  |   | 7,466 
|            |  |   |       
|Total       |  | $ | 50,175
|            |  |   |       



(7) INCOME TAXES



The Company accounts for income taxes under the liability method in accordance with SFAS No.
109, Accounting for Income Taxes. The provision for income taxes includes deferred income taxes resulting from items reported in different periods for income tax and financial statement purposes. Deferred tax assets and liabilities
represent the expected future tax consequences of the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effects of changes in tax rates on deferred tax assets and
liabilities are recognized in the period that includes the enactment date.



(8) CREDIT AGREEMENT



The Companys bank credit agreement
(the Credit Agreement), which was comprised of a $340 million term loan commitment, has been amended a number of times since inception. On November 1, 1999, the Credit Agreement was amended to increase the term loan amount to $430
million and provide a $60 million revolving credit commitment. We also amended the Credit Agreement on February 14, 2002, in connection with the subordinated notes. The amendment included changes to the interest rates discussed below, as well as
changes to certain financial covenants. The Company amended the Credit Agreement on May 22, 2002. This amendment restructured the marginal interest rate on the Companys term loans. Additionally, the Company amended the Credit Agreement on
January 23, 2003, in connection with the Weider Acquisition to increase the term loan amount by $140 million. The Company also amended the Credit Agreement on February 17, 2004, which changed the total leverage ratio covenant from 6.25 to 6.50 for
the December 2003 and March 2004 quarters. Additionally, the Credit Agreement was amended on June 25, 2004, which changed the Companys total leverage ratio covenant and certain interest coverage ratio covenants through June 2006. As a result
of the amendment, the total leverage ratio covenant is 6.95 through March 2005, 6.75 from June 2005 to March 2006 and 6.50 from June 2006 and thereafter. The interest coverage ratio remains at 1.75 from March 2004 and thereafter.



(a) Borrowings under the term loan commitments are payable
in varying quarterly installments from July 2001 through April 2007. We are required to make Excess Cash Flow payments (as defined), which will be applied ratably to the then outstanding term loans. There was no required Excess Cash Flow payment for
fiscal 2004.



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(b) Revolving Credit Commitment  The Credit Agreement also provides for
additional borrowings up to a maximum of $60 million. This commitment, which expires in April 2006, allows funds to be borrowed and repaid from time to time with permanent reductions in the revolving credit commitment permitted at our option. As of
September 27, 2004, no amounts were outstanding under the revolving credit facility.



(c) Commitment Fees  We are required to pay a commitment fee ranging from 3/8% to 1/2% of the unused portion of the revolving
commitment.



(d) Guarantees, Collateral and
Financial Covenants  Our obligations under the Credit Agreement are guaranteed by all of our subsidiaries and by Media. The obligations and such guarantees are secured by (i) a pledge by the Company of all of the capital stock of its
subsidiaries, (ii) a pledge of all of the capital stock of the Company and (iii) a security interest in substantially all of the assets of the Companys subsidiaries.



In addition to the above, the Credit Agreement also contains certain covenants that, among others, restrict paying cash dividends, incurring
additional indebtedness, entering into certain mergers or consolidations, making capital expenditures and selling or otherwise disposing of assets. We are also required to satisfy certain financial tests relating to operating cash flow and debt
coverage ratios.



The effective interest rate under the Credit Agreement,
including amounts borrowed under the term loan commitments and revolving credit commitment, as of September 27, 2004 was 4.4% and the weighted average effective interest rates for the two fiscal quarters ended September 29, 2003 and September 27,
2004 were 4.1% and 4.2%, respectively.



American Media Operations, Inc. has no
material assets or operations other than the investments in our subsidiaries. The subordinated notes are unconditionally guaranteed, on a senior subordinated basis, by all of our domestic subsidiaries. Each domestic subsidiary that will be organized
in the future by us, unless such subsidiary is designated as an unrestricted subsidiary, will jointly, severally, fully and unconditionally guarantee the subordinated notes on a senior subordinated basis. Subordinated note guarantees are joint and
several, full and unconditional and general unsecured obligations of the note guarantors. The note guarantors are our subsidiaries. At present, the note guarantors comprise all of our direct and indirect domestic subsidiaries. Note guarantees are
subordinated in right of payment to all existing and future senior debt of the note guarantors, including the credit facility, and are also effectively subordinated to all secured obligations of note guarantors to the extent of the assets securing
such obligations, including the credit facility. Furthermore, the subordinated note indentures permit note guarantors to incur additional indebtedness, including senior debt, subject to certain limitations. We have not presented separate financial
statements and other disclosures concerning each of the note guarantors, as these disclosures are not applicable under SEC rules and regulations.



(9) FAIR VALUE OF FINANCIAL INSTRUMENTS



The estimated fair value of our financial instruments is as follows:



|                                        |  |                 |         |                    |   |                 |  |            |         |  |   |        
|--------------------------------------- |  | --------------- | ------- | ------------------ | - | --------------- |  | ---------- | ------- |  | - | -------
|                                        |  | March 29, 2004  |         | September 27, 2004
|                                        |  | Carrying Amount |         | Fair Value         |   | Carrying Amount |  | Fair Value
|Term loan, including current portion    |  | $               | 439,652 |                    | $ | 439,652         |  | $          | 426,818 |  | $ | 426,818
|Subordinated indebtedness               |  | $               | 550,000 |                    | $ | 561,875         |  | $          | 550,000 |  | $ | 576,312
|Interest rate swap receivable (payable) |  | $               | 2,813   |                    | $ | 2,813           |  | $          | 311     |  | $ | 311    



The fair value of our financial
instruments is estimated based on the quoted market prices for the same or similar issues or on the current rate offered to us for financial instruments of the same remaining maturities. The carrying amount for cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of those instruments.



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Effective August 20, 2003, we entered into an interest rate swap agreement, which effectively converted a portion of our
fixed-rate debt to variable rate debt. The agreement is scheduled to expire in January 2007 and has a notional amount of $150 million. Under this agreement, we received a fixed rate of 8.875% and pay LIBOR in arrears plus a spread of 5.38% subject
to a collar adjustment. As of September 27, 2004, the fair value of this swap was a receivable of $311,000. The change in the fair value of the swap has been recognized as an addition to interest expense for the two fiscal quarters ended September
27, 2004. On January 15, 2004, we received $1,635,000 in connection with the interim settlement of this swap agreement. Additionally, on July 15, 2004, we received $1,166,000 in connection with the interim settlement of this swap agreement. The next
reset date for this swap agreement is January 15, 2005. At each reset date the Company either receives or pays money based on the fair value of the swap as of that date.



(10) FRONTLINE MARKETING



On November 27, 2000, the Company sold its 80% owned subsidiary, Frontline Marketing Inc. (FMI), to the minority shareholder for a $2.5 million note
receivable (the FMI Note). The FMI Note initially had a short-term component of $500,000, which amount has been paid in full, and a long-term component of $2,000,000 which is payable to us based on defined cash flow of FMI. The FMI Note
bears interest at 9%. No gain or loss was initially recognized on this transaction. As of September 27, 2004, the FMI Notes balance is $1.4 million.



(11) LITIGATION



Various suits and claims arising in the ordinary course of business have been instituted against us. We have insurance policies available to recover potential legal costs. We periodically evaluate and assess the risks
and uncertainties associated with litigation independent from those associated with our potential claim for recovery from third party insurance carriers. During the two fiscal quarters ended September 27, 2004, the Company provided $4 million
related to significant legal charges. In the opinion of management, none of the suits and claims currently pending will have a material adverse effect on the Companys financial statements.



(12) DEFERRED DEBT COSTS



Certain costs incurred in connection with the issuance of our long-term debt have been
deferred and are amortized as part of interest expense over periods from 1 to 10 years. For the two fiscal quarters ended September 29, 2003 and September 27, 2004, amortization of deferred debt costs, which is included in interest expense in the
accompanying consolidated statements of income, totaled approximately $3.2 million and $3.2 million, respectively.



In connection with the Companys issuance of $150 million of 10.25% Series B Senior Subordinated Notes due 2009 on February 14, 2002, $7.0 million of issuance costs
have been deferred and are being amortized as part of interest expense over the life of the notes. In connection with our issuance of $150 million of 8.875% Senior Subordinated Notes due 2011 on January 23, 2003, $7.9 million of issuance costs have
been deferred and are being amortized as part of interest expense over the life of the notes. In connection with our increase in the Credit Agreement of $140 million on January 23, 2003, $3.5 million of debt costs have been deferred and are being
amortized as part of interest expense over the life of the Credit Agreement. In connection with our Credit Agreement amendment on February 17, 2004, $260,000 of debt costs have been deferred and were amortized as part of interest expense over the
life of the amendment. This amendment provided for an increase in the leverage ratio from 6.25 to 6.50 for the fiscal quarters ended December 29, 2003 and March 29, 2004. Additionally, in connection with our Credit Agreement amendment on June 25,
2004, $1.3 million of



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debt costs have been deferred and are being amortized as part of interest expense over the life of the amendment. This
amendment changed the Companys total leverage ratio covenant and certain interest coverage ratio covenants through June 2006. As a result of the amendment, the total leverage ratio covenant is 6.95 through March 2005, 6.75 from June 2005 to
March 2006 and 6.50 from June 2006 and thereafter. The interest coverage ratio remains at 1.75 from March 2004 and thereafter.



(13) SUBORDINATED INDEBTEDNESS



On May 7, 1999, the Company issued $250,000,000 in aggregate principal amount of 10.25% Senior Subordinated Notes, which mature on May 1, 2009. Interest on these notes is
payable in semi-annual installments on May 1st and November 1st of each year. These notes are redeemable at our option at prices ranging from 105.125% to 100% of their face amount after April 2004. The indenture under which the notes were issued
includes certain restrictive covenants that prohibit payment of dividends and limit, among other things, our ability to incur indebtedness, give guarantees, make investments, sell assets and merge or consolidate.



On February 14, 2002, the Company issued $150,000,000 in aggregate principal amount of 10.25%
Series B Senior Subordinated Notes due 2009 through a private placement. The gross proceeds from the offering were $150,750,000 including a premium on the notes of $750,000. The Company used the gross proceeds of the offering (a) to make a
$75,375,000 distribution to EMP Group LLC, (b) to prepay $68,375,000 of the term loans under the Credit Agreement and (c) to pay transaction costs. The notes are unsecured and subordinated in right of payment to all our existing and future senior
indebtedness. The notes rank equally with all our existing and future senior subordinated indebtedness. The notes are guaranteed on a senior subordinated basis by all our current subsidiaries.



On January 23, 2003, the Company issued $150,000,000 in aggregate principal amount of 8.875%
Senior Subordinated Notes due 2011 through a private placement. The net proceeds from the offering were $145,875,000, including a discount on the notes of $4,125,000. We used the net proceeds of the offering to (a) fund the acquisition of Weider
Publications LLC, and (b) pay the transaction costs. These notes are unsecured and subordinated in right of payment to all our existing and future senior indebtedness. The notes rank equally with all our existing and future senior subordinated
indebtedness. The notes are guaranteed on a senior subordinated basis by all our current subsidiaries.



(14) RECAPITALIZATION OF EQUITY



On
April 17, 2003, the Company completed a series of transactions whereby principals and affiliates of Evercore Partners LLP (Evercore) and Thomas H. Lee Company (T.H. Lee), David J. Pecker, the Chief Executive Officer of the
Company, other members of management and certain other investors contributed approximately $434.6 million in cash and existing ownership interests, valued at approximately $73.3 million, of EMP Group LLC, our ultimate parent, to a merger entity
which was then merged with and into EMP Group LLC in exchange for newly issued ownership interests of EMP Group LLC.



Upon completion of the merger, EMP Group LLCs existing limited liability company agreement was amended and restated in its entirety. Under the new agreement, the
board of managers of EMP Group LLC consists of three designees of Evercore, three designees of T.H. Lee, one of whom is subject to Evercores prior approval, and the Chief Executive Officer of American Media, Inc., who is subject to the
approval of Evercore and T.H. Lee. While Evercore and T.H. Lee jointly control EMP Group LLC, the new limited liability company agreement requires that certain significant actions of EMP Group LLC be approved by David J. Pecker and a majority of the
other investors of EMP Group LLC.



In addition, in connection with the merger,
David J. Pecker and American Media, Inc. entered into a new employment agreement, which governs the terms of David J. Peckers employment as Chief Executive Officer



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of American Media, Inc. for a term of five years. Also, American Media, Inc., THL Managers V, L.L.C., an affiliate of
T.H. Lee, and Evercore Advisors L.P., an affiliate of Evercore, have entered into a Management Agreement pursuant to which THL Managers V, L.L.C. and Evercore Advisors L.P. will provide certain management and advisory services to American Media,
Inc. for an annual fee of $1.0 million each. The fee of this Management Agreement is amortized to expense by the Company over the annual period. Additionally, $2.3 million of management bonuses were granted as part of the recapitalization. These
bonuses were charged to expense by the Company during the fiscal quarter ended June 30, 2003. Additionally, the intercompany payable to American Media, Inc. was eliminated as a result of the recapitalization.



(15) RESTRUCTURING ACTIVITIES



During the fiscal year ended March 29, 2004, the Company initiated a plan to relocate the
Starand Mira! publications to New York City. The Companys relocation plan involved the termination of 94 employees. This activity resulted in a charge of $2,600,000 for termination benefits and $139,000 for costs associated with
the relocation of existing employees. Through September 27, 2004, the Company has paid all termination benefits and all costs associated with relocation of existing employees. The Company has completed this restructuring plan.



The following summarizes the cumulative activity in the Companys reserve related to
this activity as of September 27, 2004 (in thousands):



|                     |  |                      |       |              |   |        |                             |  |   |  
|-------------------- |  | -------------------- | ----- | ------------ | - | ------ | --------------------------- |  | - | -
|                     |  | RestructuringExpense |       | CashPayments |   |        | Balances September 27. 2004
|Accrued liabilities: |  |                      |       |              |   |        |                             |  |   |  
|Severance            |  | $                    | 2,600 |              | $ | (2,600 | )                           |  | $ | 
|Relocation           |  |                      | 139   |              |   | (139   | )                           |  |   | 
|                     |  |                      |       |              |   |        |                             |  |   |  
|                     |  | $                    | 2,739 |              | $ | (2,739 | )                           |  | $ | 
|                     |  |                      |       |              |   |        |                             |  |   |  



In connection with the relocation of
Star magazine, the Company entered into an agreement to lease an additional 33,000 square feet in its One Park Avenue building in New York City. The lease term for this additional space is from November 2003 to March 2010. The annual base
rent for this additional space is approximately $940,000.



(16) NEW
ACCOUNTING PRONOUNCEMENTS



In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities (FIN 46), which was amended in December 2003. This Interpretation requires variable interest entities (commonly referred to as SPEs) to be consolidated by the primary
beneficiary of the entity if certain criteria are met. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003,
the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The adoption of this Interpretation did not have a material effect on our consolidated financial statements.



In April 2003, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is effective for contracts entered into or modified
after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on our consolidated financial statements.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It



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requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some
circumstances). This Statement is effective for financial instruments entered into or modified after May 30, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150
did not have a material impact on our consolidated financial statements.



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



Executive Summary



We are a leading publisher in the fields of weekly celebrity journalism and health and fitness magazines. We publish the following magazines: Star, Shape, Mens Fitness, Muscle & Fitness, Flex, Muscle
& Fitness Hers, Fit Pregnancy, Natural Health, Shape en Espanol, National Enquirer, Globe, National Examiner, Weekly World News, Sun, Country WeeklyandMIRA!, as well as other special topic magazines.



Results of Operations



Fiscal Quarter Ended September 27, 2004 vs. Fiscal Quarter Ended September 29, 2003



Please note that our fiscal quarter ended September 27, 2004 includes 14 issues of our
weekly publications versus 13 issues for the prior years comparable fiscal quarter due to a change in the scheduled delivery dates of the weekly publications. The delivery of these publications generally moved up to a pre-weekend schedule
during the quarter ended September 27, 2004. Revenues from this additional issue of our weekly publications were partially offset by one less issue of Mens Fitness and Muscle and Fitness Hers in the current fiscal quarter. The net impact on
operating revenues was an increase of $4.6 million.



Revenues



Total operating revenues were $136,562,000 for the current fiscal
quarter. Operating revenues increased by $9,689,000, or 7.6%, from the prior years comparable fiscal quarter. This increase is primarily due to an increase in circulation revenues of $6.5 million and an increase in advertising revenues of $3.9
million. The increase in circulation revenues is primarily related to an increase in the cover price for the Starand the net impact of the issue delivery changes as discussed above. These increases were partially offset by an 8.8% decline in
circulation unit sales for AMIs weekly publications, which was in-line with other checkout titles performance. Contributing to the decline in unit sales were factors including recent strong competition in the weekly magazine market.



Advertising revenues increased $3.9 million or 10.1% from the prior
years comparable fiscal quarter. This increase in advertising revenues is primarily related to Starand Shape. Advertising revenue for Staris up 57% from the prior years comparable fiscal quarter. Advertising
revenue for Shape is up 34% from the prior years comparable fiscal quarter.



Operating Expenses



Total operating
expenses for the current fiscal quarter increased by $14,481,000, or 14.5% versus the prior year. This increase was primarily due to increased operating expenses related to Star in the current fiscal quarter ($9.2 million), significantly
increased legal charges ($3.6 million), an increase in depreciation expense ($0.8 million) and the net impact of the issue delivery changes ($2.4 million). These increases were offset by $2.7 million of restructuring expenses that were charged to
expense during the prior years comparable fiscal quarter. Upgraded paper for Star contributed approximately $4.2 million and one-time promotional cost contributed $0.9 million of the $9.2 million in incremental expenses.



Interest Expense



Interest expense decreased for the current fiscal quarter by $100,000 to $17,539,000 compared to the prior years comparable fiscal
quarter. Included in interest expense for the current fiscal quarter was a decrease in interest expense of $2.5 million related to our interest rate swap agreement. Included in interest expense for the prior years comparable fiscal quarter was
a decrease in interest expense of $1.5 million related to our interest swap agreement. Additionally, there was a higher effective interest rate during the current fiscal quarter of 4.4% as compared to 4.0% in the prior years comparable fiscal
quarter.



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Income Taxes



The provision for income taxes decreased for the current fiscal quarter by $1,595,000 to $1,981,000 compared to the prior years comparable fiscal quarter. This
decrease was primarily due to the overall decrease in pre-tax income. The effective tax rate for the fiscal quarters ended September 27, 2004 and September 29, 2003 was 42% and 38%, respectively.



Two Fiscal Quarters Ended September 27, 2004 vs. Two Fiscal Quarters Ended September 29,
2003



Please note that our two fiscal quarters ended September 27, 2004
include 27 issues of our weekly publications versus 26 issues for the prior years comparable two fiscal quarters due to a change in the scheduled delivery dates of the weekly publications. The delivery of these publications generally moved to
a pre-weekend schedule during the quarter ended September 27, 2004. Revenues from this additional issue of our weekly publications were partially offset by one less issue of Mens Fitness (five issues versus six) and Muscle and Fitness Hers
(four issues versus five) in the two quarters ended September 27, 2004. The net impact on operating revenues was an increase of $4.6 million.



Revenues



Total operating revenues were $270,009,000 for the first six months. Operating revenues increased by $18,162,000, or 7.2%, from the prior year. This increase is primarily due to an increase in circulation revenues of
$9.3 million and an increase in advertising revenues of $9.3 million, which includes the net impact of the issue delivery changes of $4.6 million as discussed above. The increase in circulation revenues is primarily related to the Star. In
addition, the new Star has increased single copy sales since its April 2004 national launch by 9.2%, even at the higher $3.29 cover price. This increase was partially offset by an 11.0% decline in circulation unit sales for AMIs weekly
publications, which was in-line with other checkout titles performance. Contributing to the decline in unit sales were factors including recent strong competition in the weekly magazine market.



Advertising revenues increased $9.3 million or 12.2% from the prior year. This increase in
advertising revenues is primarily related to the Starand Shape. Stars advertising revenues increased 42% versus the prior year. Advertising revenues for Shape has increased 30% from the prior year.



Operating Expenses



Total operating expenses for the first six months increased by $27,042,000, or 13.8%, when compared to the prior year. This increase was
primarily due to operating expenses related to Star in the first six months ($19.7 million), significantly increased legal charges ($3.1 million), an increase in depreciation expense ($1.9 million) and the net impact of the issue delivery
changes ($2.4 million). These increases were offset by $2.7 million of restructuring expenses that were charged to expense during the prior years comparable two fiscal quarters. Upgraded paper for the Star contributed approximately $7.9
million and one-time promotional costs contributed $3.9 million of the $19.7 million in incremental expenses.



Interest Expense



Interest expense
increased for the two current fiscal quarters by $3,286,000 to $40,975,000 compared to the prior year. This increase in interest expense relates to increased interest expense of $1.3 million for the two current fiscal quarters related to our
interest rate swap agreement versus a decline of $1.5 million in the prior years results.



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Income Taxes



The provision for income taxes decreased for the two current fiscal quarters by $4,308,000 to $2,571,000 compared to the prior years comparable two fiscal quarters.
This decrease was primarily due to lowered pre-tax income. The effective tax rate for the six months ended September 27, 2004 and September 29, 2003 was 43% and 38%, respectively.



LIQUIDITY AND CAPITAL RESOURCES



We have substantially increased our indebtedness in connection with the Weider Acquisition. Our liquidity requirements have been significantly increased, primarily due to
increased interest and principal payment obligations under the Credit Agreement and our subordinated notes. We believe that the net cash generated from operating activities and amounts available under the $60.0 million revolving credit facility will
be sufficient to fund our debt service requirements under the Credit Agreement and the subordinated notes, to make capital expenditures and to cover working capital requirements. As of September 27, 2004, there were no amounts outstanding on the
revolving credit facility. We believe, however, that based upon our current level of operations and anticipated growth, it will be necessary to refinance the subordinated notes upon their maturity. To the extent we make future acquisitions, we may
require new sources of funding, including additional debt, equity financing or some combination thereof. There can be no assurances that such additional sources of funding will be available to us on acceptable terms.



Our ability to make scheduled payments of principal and interest under the Credit Agreement
and the subordinated notes, as well as our other obligations and liabilities, is subject to our future operating performance which is dependent upon general economic, financial, competitive, legislative, regulatory, business and other factors beyond
our control.



At September 27, 2004, we had cash and cash equivalents of $15.6
million and a working capital deficiency of $7.8 million. We do not consider our working capital deficiency to be a true measure of our liquidity position as our working capital needs typically are met by cash generated by our business. Our working
capital deficiency resulted principally from our policy of using available cash to reduce borrowings which are recorded as noncurrent liabilities, thereby reducing current assets without a corresponding reduction in current liabilities.



Historically, our primary sources of liquidity have been cash generated from operations
and amounts available under our credit agreements, which have been used to fund shortfalls in available cash.



We made capital expenditures in the two fiscal quarters ended September 29, 2003 and September 27, 2004 totaling $12.5 million and $11.4 million, respectively.



At September 27, 2004, our outstanding indebtedness totaled $978.0 million, of which $426.8
million represented borrowings under the credit agreement and $0.5 million represents unamortized bond premium. At November 10, 2004, our outstanding indebtedness totaled $976.6 million, of which $425.4 million represented borrowings under the
credit agreement. As of September 27, 2004, the Companys effective interest rate on borrowings under the credit agreement was 4.4%. The effective rate for borrowings under the credit agreement averaged 4.2% for the two fiscal quarters ended
September 27, 2004. The effective rate for borrowings under the credit agreement averaged 4.1% for the two fiscal quarters ended September 29, 2003.



American Media Operations, Inc. has no material assets or operations other than the investments in our subsidiaries. The subordinated notes are unconditionally
guaranteed, on a senior subordinated basis, by all of our domestic subsidiaries. Each domestic subsidiary that will be organized in the future by us, unless such subsidiary is designated as an unrestricted subsidiary, will jointly, severally, fully
and unconditionally guarantee the subordinated notes on a senior subordinated basis. Subordinated note guarantees are joint and several, full and unconditional and general unsecured obligations of the note guarantors. The note guarantors are our
subsidiaries. At present, the note guarantors comprise all of our direct and indirect domestic



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subsidiaries. Note guarantees are subordinated in right of payment to all existing and future senior debt of the note
guarantors, including the credit facility, and are also effectively subordinated to all secured obligations of note guarantors to the extent of the assets securing such obligations, including the credit facility. Furthermore, the subordinated note
indentures permit note guarantors to incur additional indebtedness, including senior debt, subject to certain limitations. We have not presented separate financial statements and other disclosures concerning each of the note guarantors, as these
disclosures are not applicable under SEC rules and regulations.



Earnings
before Interest, Taxes, Depreciation and Amortization (EBITDA)



The following table and discussion summarizes EBITDA for the three months and six months ended September 29, 2003 and September 27, 2004 (dollars in 000s):



|                                                  |  |                                       |        |   |                                       |   |                                             |  |                                              |        |  |   |       
|------------------------------------------------- |  | ------------------------------------- | ------ | - | ------------------------------------- | - | ------------------------------------------- |  | -------------------------------------------- | ------ |  | - | ------
|                                                  |  | Fiscal QuarterEndedSeptember 29, 2003 |        |   | Fiscal QuarterEndedSeptember 27, 2004 |   | Two Fiscal QuartersEnded September 29, 2003 |  | Two Fiscal Quarters Ended September 27, 2004
|Net income (6)                                    |  | $                                     | 5,938  |   |                                       | $ | 2,701                                       |  | $                                            | 11,320 |  | $ | 3,421 
|Add -                                             |  |                                       |        |   |                                       |   |                                             |  |                                              |        |  |   |       
|Interest expense                                  |  |                                       | 17,639 |   |                                       |   | 17,539                                      |  |                                              | 37,689 |  |   | 40,975
|Income taxes                                      |  |                                       | 3,576  |   |                                       |   | 1,981                                       |  |                                              | 6,879  |  |   | 2,571 
|Depreciation and amortization                     |  |                                       | 10,193 |   |                                       |   | 10,970                                      |  |                                              | 20,211 |  |   | 22,075
|Other (income) expense, net                       |  |                                       | (95    | ) |                                       |   | 45                                          |  |                                              | 60     |  |   | 101   
|                                                  |  |                                       |        |   |                                       |   |                                             |  |                                              |        |  |   |       
|EBITDA (6)                                        |  |                                       | 37,251 |   |                                       |   | 33,236                                      |  |                                              | 76,159 |  |   | 69,143
|Management bonus (1)                              |  |                                       |       |   |                                       |   |                                            |  |                                              | 2,310  |  |   |      
|Restructuring expense (2)                         |  |                                       | 2,705  |   |                                       |   |                                            |  |                                              | 2,705  |  |   |      
|Management fees (3)                               |  |                                       | 500    |   |                                       |   | 500                                         |  |                                              | 1,000  |  |   | 1,000 
|Star re-launch and new titles launch expenses (4) |  |                                       |       |   |                                       |   | 2,476                                       |  |                                              |       |  |   | 6,335 
|                                                  |  |                                       |        |   |                                       |   |                                             |  |                                              |        |  |   |       
|Adjusted EBITDA (5)(6)                            |  | $                                     | 40,456 |   |                                       | $ | 36,212                                      |  | $                                            | 82,174 |  | $ | 76,478
|                                                  |  |                                       |        |   |                                       |   |                                             |  |                                              |        |  |   |       

---

|(1) | Net income for the two fiscal quarters ended September 29, 2003 includes a $2.3 million bonus as an expense granted to certain members of management as part of the Companys
recapitalization on April 17, 2003. This bonus was funded with cash contributed as part of the recapitalization.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Net income for the fiscal quarter ended September 29, 2003 includes $2.7 million of severance and relocation expenses relating to the relocation of publications to our New York
facility.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The Companys amended Credit Agreement allows for the add-back of management fees.
|--- | ----------------------------------------------------------------------------------

|(4) | The Companys amended Credit Agreement allows for the add-back of certain non-recurring Star re-launch costs and expenses relating to the launch of new magazine titles
to the extent such charges and expenses were incurred during such quarters.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Adjusted EBITDA is presented to identify EBITDA add-backs and deductions as required per our Credit Agreement. Adjusted EBITDA is used to determine our compliance with our Credit
Agreement covenant ratios. Accordingly, Adjusted EBITDA is presented as it is a meaningful measurement for our debt compliance.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes $4.0 million for significant legal charges in the fiscal quarter ended September 27, 2004.
|--- | ---------------------------------------------------------------------------------------------------



We define EBITDA as net income (loss) before extraordinary charges, interest expense, income taxes, depreciation and amortization and other
income (expense). EBITDA is not a measure of performance defined by GAAP. EBITDA should not be considered in isolation or as a substitute for net income or cash flows from operating activities, which have been prepared in accordance with GAAP or as
a measure of our operating performance, profitability or liquidity. We believe EBITDA provides useful information regarding our ability to service our debt, and we understand that such information is considered by certain investors to be an
additional basis for evaluating a companys ability to pay interest and repay debt. EBITDA is a widely used performance measure for publishing companies and is provided here as a supplemental measure of operating performance to operating income
calculated in accordance with GAAP.



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New Accounting Pronouncements



In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), which
was amended in December 2003. This Interpretation requires variable interest entities (commonly referred to as SPEs) to be consolidated by the primary beneficiary of the entity if certain criteria are met. FIN 46 is effective immediately for all new
variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June
15, 2003. The adoption of this Interpretation did not have a material effect on our consolidated financial statements.



In April 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 did not have a
material impact on our consolidated financial statements.



In May 2003, the
FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered
into or modified after May 30, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on our consolidated financial statements.



Critical Accounting Policies and Estimates



During the fiscal quarter ended September 27, 2004, there were no significant changes
related to the Companys critical accounting policies and estimates as disclosed in the Companys annual report on Form 10-K for the fiscal year ended March 29, 2004.



Forward-Looking Statements



Some of the information presented in this Form 10-Q constitutes forward-looking statements, including, in particular, the statements about our plans, strategies and
prospects under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations. We have based these forward-looking statements on our current assumptions, expectations and projections about future
events. We caution you that a variety of factors could cause business conditions and results to differ materially from what is contained in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and
assumptions about us, including, among other things:



| | our high degree of leverage and significant debt service obligations,
|- | ---------------------------------------------------------------------



| | our ability to refinance existing debt,
|- | ---------------------------------------



| | our ability to increase circulation and advertising revenues,
|- | -------------------------------------------------------------



| | market conditions for our publications,
|- | ---------------------------------------



| | our ability to develop new publications and services,
|- | -----------------------------------------------------



| | outcomes of pending and future litigation,
|- | ------------------------------------------



| | the effects of terrorism, including bio-terrorism, on our business,
|- | -------------------------------------------------------------------



| | increasing competition by media companies,
|- | ------------------------------------------



| | lower than expected valuations associated with cash flows and revenues may result in the inability to realize the value of recorded intangibles and goodwill,
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | changes in the costs of paper used by us,
|- | -----------------------------------------



| | any future changes in management,
|- | ---------------------------------



| | general risks associated with the publishing industry,
|- | ------------------------------------------------------



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| | declines in spending levels by advertisers and consumers,
|- | ---------------------------------------------------------



| | the ability in a challenging environment to continue to develop new sources of circulation,
|- | -------------------------------------------------------------------------------------------



| | increased costs and business disruption resulting from diminished service levels from our wholesalers, and
|- | ----------------------------------------------------------------------------------------------------------



| | the introduction and increased popularity over the long term of alternative technologies for the provision of news and information.
|- | -----------------------------------------------------------------------------------------------------------------------------------



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We are exposed to certain market risks that are inherent in our financial statements. We are subject to interest risk on our credit facilities and any future financing requirements. Our fixed rate debt consists
primarily of senior subordinated notes.



Interest rate changes result in
increases or decreases in our income before taxes and cash provided from operating activities. A 1% change in our weighted interest rate on our variable debt would have resulted in a change of $1.4 million in our interest expense for the fiscal
quarter ended September 27, 2004.



Effective August 20, 2003, we entered into
an interest rate swap agreement, which effectively converted a portion of our fixed-rate debt to variable rate debt. The agreement is scheduled to expire in January 2007 and has a notional amount of $150 million. Under this agreement, we received a
fixed rate of 8.875% and pay LIBOR in arrears plus a spread of 5.38% subject to a collar adjustment. As of September 27, 2004, the fair value of this swap was a receivable of $311,000. The change in the fair value of the swap has been recognized as
an addition to interest expense for the fiscal quarter ended September 27, 2004. On January 15, 2004, we received $1,635,000 in connection with the interim settlement of this swap agreement. Additionally, on July 15, 2004, we received $1,166,000 in
connection with the interim settlement of this swap agreement. The next reset date for this swap agreement is January 15, 2005. At each reset date the Company either receives or pays money based on the fair value of the swap as of that date.



Our primary market risk exposures relate to (1) the interest rate risk on
long-term and short-term borrowings, (2) our ability to refinance our senior subordinated notes at maturity at market rates, (3) the impact of interest rate movements on our ability to meet interest expense requirements and comply with financial
covenants and (4) the impact of interest rate movements on our ability to obtain adequate financing to fund acquisitions. We manage the interest rate risk on our outstanding long-term and short-term debt through our use of fixed and variable rate
debt. While we cannot predict or manage our ability to refinance existing debt or the impact interest rate movements will have on our ability to refinance existing debt, we continue to evaluate our financial position on an ongoing basis.



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ITEM 4. CONTROLS AND PROCEDURES



(a) Disclosure Controls and Procedures:



The
Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered
by this report. Based on such evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended.



(b) Internal Control Over Financial Reporting:



During the three month period ended September 27, 2004, there have not been
any changes in the Companys internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART II. OTHER INFORMATION



Item 1. Legal Proceedings



See footnote 11 of
Part I, Item I.



Item 6. Exhibits



Exhibit 31.1 Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.



Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.



Exhibit 32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002.



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SIGNATURE



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



|                        |  |                                     
|----------------------- |  | ------------------------------------
|                        |  | AMERICAN MEDIA OPERATIONS, INC.     
|                        |  | Registrant                          
|                        | 
|Date: November 10, 2004 |  |                                     
|                        | 
|                        |  | /s/ DAVID J. PECKER                 
|                        |  | David J. Pecker                     
|                        |  | Chairman of the Board, President,   
|                        |  | Chief Executive Officer and Director
|                        |  | (Principal Executive Officer)       
|                        | 
|Date: November 10, 2004 |  |                                     
|                        | 
|                        |  | /s/ JOHN A. MILEY                   
|                        |  | John A. Miley                       
|                        |  | Executive Vice President and        
|                        |  | Chief Financial Officer             
|                        |  | (Principal Financial Officer)       
|                        | 
|Date: November 10, 2004 |  |                                     
|                        | 
|                        |  | /s/ MARK J. BROCKELMAN              
|                        |  | Mark J. Brockelman                  
|                        |  | Vice President of Finance           
|                        |  | (Principal Accounting Officer)      



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Exhibit Index



|             |  |                                                                                                                                
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.  |  | Description                                                                                                                    
|             | 
|Exhibit 31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                            
|             | 
|Exhibit 31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                            
|             | 
|Exhibit 32   |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002.



26