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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 2007

OR

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

Commission file number  001-11112



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AMERICAN MEDIA OPERATIONS, INC.

(Exact name of registrant as specified in its charter)



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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated
filer ̈Accelerated filer ̈Non-accelerated filer  x

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

As of October 31, 2007, there were 7,507.6 shares of common stock outstanding.



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##### Table of Contents

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

September 30, 2007



|                                                                                                                                                              |  |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------
|                                                                                                                                                              |  | Page(s)
|CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE THE COMPANYS ACTUAL RESULTS TO DIFFER FROM THOSE PROJECTED IN FORWARD-LOOKING STATEMENTS |  | 3      
|                                                                                                                                                              | 
|PART I. FINANCIAL INFORMATION                                                                                                                                 |  |        
|                                                                                                                                                              | 
|Item 1. Financial Statements                                                                                                                                  |  |        
|                                                                                                                                                              | 
|Unaudited Condensed Consolidated Balance Sheets as of March 31, 2007 and as of September 30, 2007                                                             |  | 4      
|                                                                                                                                                              | 
|Unaudited Condensed Consolidated Statements of Loss for the Fiscal Quarter and Two Fiscal Quarters Ended September 30, 2006 and September 30, 2007            |  | 5      
|                                                                                                                                                              | 
|Unaudited Condensed Consolidated Statements of Cash Flows for the Two Fiscal Quarters Ended September 30, 2006 and September 30, 2007                         |  | 6      
|                                                                                                                                                              | 
|Notes to Unaudited Condensed Consolidated Financial Statements                                                                                                |  | 7      
|                                                                                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                 |  | 21     
|                                                                                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                                                                                            |  | 32     
|                                                                                                                                                              | 
|Item 4. Controls and Procedures                                                                                                                               |  | 32     
|                                                                                                                                                              | 
|PART II. OTHER INFORMATION                                                                                                                                    |  |        
|                                                                                                                                                              | 
|Item 1. Legal Proceedings                                                                                                                                     |  | 33     
|Item 1A. Risk Factors                                                                                                                                         |  | 33     
|Item 6. Exhibits                                                                                                                                              |  | 33     
|                                                                                                                                                              | 
|Signatures                                                                                                                                                    |  | 34     



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CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS

THAT COULD CAUSE THE COMPANYS ACTUAL RESULTS TO
DIFFER

FROM THOSE PROJECTED IN FORWARD-LOOKING STATEMENTS

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

Factors that could affect our actual results include the following:



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



| |  |  | increased competition, including price competition and competition from other publications and forms of media, such as television and radio programs and Internet
sites concentrating on celebrity news
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in demand for our services and products by our customers and advertisers
| | - |  | --------------------------------------------------------------------------------



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



| |  |  | our ability to attract and retain experienced and qualified personnel
| | - |  | ---------------------------------------------------------------------



| |  |  | our ability to obtain sufficient financing to continue to sustain or expand our operations
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | adverse results in litigation matters or any regulatory proceedings
| | - |  | -------------------------------------------------------------------



| |  |  | any downgrade in the rating of our securities
| | - |  | ---------------------------------------------



| |  |  | our ability to comply with covenant requirements in our agreements with our lenders and in our indentures
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | our ability to implement and maintain an effective system of internal controls over financial reporting
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | our ability to realize expected benefits from cost savings and revenue enhancement initiatives
| | - |  | ----------------------------------------------------------------------------------------------

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

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



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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)



|                                                                                                     |  |                |           |   |                    |   |           |  
|---------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ------------------ | - | --------- | -
|                                                                                                     |  | March 31, 2007 |           |   | September 30, 2007 |  
|ASSETS                                                                                               |  |                |           |   |                    |   |           |  
|CURRENT ASSETS:                                                                                      |  |                |           |   |                    |   |           |  
|Cash and cash equivalents                                                                            |  | $              | 60,414    |   |                    | $ | 54,514    |  
|Trade receivables, net of allowance for doubtful accounts of $5,909 and $6,749, respectively         |  |                | 48,502    |   |                    |   | 54,443    |  
|Inventories                                                                                          |  |                | 23,525    |   |                    |   | 24,164    |  
|Prepaid expenses and other current assets                                                            |  |                | 14,737    |   |                    |   | 16,522    |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|Total current assets                                                                                 |  |                | 147,178   |   |                    |   | 149,643   |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|PROPERTY AND EQUIPMENT, NET:                                                                         |  |                |           |   |                    |   |           |  
|Leasehold improvements                                                                               |  |                | 1,724     |   |                    |   | 1,719     |  
|Furniture, fixtures and equipment                                                                    |  |                | 41,474    |   |                    |   | 42,279    |  
|Less  accumulated depreciation                                                                      |  |                | (36,292   | ) |                    |   | (38,508   | )
|                                                                                                     |  |                |           |   |                    |   |           |  
|Total property and equipment, net                                                                    |  |                | 6,906     |   |                    |   | 5,490     |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|OTHER ASSETS:                                                                                        |  |                |           |   |                    |   |           |  
|Deferred debt costs, net                                                                             |  |                | 23,886    |   |                    |   | 19,383    |  
|Deferred rack costs, net                                                                             |  |                | 11,838    |   |                    |   | 9,383     |  
|Other long-term assets                                                                               |  |                | 2,608     |   |                    |   | 2,758     |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|Total other assets                                                                                   |  |                | 38,332    |   |                    |   | 31,524    |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:                                                     |  |                |           |   |                    |   |           |  
|Goodwill                                                                                             |  |                | 387,463   |   |                    |   | 387,463   |  
|Other identified intangibles, net of accumulated amortization of $143,651 and $147,930, respectively |  |                | 399,404   |   |                    |   | 395,125   |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|Total goodwill and other identified intangible assets                                                |  |                | 786,867   |   |                    |   | 782,588   |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|TOTAL ASSETS                                                                                         |  | $              | 979,283   |   |                    | $ | 969,245   |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|                                                                                                     |  |               
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                |  |                |           |   |                    |   |           |  
|CURRENT LIABILITIES:                                                                                 |  |                |           |   |                    |   |           |  
|Term loan                                                                                            |  | $              |          |   |                    | $ | 2,250     |  
|Accounts payable                                                                                     |  |                | 33,189    |   |                    |   | 31,935    |  
|Accrued expenses and other liabilities                                                               |  |                | 57,418    |   |                    |   | 53,159    |  
|Accrued interest                                                                                     |  |                | 31,736    |   |                    |   | 24,547    |  
|Deferred revenues                                                                                    |  |                | 42,619    |   |                    |   | 41,448    |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|Total current liabilities                                                                            |  |                | 164,962   |   |                    |   | 153,339   |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|NON-CURRENT LIABILITIES:                                                                             |  |                |           |   |                    |   |           |  
|Term loan and revolving credit facility                                                              |  |                | 510,000   |   |                    |   | 507,750   |  
|Senior subordinated notes, including bond premium                                                    |  |                | 550,217   |   |                    |   | 550,165   |  
|Senior subordinated notes to be issued                                                               |  |                |          |   |                    |   | 17,291    |  
|Deferred income taxes                                                                                |  |                | 86,521    |   |                    |   | 91,725    |  
|Management fee payable                                                                               |  |                | 2,000     |   |                    |   | 4,000     |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|Total liabilities                                                                                    |  |                | 1,313,700 |   |                    |   | 1,324,270 |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|COMMITMENTS AND CONTINGENCIES (Note 10)                                                              |  |                |           |   |                    |   |           |  
|STOCKHOLDERS DEFICIT:                                                                               |  |                |           |   |                    |   |           |  
|Common stock, $.20 par value; 10,000 shares authorized; 7,508 shares issued and outstanding          |  |                | 2         |   |                    |   | 2         |  
|Additional paid-in capital                                                                           |  |                | 281,671   |   |                    |   | 281,671   |  
|Accumulated deficit                                                                                  |  |                | (616,258  | ) |                    |   | (636,881  | )
|Accumulated other comprehensive income                                                               |  |                | 168       |   |                    |   | 183       |  
|                                                                                                     |  |                |           |   |                    |   |           |  
|Total stockholders deficit                                                                          |  |                | (334,417  | ) |                    |   | (355,025  | )
|                                                                                                     |  |                |           |   |                    |   |           |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                          |  | $              | 979,283   |   |                    | $ | 969,245   |  
|                                                                                                     |  |                |           |   |                    |   |           |  

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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS

(in thousands)



|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|---------------------------------------------------------------------------- |  | -------------------- | ------- | - | ------------------------- | - | ------- | ------------------ |  | - | ------------------ | - |  | - | ------- | -
|                                                                             |  | Fiscal Quarter Ended |         |   | Two Fiscal Quarters Ended |  
|                                                                             |  | September 30, 2006   |         |   | September 30, 2007        |   |         | September 30, 2006 |  |   | September 30, 2007 |  
|OPERATING REVENUES:                                                          |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|Circulation                                                                  |  | $                    | 73,148  |   |                           | $ | 70,742  |                    |  | $ | 138,465            |   |  | $ | 137,099 |  
|Advertising                                                                  |  |                      | 44,163  |   |                           |   | 50,383  |                    |  |   | 85,854             |   |  |   | 96,886  |  
|Other                                                                        |  |                      | 7,519   |   |                           |   | 10,789  |                    |  |   | 14,983             |   |  |   | 19,061  |  
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|Total operating revenues                                                     |  |                      | 124,830 |   |                           |   | 131,914 |                    |  |   | 239,302            |   |  |   | 253,046 |  
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|                                                                             |  |                      |         |  
|OPERATING EXPENSES:                                                          |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|Editorial                                                                    |  |                      | 13,836  |   |                           |   | 12,959  |                    |  |   | 27,392             |   |  |   | 25,598  |  
|Production                                                                   |  |                      | 37,646  |   |                           |   | 36,427  |                    |  |   | 75,404             |   |  |   | 71,773  |  
|Distribution, circulation and other cost of sales                            |  |                      | 21,760  |   |                           |   | 22,200  |                    |  |   | 44,645             |   |  |   | 42,838  |  
|Selling, general and administrative                                          |  |                      | 25,552  |   |                           |   | 25,759  |                    |  |   | 57,169             |   |  |   | 48,683  |  
|Depreciation and amortization                                                |  |                      | 3,797   |   |                           |   | 3,211   |                    |  |   | 7,812              |   |  |   | 6,500   |  
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|Total operating expenses                                                     |  |                      | 102,591 |   |                           |   | 100,556 |                    |  |   | 212,422            |   |  |   | 195,392 |  
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|                                                                             |  |                      |         |  
|OPERATING INCOME                                                             |  |                      | 22,239  |   |                           |   | 31,358  |                    |  |   | 26,880             |   |  |   | 57,654  |  
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|                                                                             |  |                      |         |  
|OTHER INCOME (EXPENSE):                                                      |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|Interest expense                                                             |  |                      | (23,665 | ) |                           |   | (24,818 | )                  |  |   | (48,006            | ) |  |   | (49,509 | )
|Senior subordinated notes to be issued                                       |  |                      |        |   |                           |   | (17,291 | )                  |  |   |                   |   |  |   | (17,291 | )
|Amortization of deferred debt costs                                          |  |                      | (1,854  | ) |                           |   | (2,759  | )                  |  |   | (3,397             | ) |  |   | (5,445  | )
|Other income, net                                                            |  |                      | 198     |   |                           |   | 203     |                    |  |   | 527                |   |  |   | 837     |  
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|Total other expense                                                          |  |                      | (25,321 | ) |                           |   | (44,665 | )                  |  |   | (50,876            | ) |  |   | (71,408 | )
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|                                                                             |  |                      |         |  
|LOSS BEFORE PROVISION FOR INCOME TAXES AND LOSS FROM DISCONTINUED OPERATIONS |  |                      | (3,082  | ) |                           |   | (13,307 | )                  |  |   | (23,996            | ) |  |   | (13,754 | )
|                                                                             |  |                      |         |  
|PROVISION FOR INCOME TAXES                                                   |  |                      | 759     |   |                           |   | 3,876   |                    |  |   | 5,654              |   |  |   | 3,368   |  
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|                                                                             |  |                      |         |  
|LOSS FROM CONTINUING OPERATIONS                                              |  |                      | (3,841  | ) |                           |   | (17,183 | )                  |  |   | (29,650            | ) |  |   | (17,122 | )
|                                                                             |  |                      |         |  
|LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES                       |  |                      | (498    | ) |                           |   | (572    | )                  |  |   | (2,161             | ) |  |   | (756    | )
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|                                                                             |  |                      |         |  
|NET LOSS                                                                     |  | $                    | (4,339  | ) |                           | $ | (17,755 | )                  |  | $ | (31,811            | ) |  | $ | (17,878 | )
|                                                                             |  |                      |         |   |                           |   |         |                    |  |   |                    |   |  |   |         |  

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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                            |  |                           |         |   |                    |   |         |  
|--------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ------------------ | - | ------- | -
|                                                                            |  | Two Fiscal Quarters Ended |        
|                                                                            |  | September 30, 2006        |         |   | September 30, 2007 |  
|Cash Flows from Operating Activities:                                       |  |                           |         |   |                    |   |         |  
|Net loss                                                                    |  | $                         | (31,811 | ) |                    | $ | (17,878 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                           |         |   |                    |   |         |  
|Depreciation of property and equipment                                      |  |                           | 3,413   |   |                    |   | 2,221   |  
|Amortization of other identified intangibles                                |  |                           | 4,503   |   |                    |   | 4,279   |  
|Senior subordinated notes to be issued                                      |  |                           |        |   |                    |   | 17,291  |  
|Provision for bad debts                                                     |  |                           | 1,513   |   |                    |   | 762     |  
|Amortization of deferred debt costs                                         |  |                           | 3,397   |   |                    |   | 5,445   |  
|Amortization of deferred rack costs                                         |  |                           | 9,812   |   |                    |   | 6,466   |  
|Write-off of deferred rack costs and property and equipment                 |  |                           | 1,144   |   |                    |   | 195     |  
|Provision for excess and obsolete inventory                                 |  |                           |        |   |                    |   | 211     |  
|Deferred income tax provision                                               |  |                           | 5,331   |   |                    |   | 2,884   |  
|Other                                                                       |  |                           | (148    | ) |                    |   | (523    | )
|Decrease (increase) in operating assets:                                    |  |                           |         |   |                    |   |         |  
|Trade receivables                                                           |  |                           | (5,120  | ) |                    |   | (6,703  | )
|Inventories                                                                 |  |                           | 12,937  |   |                    |   | (850    | )
|Prepaid expenses and other current assets                                   |  |                           | 1,166   |   |                    |   | (1,785  | )
|Deferred rack costs                                                         |  |                           | (3,205  | ) |                    |   | (4,206  | )
|Other long-term assets                                                      |  |                           | (136    | ) |                    |   | (150    | )
|Increase (decrease) in operating liabilities:                               |  |                           |         |   |                    |   |         |  
|Accounts payable                                                            |  |                           | (6,964  | ) |                    |   | (1,254  | )
|Accrued expenses and other liabilities                                      |  |                           | (12,758 | ) |                    |   | (4,393  | )
|Accrued interest                                                            |  |                           | (4,077  | ) |                    |   | (7,189  | )
|Deferred revenues                                                           |  |                           | (485    | ) |                    |   | (1,171  | )
|Management fee payable                                                      |  |                           | 2,000   |   |                    |   | 2,000   |  
|                                                                            |  |                           |         |   |                    |   |         |  
|Total adjustments                                                           |  |                           | 12,323  |   |                    |   | 13,530  |  
|                                                                            |  |                           |         |   |                    |   |         |  
|Net cash used in operating activities                                       |  |                           | (19,488 | ) |                    |   | (4,348  | )
|                                                                            |  |                           |         |   |                    |   |         |  
|                                                                            |  |                          
|Cash Flows from Investing Activities:                                       |  |                           |         |   |                    |   |         |  
|Purchases of property and equipment                                         |  |                           | (1,662  | ) |                    |   | (805    | )
|Proceeds from sale of assets                                                |  |                           | 198     |   |                    |   | 389     |  
|Investment in Mr. Olympia, LLC                                              |  |                           | (300    | ) |                    |   | (300    | )
|                                                                            |  |                           |         |   |                    |   |         |  
|Net cash used in investing activities                                       |  |                           | (1,764  | ) |                    |   | (716    | )
|                                                                            |  |                           |         |   |                    |   |         |  
|                                                                            |  |                          
|Cash Flows from Financing Activities:                                       |  |                           |         |   |                    |   |         |  
|Proceeds from revolving credit facility borrowings                          |  |                           | 68,000  |   |                    |   |        |  
|Revolving credit facility principal repayments                              |  |                           | (40,000 | ) |                    |   |        |  
|Payment of deferred debt costs                                              |  |                           | (3,975  | ) |                    |   | (942    | )
|                                                                            |  |                           |         |   |                    |   |         |  
|Net cash provided by (used in) financing activities                         |  |                           | 24,025  |   |                    |   | (942    | )
|                                                                            |  |                           |         |   |                    |   |         |  
|                                                                            |  |                          
|Effect of exchange rate changes on cash                                     |  |                           | 154     |   |                    |   | 106     |  
|                                                                            |  |                           |         |   |                    |   |         |  
|Net Increase (Decrease) in Cash and Cash Equivalents                        |  |                           | 2,927   |   |                    |   | (5,900  | )
|Cash and Cash Equivalents, Beginning of Period                              |  |                           | 19,591  |   |                    |   | 60,414  |  
|                                                                            |  |                           |         |   |                    |   |         |  
|Cash and Cash Equivalents, End of Period                                    |  | $                         | 22,518  |   |                    | $ | 54,514  |  
|                                                                            |  |                           |         |   |                    |   |         |  

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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

September 30, 2007



|(1) | Basis of Presentation
|--- | ---------------------

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

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



|(2) | Comprehensive Loss
|--- | ------------------

The change in the components of other
comprehensive loss is comprised of foreign currency translation adjustments and is reported as follows (in thousands):



|                                                    |  |                      |        |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|--------------------------------------------------- |  | -------------------- | ------ | - | ------------------------- | - | ------- | ------------------ |  | - | ------------------ | - |  | - | ------- | -
|                                                    |  | Fiscal Quarter Ended |        |   | Two Fiscal Quarters Ended |  
|                                                    |  | September 30, 2006   |        |   | September 30, 2007        |   |         | September 30, 2006 |  |   | September 30, 2007 |  
|Net loss                                            |  | $                    | (4,339 | ) |                           | $ | (17,755 | )                  |  | $ | (31,811            | ) |  | $ | (17,878 | )
|Foreign currency translation adjustments,net of tax |  |                      | 67     |   |                           |   | (10     | )                  |  |   | 109                |   |  |   | 15      |  
|                                                    |  |                      |        |   |                           |   |         |                    |  |   |                    |   |  |   |         |  
|Comprehensive loss                                  |  | $                    | (4,272 | ) |                           | $ | (17,765 | )                  |  | $ | (31,702            | ) |  | $ | (17,863 | )
|                                                    |  |                      |        |   |                           |   |         |                    |  |   |                    |   |  |   |         |  



|(3) | Inventories
|--- | -----------

Inventories are stated at the lower of cost or
market. Cost is determined on the first-in, first-out (FIFO) method. The Company writes down inventory for estimated obsolescence and/or excess or damaged inventory. During the fiscal quarter and two fiscal quarters ended September 30, 2007,
the Company wrote down approximately $0.1 million and $0.2 million of inventory, respectively. This write down is included in production expense in the accompanying Unaudited Condensed Consolidated Statements of Loss. The Company did not write down
any inventory during the fiscal quarter and two fiscal quarters ended September 30, 2006.

Inventories are comprised of the following (in thousands):



|                                                                            |  |                |        |                    |   |       
|--------------------------------------------------------------------------- |  | -------------- | ------ | ------------------ | - | ------
|                                                                            |  | March 31, 2007 |        | September 30, 2007
|Raw materials  paper                                                       |  | $              | 16,867 |                    | $ | 18,768
|Finished product  paper, production and distributioncosts of future issues |  |                | 6,658  |                    |   | 5,396 
|                                                                            |  |                |        |                    |   |       
|Total inventory                                                             |  | $              | 23,525 |                    | $ | 24,164
|                                                                            |  |                |        |                    |   |       



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|(4) | Fair Value of Financial Instruments
|--- | -----------------------------------

The estimated fair value of
the Companys financial instruments is as follows (in thousands):



|                                          |  |                |         |  |                    |   |            |   |         |  |    |                |  |   |         |  |            |   |  |   |         |  |    |  
|----------------------------------------- |  | -------------- | ------- |  | ------------------ | - | ---------- | - | ------- |  | -- | -------------- |  | - | ------- |  | ---------- | - |  | - | ------- |  | -- | -
|                                          |  | March 31, 2007 |         |  | September 30, 2007 |  
|                                          |  | CarryingAmount |         |  |                    |   | Fair Value |   |         |  |    | CarryingAmount |  |   |         |  | Fair Value |   |  |  
|Term loan                                 |  | $              | 450,000 |  |                    |   |            | $ | 450,000 |  |    |                |  | $ | 450,000 |  |            |   |  | $ | 450,000 |  |    |  
|Revolving credit facility                 |  |                | 60,000  |  |                    |   |            |   | 60,000  |  |    |                |  |   | 60,000  |  |            |   |  |   | 60,000  |  |    |  
|Subordinated indebtedness                 |  |                | 550,000 |  | (a                 | ) |            |   | 515,125 |  | (a | )              |  |   | 550,000 |  | (a         | ) |  |   | 475,500 |  | (a | )
|                                          |  |                |         |  |                    |   |            |  
|(a) Amount does not include bond premium. |  |                |         |  |                    |   |            |   |         |  |    |                |  |   |         |  |            |   |  |   |         |  |    |  

The fair value of the Companys financial instruments is estimated based on the quoted market prices for the
same or similar issues, or on the current rate offered to the Company 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.



|(5) | Income Taxes
|--- | ------------

The Company adopted the provisions of FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes: An Interpretation of FASB Statement No. 109 (FIN 48), on April 1, 2007. As a result of the implementation of FIN 48, the Company
recognized a $2.7 million increase to the April 1, 2007 balance of accumulated deficit, net of the valuation allowance impact. The cumulative effect of the change in accumulated deficit resulted in a $0.3 million increase in accrued expenses
and other liabilities and a $2.4 million reduction of a deferred tax asset previously recognized and included in deferred income taxes. The total amount of unrecognized tax benefits as of April 1, 2007 was $10.2 million. Approximately $5.2
million of this amount would, if recognized, have an effect on the effective income tax rate. In addition to the unrecognized tax benefits, the Company had $1.2 million of interest and penalties accrued as of April 1, 2007.

During the two fiscal quarters ended September 30, 2007, the Companys liability for unrecognized tax benefits decreased by $0.1 million, primarily
attributable to a decrease of $0.2 million due to the settlement of a Michigan audit, partially offset by an increase of $0.1 million of interest that was accrued in the first two quarters of fiscal year 2008. The Companys policy is to
recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of September 30, 2007, the Companys FIN 48 liabilities were $3.6 million.

The Company has identified its major tax jurisdictions to include the federal government, and the states of California, Florida and New York. The only
periods subject to examination for the Companys federal return are the fiscal years ended 2003, 2005, 2006, and 2007 tax years. The audit of the tax year 2004 has been completed without adjustment, but is still pending review by the Joint
Committee on Taxation. The periods subject to examination for the Company's major states are the fiscal years ended 2003-2007.

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



|(6) | Credit Agreement
|--- | ----------------

The Companys bank credit agreement (as
amended, the 2006 Credit Agreement) includes a $60.0 million revolving credit facility and a $450.0 million term loan commitment, which were both fully drawn as of September 30, 2007. The Company has the option to pay interest at
the JP Morgan Chase Bank N.A. (JP Morgan) prime rate plus 2.25% or at the London interbank offering rate (LIBOR) plus 3.25%. As of September 30, 2007, all of the Companys borrowings were based on LIBOR. The
Companys effective weighted-average interest rate on its term loan and its revolving credit facility during the fiscal quarter and two fiscal quarters ended September 30, 2007 was 8.7% and 8.6%, respectively. The Companys revolving
credit commitment matures in January 2012 and the Companys term loan matures in January 2013 but both will mature on February 1, 2009 if the Company does not refinance its outstanding 10.25% senior subordinated notes due 2009 (the
2009 Notes) on or prior to February 1, 2009. In addition, the revolving



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credit commitment and the term loan under the 2006 Credit Agreement both will mature on October 15, 2010 if the Company does not refinance its
outstanding 8.875% senior subordinated notes due 2011 (the 2011 Notes and, together with the 2009 Notes, the Notes) on or prior to October 15, 2010.

The 2006 Credit Agreement includes certain representations and warranties, conditions precedent, affirmative covenants, negative covenants and events of default. The negative covenants include financial maintenance
covenants comprised of a leverage ratio, a senior secured leverage ratio, a consolidated interest expense coverage ratio, and capital expenditure limits. The 2006 Credit Agreement also contains certain covenants that, subject to certain exceptions,
restrict paying cash dividends, incurring additional indebtedness, creating liens, making acquisitions or other investments, entering into certain mergers or consolidations and selling or otherwise disposing of assets. The April 2007 Waiver (as
defined below) amended a provision of the 2006 Credit Agreement which restricts the giving of any consideration to or for the benefit of any holder of Notes for any amendment, modification or waiver relating to a financial reporting violation, among
other things, to reduce the requirement that the Company maintain a minimum amount of liquidity such that the provision now requires that the Companys cash and cash equivalents and unused availability under the 2006 Credit Agreement are at
least $25.0 million. Although there can be no assurances, the Company anticipates that, based on current projections, its operating results for the remainder of fiscal year 2008 will be sufficient to satisfy the financial covenants, as amended,
under the 2006 Credit Agreement.

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

The Company has obtained a number of waivers and amendments to the 2006 Credit Agreement since January 30, 2006. On April 16, 2007, the Company entered into an Amendment and Waiver Agreement with respect to
certain provisions of the 2006 Credit Agreement (the April 2007 Waiver). The April 2007 Waiver provided, among other things, for extensions of the applicable deadlines for delivery of certain of the Companys financial statements.
These financial statements were delivered in accordance with the deadlines required by the April 2007 Waiver. Pursuant to the April 2007 Waiver, the Company paid an amendment fee in cash to lenders who approved the April 2007 Waiver equal to $0.50
per $1,000 in principal amount of the outstanding and available credit facilities of such lenders resulting in an aggregate payment of $0.3 million.



|(7) | Senior Subordinated Indebtedness
|--- | --------------------------------

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

The Company failed to meet the specified leverage ratio of 8:1 as of September 30,
2007, as required by the March 2006 Supplemental Indentures, and the Company expects to elect to issue a total of $20.0 million of 2009 Notes and 2011 Notes to the existing holders of the Notes. As of September 30, 2007, the Company recorded a
liability at a fair market value of $17.3 million included in senior subordinated notes to be issued, net of discount, in the accompanying Unaudited Condensed Consolidated Balance Sheets and a related expense of $17.3 million included in senior
subordinated notes to be issued in the accompanying Unaudited Condensed Consolidated Statements of Loss.

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

On May 15, 2007, the Company entered into Consent Agreements with holders of a majority of the outstanding principal amount of the 2009 Notes and holders of a
majority of the outstanding principal amount of the 2011 Notes (collectively, the May 2007 Subordinated Debt Consent Agreements). Pursuant to these agreements, the Company paid in cash $1.25 per $1,000 in principal amount of Notes to
each holder of Notes, for an aggregate payment to all Note holders of $0.7 million. In addition, the Company entered into supplemental indentures under the indentures pursuant to which the Notes were issued (the May 2007 Supplemental
Indentures). The May 2007 Supplemental Indentures provided, among other things, for extensions of the applicable deadlines by which the Company was required under such indentures to file with the SEC and provide the trustee and holders of the
Notes its filings under the Securities and Exchange Act of 1934 (the 1934 Act filings). The 1934 Act filings were filed in accordance with the deadlines required by the May 2007 Supplemental Indentures.



9



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##### Table of Contents

|(8) | Restructuring Activities
|--- | ------------------------

On April 4, 2006, the board of
directors of the Company committed to a plan (the Plan) to restructure certain of its operations. The Plan was adopted to improve the Companys profitability and future net cash flows, and includes actions that the Company has taken
and intends to take, including: discontinuing the publication of Celebrity Living Weekly, MPH and Shape En Espanol, the relocation of the operations associated with National Enquirer from New York City back to Boca Raton,
Florida, centralizing certain operations, and reducing certain other operating, general and administrative expenses. The Companys relocation plan involved the termination of approximately 50 employees. This activity resulted in a charge of
$2.3 million for termination benefits, $0.1 million for costs associated with the relocation of employees, $0.6 million for facility closures and $0.9 million for deferred rack cost write-offs. $2.8 million of these charges was included in selling,
general and administrative expense and $1.1 million of these charges was included in loss from discontinued operations in the accompanying Unaudited Condensed Consolidated Statements of Loss for the two fiscal quarters ended September 30, 2006.
In addition, these restructuring charges were primarily incurred in the Tabloid Publications (formerly known as Newspaper Publications) and Corporate/Other reporting segments. Through September 30, 2007, the Company has paid
termination benefits of $2.3 million, $0.1 million for relocation costs and $0.4 million for costs associated with facility closures. The Company no longer has an accrual at September 30, 2007 associated with this action. The Company has
completed this restructuring plan.

The following table sets forth the detail and activity in the restructuring expense accrual related to this activity
during the two fiscal quarters ended September 30, 2007 (in thousands):



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

On June 14, 2006, the Company announced that it was implementing a strategy to refocus the Company and devote
its full resources to growing its core brands. As part of this strategy, the Company announced that it would explore the sale of its five market leading special interest titles: Muscle & Fitness, Flex, Muscle & Fitness Hers,
Country Weekly, and Mira!. These publications collectively represented total revenues and operating income of $42.9 million and $14.5 million, respectively, for the two fiscal quarters ended September 30, 2007. As a result of the
restatement of the Companys financial statements for the fiscal year ended March 31, 2005 and the fiscal quarters ended June 30, 2005 and September 30, 2005 (the Restatement), the implementation of this strategy was
delayed.

As part of re-examining the implementation of this strategy after the completion of the Restatement, the board of directors of the Company
decided to explore a full range of strategic alternatives, including the raising of capital, the refinancing of the Companys existing debt or other transactions that could materially change the Companys capital structure, in addition to
the potential sale of the special interest titles mentioned above. There can be no assurance that the exploration of these strategic alternatives will result in a transaction. The Company does not intend to disclose developments with respect to the
exploration of strategic alternatives unless and until the Companys board has approved a specific transaction.



|(9) | Discontinued Operations
|--- | -----------------------

In order to improve the Companys
profitability and future net cash flows, in April 2006, the Company discontinued the Celebrity Living Weekly, MPH and Shape En Espanol publications in accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). During the fourth quarter of fiscal year 2007, the Company discontinued the publication of Looking
Good Now. The Company discontinued the



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##### Table of Contents

publication of Weekly World News effective with the August 27, 2007 issue. The discontinuance of Weekly World News resulted in total
charges of $0.3 million in the fiscal quarter and two fiscal quarters ended September 30, 2007. These charges consisted of $0.2 million related to the write-off of deferred rack costs and $0.1 million related to the termination of a consultant
contract and employee termination benefits. Operating results of these publications have been classified as discontinued operations for all periods presented. These publications were previously included in the Corporate/Other segment.

The following table sets forth total operating revenues, pre-tax loss from discontinued operations, income taxes and loss from discontinued operations for the fiscal
quarter and two fiscal quarters ended September 30, 2006 and 2007, respectively (in thousands):



|                                          |  |                                   |       |   |                                        |   |      |      |  |   |        |   |  |   |      |  
|----------------------------------------- |  | --------------------------------- | ----- | - | -------------------------------------- | - | ---- | ---- |  | - | ------ | - |  | - | ---- | -
|                                          |  | Fiscal Quarter EndedSeptember 30, |       |   | Two Fiscal QuartersEnded September 30, |  
|                                          |  | 2006                              |       |   | 2007                                   |   |      | 2006 |  |   | 2007   |  
|Total operating revenues                  |  | $                                 | 1,338 |   |                                        | $ | 238  |      |  | $ | 4,129  |   |  | $ | 880  |  
|                                          |  |                                   |       |   |                                        |   |      |      |  |   |        |   |  |   |      |  
|                                          |  |                                   |       |  
|Pre-tax loss from discontinued operations |  | $                                 | (498  | ) |                                        | $ | (572 | )    |  | $ | (2,161 | ) |  | $ | (756 | )
|Provision for income taxes                |  |                                   |      |   |                                        |   |     |      |  |   |       |   |  |   |     |  
|                                          |  |                                   |       |   |                                        |   |      |      |  |   |        |   |  |   |      |  
|Loss from discontinued operations         |  | $                                 | (498  | ) |                                        | $ | (572 | )    |  | $ | (2,161 | ) |  | $ | (756 | )
|                                          |  |                                   |       |   |                                        |   |      |      |  |   |        |   |  |   |      |  



|(10) | Litigation
|---- | ----------

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



|(11) | Business Segment Information
|---- | ----------------------------

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

The Celebrity Publications segment aggregation includes StarandCountry Weekly.

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

The Womens Health and Fitness Publications segment aggregation includes ShapeandFit Pregnancy.

The Distribution Services segment is comprised of Distribution Services, Inc. (DSI) which arranges for the placement of the Companys publications and
third-party publications with retailers and monitors through its merchandising staff that these publications are properly displayed in stores, primarily large supermarkets and major retail chains such as Wal-Mart and Target. DSI coordinates (also
known as acting as a category captain) the racking of magazine fixtures for selected retailers. In addition, DSI provides sales of marketing, merchandising and information gathering services for third parties including non-magazine
clients.

The Corporate/Other segment aggregation includes the following publications: Muscle & Fitness, Mens Fitness,
Muscle & Fitness Hers, Flex, Natural Health, Sun, and Mira!.In addition, the Corporate/Other segment also includes ancillary sales and corporate overhead. Ancillary sales primarily relate to licensing, syndication, new media and
product merchandise sales. Corporate expenses not allocated to other segments include production and circulation department costs, and support departments such as information technology, accounting, legal, human resources and administration. While
most of the publications aggregated in the Corporate/Other



11



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##### Table of Contents

segment have certain similar economic characteristics and also similar products and services, production process, type or class of customer, and method of
distribution as some of the other publications which are aggregated into the other reporting segments (Celebrity Publications, Tabloid Publications and Womens Health and Fitness Publications), their gross margins are dissimilar with such other
publications. Accordingly, the Company has aggregated those publications into the Corporate/Other reporting segment.

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

Segment Data

The following table presents the results of and assets employed in the Companys five reporting segments for the fiscal quarter and two fiscal quarters ended September 30, 2006 and 2007, respectively. The
information includes certain intersegment transactions and is, therefore, not necessarily indicative of the results had the operations existed as stand-alone businesses. Intersegment transactions represent intercompany advertising and other
services, which are billed at what management believes are prevailing market rates. These intersegment transactions, which represent transactions between operating units in different business segments, are eliminated in consolidation. The results of
operations exclude the results of our discontinued operations for all periods presented. See Note 9, Discontinued Operations, for a discussion regarding discontinued operations.



|                                    |  |      |  |                        |         |                     |                |                                       |  |                      |         |                     |   |        |                    |   |         |                   |  |   |        |       |  |   |        
|----------------------------------- |  | ---- |  | ---------------------- | ------- | ------------------- | -------------- | ------------------------------------- |  | -------------------- | ------- | ------------------- | - | ------ | ------------------ | - | ------- | ----------------- |  | - | ------ | ----- |  | - | -------
|                                    |  |      |  | Segment (in thousands) |         |                     | (in thousands)
|                                    |  |      |  | CelebrityPublications  |         | TabloidPublications |                | Womens Healthand FitnessPublications |  | DistributionServices |         | Corporate/Other (1) |   |        | EliminationEntries |   |         | ConsolidatedTotal
|Operating revenues                  |  |      |  |                        |         |                     |                |                                       |  |                      |         |                     |   |        |                    |   |         |                   |  |   |        |       |  |   |        
|Quarter ended September 30,         |  | 2006 |  | $                      | 35,341  |                     | $              | 37,424                                |  | $                    | 20,349  |                     | $ | 7,782  |                    | $ | 26,317  |                   |  | $ | (2,383 | ) (2) |  | $ | 124,830
|                                    |  | 2007 |  | $                      | 33,375  |                     | $              | 36,908                                |  | $                    | 25,489  |                     | $ | 8,145  |                    | $ | 30,357  |                   |  | $ | (2,360 | ) (2) |  | $ | 131,914
|Two Quarters ended September 30,    |  | 2006 |  | $                      | 64,135  |                     | $              | 72,036                                |  | $                    | 41,081  |                     | $ | 15,101 |                    | $ | 51,543  |                   |  | $ | (4,594 | ) (2) |  | $ | 239,302
|                                    |  | 2007 |  | $                      | 65,083  |                     | $              | 71,591                                |  | $                    | 47,845  |                     | $ | 15,884 |                    | $ | 57,124  |                   |  | $ | (4,481 | ) (2) |  | $ | 253,046
|                                    |  |      |  |                        |         |                     |                |                                      
|Operating income (loss)             |  |      |  |                        |         |                     |                |                                       |  |                      |         |                     |   |        |                    |   |         |                   |  |   |        |       |  |   |        
|Quarter ended September 30,         |  | 2006 |  | $                      | 8,861   |                     | $              | 17,456                                |  | $                    | 7,207   |                     | $ | 2,265  |                    | $ | (13,550 | )                 |  | $ |       |       |  | $ | 22,239 
|                                    |  | 2007 |  | $                      | 9,970   |                     | $              | 18,325                                |  | $                    | 10,067  |                     | $ | 2,036  |                    | $ | (9,040  | )                 |  | $ |       |       |  | $ | 31,358 
|Two Quarters ended September 30,    |  | 2006 |  | $                      | 9,673   |                     | $              | 30,313                                |  | $                    | 15,181  |                     | $ | 3,755  |                    | $ | (32,042 | )                 |  | $ |       |       |  | $ | 26,880 
|                                    |  | 2007 |  | $                      | 18,359  |                     | $              | 34,192                                |  | $                    | 19,083  |                     | $ | 3,806  |                    | $ | (17,786 | )                 |  | $ |       |       |  | $ | 57,654 
|                                    |  |      |  |                        |         |                     |                |                                      
|Depreciation and amortization       |  |      |  |                        |         |                     |                |                                       |  |                      |         |                     |   |        |                    |   |         |                   |  |   |        |       |  |   |        
|Quarter ended September 30,         |  | 2006 |  | $                      | 492     |                     | $              | 658                                   |  | $                    |        |                     | $ | 86     |                    | $ | 2,561   |                   |  | $ |       |       |  | $ | 3,797  
|                                    |  | 2007 |  | $                      | 490     |                     | $              | 658                                   |  | $                    |        |                     | $ | 7      |                    | $ | 2,056   |                   |  | $ |       |       |  | $ | 3,211  
|Two Quarters ended September 30,    |  | 2006 |  | $                      | 984     |                     | $              | 1,315                                 |  | $                    |        |                     | $ | 176    |                    | $ | 5,337   |                   |  | $ |       |       |  | $ | 7,812  
|                                    |  | 2007 |  | $                      | 984     |                     | $              | 1,315                                 |  | $                    |        |                     | $ | 16     |                    | $ | 4,185   |                   |  | $ |       |       |  | $ | 6,500  
|                                    |  |      |  |                        |         |                     |                |                                      
|Amortization of deferred rack costs |  |      |  |                        |         |                     |                |                                       |  |                      |         |                     |   |        |                    |   |         |                   |  |   |        |       |  |   |        
|Quarter ended September 30,         |  | 2006 |  | $                      | 1,312   |                     | $              | 1,612                                 |  | $                    | 132     |                     | $ |       |                    | $ | 1,416   |                   |  | $ |       |       |  | $ | 4,472  
|                                    |  | 2007 |  | $                      | 513     |                     | $              | 1,163                                 |  | $                    | 187     |                     | $ |       |                    | $ | 977     |                   |  | $ |       |       |  | $ | 2,840  
|Two Quarters ended September 30,    |  | 2006 |  | $                      | 2,327   |                     | $              | 3,710                                 |  | $                    | 258     |                     | $ |       |                    | $ | 2,887   |                   |  | $ |       |       |  | $ | 9,182  
|                                    |  | 2007 |  | $                      | 1,329   |                     | $              | 2,585                                 |  | $                    | 383     |                     | $ |       |                    | $ | 1,974   |                   |  | $ |       |       |  | $ | 6,271  
|                                    |  |      |  |                        |         |                     |                |                                      
|Total Assets                        |  |      |  |                        |         |                     |                |                                       |  |                      |         |                     |   |        |                    |   |         |                   |  |   |        |       |  |   |        
|At March 31, 2007                   |  |      |  | $                      | 189,577 |                     | $              | 336,476                               |  | $                    | 100,706 |                     | $ | 21,654 |                    | $ | 330,870 |                   |  | $ |       |       |  | $ | 979,283
|At September 30, 2007               |  |      |  | $                      | 190,154 |                     | $              | 336,696                               |  | $                    | 104,654 |                     | $ | 18,433 |                    | $ | 319,308 |                   |  | $ |       |       |  | $ | 969,245



|(1) | Income tax expense of $0.8 million and $3.9 million, interest expense of $23.7 million and $24.8 million, other expense related to senior subordinated notes to be issued of $0 and
$17.3 million, and amortization of deferred debt costs of $1.9 million and $2.8 million for the quarter ended September 30, 2006 and September 30, 2007, respectively, are included in the Corporate/Other segment. Income tax expense of $5.7
million and $3.4 million, interest expense of $48.0 million and $49.5 million, other expense related to senior subordinated notes to be issued of $0 and $17.3 million, and amortization of deferred debt costs of $3.4 million and $5.4 million for the
two quarters ended September 30, 2006 and September 30, 2007, respectively, are included in the Corporate/Other segment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amount represents transactions with other operating segments of the Company.
|--- | ----------------------------------------------------------------------------





|(12) | Supplemental Condensed Consolidating Financial Information
|---- | ----------------------------------------------------------

Subsequent to the issuance of the Companys fiscal year 2006 condensed consolidated financial statements for the quarter ended December 31, 2006, management determined that the disclosures in the Companys previously issued
consolidated financial



12



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statements concerning the guarantors to the senior subordinated debt were inappropriate and that the Company should have included supplemental condensed
consolidating financial information in accordance with Rule 3-10(f) of Regulation S-X under the Securities Exchange Act of 1934 (Exchange Act). The information for the fiscal quarter and two fiscal quarters ended September 30, 2006
disclosed below, which had been previously omitted, has been included.

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



13



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SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2007

(in
thousands)



|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|----------------------------------------------------- |  | ------ | -------- | - | ---------- | - | ------- | -------------- |  | - | ------------ | - |  | --------------------- | -------- | - |  | - | --------- | -
|                                                      |  | Parent |          |   | Guarantors |   |         | Non-Guarantors |  |   | Eliminations |   |  | CondensedConsolidated |         
|ASSETS                                                |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|                                                      |  |        |          |   |           
|CURRENT ASSETS:                                       |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Cash and cash equivalents                             |  | $      | 714      |   |            | $ | 50,680  |                |  | $ | 3,120        |   |  | $                     |         |   |  | $ | 54,514    |  
|Trade receivables, net                                |  |        |         |   |            |   | 52,130  |                |  |   | 2,313        |   |  |                       |         |   |  |   | 54,443    |  
|Inventories                                           |  |        |         |   |            |   | 23,629  |                |  |   | 535          |   |  |                       |         |   |  |   | 24,164    |  
|Prepaid expenses and other current assets             |  |        | 1,724    |   |            |   | 15,353  |                |  |   | 712          |   |  |                       | (1,267   | ) |  |   | 16,522    |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total current assets                                  |  |        | 2,438    |   |            |   | 141,792 |                |  |   | 6,680        |   |  |                       | (1,267   | ) |  |   | 149,643   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|PROPERTY AND EQUIPMENT, NET:                          |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Leasehold improvements                                |  |        |         |   |            |   | 1,719   |                |  |   |             |   |  |                       |         |   |  |   | 1,719     |  
|Furniture, fixtures and equipment                     |  |        |         |   |            |   | 41,809  |                |  |   | 470          |   |  |                       |         |   |  |   | 42,279    |  
|Less  accumulated depreciation                       |  |        |         |   |            |   | (38,100 | )              |  |   | (408         | ) |  |                       |         |   |  |   | (38,508   | )
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total property and equipment, net                     |  |        |         |   |            |   | 5,428   |                |  |   | 62           |   |  |                       |         |   |  |   | 5,490     |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|OTHER ASSETS:                                         |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Deferred debt costs, net                              |  |        | 19,383   |   |            |   |        |                |  |   |             |   |  |                       |         |   |  |   | 19,383    |  
|Deferred rack costs, net                              |  |        |         |   |            |   | 9,383   |                |  |   |             |   |  |                       |         |   |  |   | 9,383     |  
|Other long-term assets                                |  |        |         |   |            |   | 2,748   |                |  |   | 10           |   |  |                       |         |   |  |   | 2,758     |  
|Investment in subsidiaries                            |  |        | 532,549  |   |            |   | 2,590   |                |  |   |             |   |  |                       | (535,139 | ) |  |   |          |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total other assets                                    |  |        | 551,932  |   |            |   | 14,721  |                |  |   | 10           |   |  |                       | (535,139 | ) |  |   | 31,524    |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Goodwill                                              |  |        |         |   |            |   | 382,954 |                |  |   | 4,509        |   |  |                       |         |   |  |   | 387,463   |  
|Other identified intangibles, net                     |  |        | 6,000    |   |            |   | 389,125 |                |  |   |             |   |  |                       |         |   |  |   | 395,125   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total goodwill and other identified intangible assets |  |        | 6,000    |   |            |   | 772,079 |                |  |   | 4,509        |   |  |                       |         |   |  |   | 782,588   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|TOTAL ASSETS                                          |  | $      | 560,370  |   |            | $ | 934,020 |                |  | $ | 11,261       |   |  | $                     | (536,406 | ) |  | $ | 969,245   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|                                                      |  |        |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)        |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   | 
|CURRENT LIABILITIES:                                  |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Term loan                                             |  | $      | 2,250    |   |            | $ |        |                |  | $ |             |   |  | $                     |         |   |  | $ | 2,250     |  
|Accounts payable                                      |  |        |         |   |            |   | 30,805  |                |  |   | 1,130        |   |  |                       |         |   |  |   | 31,935    |  
|Accrued expenses and other liabilities                |  |        | 7,184    |   |            |   | 45,521  |                |  |   | 454          |   |  |                       |         |   |  |   | 53,159    |  
|Accrued interest                                      |  |        | 24,438   |   |            |   |        |                |  |   | 109          |   |  |                       |         |   |  |   | 24,547    |  
|Deferred revenues                                     |  |        |         |   |            |   | 40,886  |                |  |   | 562          |   |  |                       |         |   |  |   | 41,448    |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total current liabilities                             |  |        | 33,872   |   |            |   | 117,212 |                |  |   | 2,255        |   |  |                       |         |   |  |   | 153,339   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|NON-CURRENT LIABILITIES:                              |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Term loan and revolving credit facility               |  |        | 507,750  |   |            |   |        |                |  |   |             |   |  |                       |         |   |  |   | 507,750   |  
|Senior subordinated notes, including bond premium     |  |        | 550,165  |   |            |   |        |                |  |   |             |   |  |                       |         |   |  |   | 550,165   |  
|Senior subordinated notes to be issued                |  |        | 17,291   |   |            |   |        |                |  |   |             |   |  |                       |         |   |  |   | 17,291    |  
|Deferred income taxes                                 |  |        |         |   |            |   | 93,067  |                |  |   | (75          | ) |  |                       | (1,267   | ) |  |   | 91,725    |  
|Management fee payable                                |  |        |         |   |            |   | 4,000   |                |  |   |             |   |  |                       |         |   |  |   | 4,000     |  
|Due to (from) affiliates                              |  |        | (193,683 | ) |            |   | 187,192 |                |  |   | 6,491        |   |  |                       |         |   |  |   |          |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total liabilities                                     |  |        | 915,395  |   |            |   | 401,471 |                |  |   | 8,671        |   |  |                       | (1,267   | ) |  |   | 1,324,270 |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|                                                      |  |        |          |   |           
|STOCKHOLDERS EQUITY (DEFICIT):                       |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total stockholders equity (deficit)                  |  |        | (355,025 | ) |            |   | 532,549 |                |  |   | 2,590        |   |  |                       | (535,139 | ) |  |   | (355,025  | )
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|                                                      |  |        |          |   |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)  |  | $      | 560,370  |   |            | $ | 934,020 |                |  | $ | 11,261       |   |  | $                     | (536,406 | ) |  | $ | 969,245   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  



14



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SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2007

(in thousands)



|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|----------------------------------------------------- |  | ------ | -------- | - | ---------- | - | ------- | -------------- |  | - | ------------ | - |  | --------------------- | -------- | - |  | - | --------- | -
|                                                      |  | Parent |          |   | Guarantors |   |         | Non-Guarantors |  |   | Eliminations |   |  | CondensedConsolidated |         
|ASSETS                                                |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|CURRENT ASSETS:                                       |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Cash and cash equivalents                             |  | $      |         |   |            | $ | 58,522  |                |  | $ | 1,892        |   |  | $                     |         |   |  | $ | 60,414    |  
|Trade receivables, net                                |  |        |         |   |            |   | 46,394  |                |  |   | 2,108        |   |  |                       |         |   |  |   | 48,502    |  
|Inventories                                           |  |        |         |   |            |   | 22,870  |                |  |   | 655          |   |  |                       |         |   |  |   | 23,525    |  
|Prepaid expenses and other current assets             |  |        |         |   |            |   | 15,637  |                |  |   | 407          |   |  |                       | (1,307   | ) |  |   | 14,737    |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total current assets                                  |  |        |         |   |            |   | 143,423 |                |  |   | 5,062        |   |  |                       | (1,307   | ) |  |   | 147,178   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|PROPERTY AND EQUIPMENT, NET:                          |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Leasehold improvements                                |  |        |         |   |            |   | 1,724   |                |  |   |             |   |  |                       |         |   |  |   | 1,724     |  
|Furniture, fixtures and equipment                     |  |        |         |   |            |   | 41,030  |                |  |   | 444          |   |  |                       |         |   |  |   | 41,474    |  
|Less  accumulated depreciation                       |  |        |         |   |            |   | (35,932 | )              |  |   | (360         | ) |  |                       |         |   |  |   | (36,292   | )
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total property and equipment, net                     |  |        |         |   |            |   | 6,822   |                |  |   | 84           |   |  |                       |         |   |  |   | 6,906     |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|OTHER ASSETS:                                         |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Deferred debt costs, net                              |  |        | 23,886   |   |            |   |        |                |  |   |             |   |  |                       |         |   |  |   | 23,886    |  
|Deferred rack costs, net                              |  |        |         |   |            |   | 11,838  |                |  |   |             |   |  |                       |         |   |  |   | 11,838    |  
|Other long-term assets                                |  |        |         |   |            |   | 2,597   |                |  |   | 11           |   |  |                       |         |   |  |   | 2,608     |  
|Investment in subsidiaries                            |  |        | 499,561  |   |            |   | 1,708   |                |  |   |             |   |  |                       | (501,269 | ) |  |   |          |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total other assets                                    |  |        | 523,447  |   |            |   | 16,143  |                |  |   | 11           |   |  |                       | (501,269 | ) |  |   | 38,332    |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Goodwill                                              |  |        |         |   |            |   | 382,953 |                |  |   | 4,510        |   |  |                       |         |   |  |   | 387,463   |  
|Other identified intangibles, net                     |  |        |         |   |            |   | 399,404 |                |  |   |             |   |  |                       |         |   |  |   | 399,404   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total goodwill and other identified intangible assets |  |        |         |   |            |   | 782,357 |                |  |   | 4,510        |   |  |                       |         |   |  |   | 786,867   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|                                                      |  |        |          |   |           
|TOTAL ASSETS                                          |  | $      | 523,447  |   |            | $ | 948,745 |                |  | $ | 9,667        |   |  | $                     | (502,576 | ) |  | $ | 979,283   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|                                                      |  |        |          |   |           
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)        |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|CURRENT LIABILITIES:                                  |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Accounts payable                                      |  | $      |         |   |            | $ | 32,050  |                |  | $ | 1,139        |   |  | $                     |         |   |  | $ | 33,189    |  
|Accrued expenses and other liabilities                |  |        |         |   |            |   | 55,879  |                |  |   | 1,539        |   |  |                       |         |   |  |   | 57,418    |  
|Accrued interest                                      |  |        | 31,175   |   |            |   | 463     |                |  |   | 98           |   |  |                       |         |   |  |   | 31,736    |  
|Deferred revenues                                     |  |        |         |   |            |   | 42,028  |                |  |   | 591          |   |  |                       |         |   |  |   | 42,619    |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total current liabilities                             |  |        | 31,175   |   |            |   | 130,420 |                |  |   | 3,367        |   |  |                       |         |   |  |   | 164,962   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|NON-CURRENT LIABILITIES:                              |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Term loan and revolving credit facility               |  |        | 510,000  |   |            |   |        |                |  |   |             |   |  |                       |         |   |  |   | 510,000   |  
|Senior subordinated notes, including bond premium     |  |        | 550,217  |   |            |   |        |                |  |   |             |   |  |                       |         |   |  |   | 550,217   |  
|Deferred income taxes                                 |  |        |         |   |            |   | 87,749  |                |  |   | 79           |   |  |                       | (1,307   | ) |  |   | 86,521    |  
|Management fee payable                                |  |        |         |   |            |   | 2,000   |                |  |   |             |   |  |                       |         |   |  |   | 2,000     |  
|Due to (from) affiliates                              |  |        | (233,528 | ) |            |   | 229,015 |                |  |   | 4,513        |   |  |                       |         |   |  |   |          |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total liabilities                                     |  |        | 857,864  |   |            |   | 449,184 |                |  |   | 7,959        |   |  |                       | (1,307   | ) |  |   | 1,313,700 |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|                                                      |  |        |          |   |           
|STOCKHOLDERS EQUITY (DEFICIT):                       |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|Total stockholders equity (deficit)                  |  |        | (334,417 | ) |            |   | 499,561 |                |  |   | 1,708        |   |  |                       | (501,269 | ) |  |   | (334,417  | )
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  
|                                                      |  |        |          |   |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)  |  | $      | 523,447  |   |            | $ | 948,745 |                |  | $ | 9,667        |   |  | $                     | (502,576 | ) |  | $ | 979,283   |  
|                                                      |  |        |          |   |            |   |         |                |  |   |              |   |  |                       |          |   |  |   |           |  



15



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SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF LOSS

FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2007

(in thousands)



|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------ | ------- | - | ---------- | - | ------- | -------------- |  | ------------ | ----- |  | --------------------- | ------- | - |  | - | ------- | -
|                                                                                                                                                 |  | Parent |         |   | Guarantors |   |         | Non-Guarantors |  | Eliminations |       |  | CondensedConsolidated |        
|OPERATING REVENUES:                                                                                                                              |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Circulation                                                                                                                                      |  | $      |        |   |            | $ | 69,308  |                |  | $            | 1,434 |  | $                     |        |   |  | $ | 70,742  |  
|Advertising                                                                                                                                      |  |        |        |   |            |   | 48,779  |                |  |              | 1,604 |  |                       |        |   |  |   | 50,383  |  
|Other                                                                                                                                            |  |        | 2,862   |   |            |   | 7,631   |                |  |              | 296   |  |                       |        |   |  |   | 10,789  |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total operating revenues                                                                                                                         |  |        | 2,862   |   |            |   | 125,718 |                |  |              | 3,334 |  |                       |        |   |  |   | 131,914 |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|OPERATING EXPENSES:                                                                                                                              |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Editorial                                                                                                                                        |  |        |        |   |            |   | 12,687  |                |  |              | 272   |  |                       |         |   |  |   | 12,959  |  
|Production                                                                                                                                       |  |        | 1,840   |   |            |   | 33,648  |                |  |              | 939   |  |                       |         |   |  |   | 36,427  |  
|Distribution, circulation and other cost of sales                                                                                                |  |        |        |   |            |   | 21,584  |                |  |              | 616   |  |                       |         |   |  |   | 22,200  |  
|Selling, general and administrative                                                                                                              |  |        | 144     |   |            |   | 24,646  |                |  |              | 969   |  |                       |         |   |  |   | 25,759  |  
|Depreciation and amortization                                                                                                                    |  |        |        |   |            |   | 3,190   |                |  |              | 21    |  |                       |         |   |  |   | 3,211   |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total operating expenses                                                                                                                         |  |        | 1,984   |   |            |   | 95,755  |                |  |              | 2,817 |  |                       |        |   |  |   | 100,556 |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|OPERATING INCOME                                                                                                                                 |  |        | 878     |   |            |   | 29,963  |                |  |              | 517   |  |                       |        |   |  |   | 31,358  |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|OTHER INCOME (EXPENSE):                                                                                                                          |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Interest expense                                                                                                                                 |  |        | (24,739 | ) |            |   | (79     | )              |  |              |      |  |                       |        |   |  |   | (24,818 | )
|Senior subordinated notes to be issued                                                                                                           |  |        | (17,291 | ) |            |   |        |                |  |              |      |  |                       |        |   |  |   | (17,291 | )
|Amortization of deferred debt costs                                                                                                              |  |        | (2,759  | ) |            |   |         |                |  |              |      |  |                       |        |   |  |   | (2,759  | )
|Other income (expense), net                                                                                                                      |  |        | (447    | ) |            |   | 611     |                |  |              | 39    |  |                       |        |   |  |   | 203     |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total other income (expense)                                                                                                                     |  |        | (45,236 | ) |            |   | 532     |                |  |              | 39    |  |                       |        |   |  |   | (44,665 | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED
OPERATIONS |  |        | (44,358 | ) |            |   | 30,495  |                |  |              | 556   |  |                       |        |   |  |   | (13,307 | )
|                                                                                                                                                 |  |        |         |   |           
|PROVISION (BENEFIT) FOR INCOME TAXES                                                                                                             |  |        | (9,501  | ) |            |   | 13,209  |                |  |              | 168   |  |                       |        |   |  |   | 3,876   |  
|                                                                                                                                                 |  |        |         |   |           
|EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES                                                                                                  |  |        | 17,102  |   |            |   | 388     |                |  |              |      |  |                       | (17,490 | ) |  |   |        |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|INCOME (LOSS) FROM CONTINUING OPERATIONS                                                                                                         |  |        | (17,755 | ) |            |   | 17,674  |                |  |              | 388   |  |                       | (17,490 | ) |  |   | (17,183 | )
|                                                                                                                                                 |  |        |         |   |           
|LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES                                                                                           |  |        |        |   |            |   | (572    | )              |  |              |      |  |                       |        |   |  |   | (572    | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|NET INCOME (LOSS)                                                                                                                                |  | $      | (17,755 | ) |            | $ | 17,102  |                |  | $            | 388   |  | $                     | (17,490 | ) |  | $ | (17,755 | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  



16



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SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF LOSS

FOR THE TWO FISCAL QUARTERS ENDED SEPTEMBER 30, 2007

(in thousands)



|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------ | ------- | - | ---------- | - | ------- | -------------- |  | ------------ | ----- |  | --------------------- | ------- | - |  | - | ------- | -
|                                                                                                                                                 |  | Parent |         |   | Guarantors |   |         | Non-Guarantors |  | Eliminations |       |  | CondensedConsolidated |        
|OPERATING REVENUES:                                                                                                                              |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Circulation                                                                                                                                      |  | $      |        |   |            | $ | 134,121 |                |  | $            | 2,978 |  | $                     |        |   |  | $ | 137,099 |  
|Advertising                                                                                                                                      |  |        |        |   |            |   | 93,401  |                |  |              | 3,485 |  |                       |        |   |  |   | 96,886  |  
|Other                                                                                                                                            |  |        | 2,862   |   |            |   | 15,595  |                |  |              | 604   |  |                       |        |   |  |   | 19,061  |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total operating revenues                                                                                                                         |  |        | 2,862   |   |            |   | 243,117 |                |  |              | 7,067 |  |                       |        |   |  |   | 253,046 |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|OPERATING EXPENSES:                                                                                                                              |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Editorial                                                                                                                                        |  |        |        |   |            |   | 24,960  |                |  |              | 638   |  |                       |         |   |  |   | 25,598  |  
|Production                                                                                                                                       |  |        | 1,840   |   |            |   | 67,995  |                |  |              | 1,938 |  |                       |         |   |  |   | 71,773  |  
|Distribution, circulation and other cost of sales                                                                                                |  |        |        |   |            |   | 41,654  |                |  |              | 1,184 |  |                       |         |   |  |   | 42,838  |  
|Selling, general and administrative                                                                                                              |  |        | 144     |   |            |   | 46,543  |                |  |              | 1,996 |  |                       |         |   |  |   | 48,683  |  
|Depreciation and amortization                                                                                                                    |  |        |        |   |            |   | 6,461   |                |  |              | 39    |  |                       |         |   |  |   | 6,500   |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total operating expenses                                                                                                                         |  |        | 1,984   |   |            |   | 187,613 |                |  |              | 5,795 |  |                       |        |   |  |   | 195,392 |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|OPERATING INCOME                                                                                                                                 |  |        | 878     |   |            |   | 55,504  |                |  |              | 1,272 |  |                       |        |   |  |   | 57,654  |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|OTHER INCOME (EXPENSE):                                                                                                                          |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Interest expense                                                                                                                                 |  |        | (49,326 | ) |            |   | (183    | )              |  |              |      |  |                       |        |   |  |   | (49,509 | )
|Senior subordinated notes to be issued                                                                                                           |  |        | (17,291 | ) |            |   |        |                |  |              |      |  |                       |        |   |  |   | (17,291 | )
|Amortization of deferred debt costs                                                                                                              |  |        | (5,445  | ) |            |   |        |                |  |              |      |  |                       |        |   |  |   | (5,445  | )
|Other income (expense), net                                                                                                                      |  |        | (447    | ) |            |   | 1,231   |                |  |              | 53    |  |                       |        |   |  |   | 837     |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total other income (expense)                                                                                                                     |  |        | (72,509 | ) |            |   | 1,048   |                |  |              | 53    |  |                       |        |   |  |   | (71,408 | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED
OPERATIONS |  |        | (71,631 | ) |            |   | 56,552  |                |  |              | 1,325 |  |                       |        |   |  |   | (13,754 | )
|                                                                                                                                                 |  |        |         |   |           
|PROVISION (BENEFIT) FOR INCOME TAXES                                                                                                             |  |        | (16,342 | ) |            |   | 19,310  |                |  |              | 400   |  |                       |        |   |  |   | 3,368   |  
|                                                                                                                                                 |  |        |         |   |           
|EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES                                                                                                  |  |        | 37,411  |   |            |   | 925     |                |  |              |      |  |                       | (38,336 | ) |  |   |        |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|INCOME (LOSS) FROM CONTINUING OPERATIONS                                                                                                         |  |        | (17,878 | ) |            |   | 38,167  |                |  |              | 925   |  |                       | (38,336 | ) |  |   | (17,122 | )
|                                                                                                                                                 |  |        |         |   |           
|LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES                                                                                           |  |        |        |   |            |   | (756    | )              |  |              |      |  |                       |        |   |  |   | (756    | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|NET INCOME (LOSS)                                                                                                                                |  | $      | (17,878 | ) |            | $ | 37,411  |                |  | $            | 925   |  | $                     | (38,336 | ) |  | $ | (17,878 | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  



17



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##### Table of Contents

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF LOSS

FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2006

(in thousands)



|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------ | ------- | - | ---------- | - | ------- | -------------- |  | ------------ | ----- |  | --------------------- | ------- | - |  | - | ------- | -
|                                                                                                                                                 |  | Parent |         |   | Guarantors |   |         | Non-Guarantors |  | Eliminations |       |  | CondensedConsolidated |        
|OPERATING REVENUES:                                                                                                                              |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Circulation                                                                                                                                      |  | $      |        |   |            | $ | 71,849  |                |  | $            | 1,299 |  | $                     |        |   |  | $ | 73,148  |  
|Advertising                                                                                                                                      |  |        |        |   |            |   | 42,818  |                |  |              | 1,345 |  |                       |        |   |  |   | 44,163  |  
|Other                                                                                                                                            |  |        |        |   |            |   | 7,315   |                |  |              | 204   |  |                       |        |   |  |   | 7,519   |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total operating revenues                                                                                                                         |  |        |        |   |            |   | 121,982 |                |  |              | 2,848 |  |                       |        |   |  |   | 124,830 |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|OPERATING EXPENSES:                                                                                                                              |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Editorial                                                                                                                                        |  |        |        |   |            |   | 13,563  |                |  |              | 273   |  |                       |        |   |  |   | 13,836  |  
|Production                                                                                                                                       |  |        |        |   |            |   | 36,749  |                |  |              | 897   |  |                       |        |   |  |   | 37,646  |  
|Distribution, circulation and other cost of sales                                                                                                |  |        |        |   |            |   | 21,311  |                |  |              | 449   |  |                       |        |   |  |   | 21,760  |  
|Selling, general and administrative                                                                                                              |  |        |        |   |            |   | 24,726  |                |  |              | 826   |  |                       |        |   |  |   | 25,552  |  
|Depreciation and amortization                                                                                                                    |  |        |        |   |            |   | 3,777   |                |  |              | 20    |  |                       |        |   |  |   | 3,797   |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total operating expenses                                                                                                                         |  |        |        |   |            |   | 100,126 |                |  |              | 2,465 |  |                       |        |   |  |   | 102,591 |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|OPERATING INCOME                                                                                                                                 |  |        |        |   |            |   | 21,856  |                |  |              | 383   |  |                       |        |   |  |   | 22,239  |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|OTHER INCOME (EXPENSE):                                                                                                                          |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Interest expense                                                                                                                                 |  |        | (23,625 | ) |            |   | (40     | )              |  |              |      |  |                       |        |   |  |   | (23,665 | )
|Senior subordinated notes to be issued                                                                                                           |  |        |        |   |            |   |        |                |  |              |      |  |                       |        |   |  |   |        |  
|Amortization of deferred debt costs                                                                                                              |  |        | (1,854  | ) |            |   |        |                |  |              |      |  |                       |        |   |  |   | (1,854  | )
|Other income, net                                                                                                                                |  |        |        |   |            |   | 180     |                |  |              | 18    |  |                       |        |   |  |   | 198     |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total other income (expense)                                                                                                                     |  |        | (25,479 | ) |            |   | 140     |                |  |              | 18    |  |                       |        |   |  |   | (25,321 | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED
OPERATIONS |  |        | (25,479 | ) |            |   | 21,996  |                |  |              | 401   |  |                       |        |   |  |   | (3,082  | )
|                                                                                                                                                 |  |        |         |   |           
|PROVISION (BENEFIT) FOR INCOME TAXES                                                                                                             |  |        | (10,695 | ) |            |   | 11,334  |                |  |              | 120   |  |                       |         |   |  |   | 759     |  
|                                                                                                                                                 |  |        |         |   |           
|EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES                                                                                                  |  |        | 10,445  |   |            |   | 281     |                |  |              |      |  |                       | (10,726 | ) |  |   |        |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|INCOME (LOSS) FROM CONTINUING OPERATIONS                                                                                                         |  |        | (4,339  | ) |            |   | 10,943  |                |  |              | 281   |  |                       | (10,726 | ) |  |   | (3,841  | )
|                                                                                                                                                 |  |        |         |   |           
|LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES                                                                                           |  |        |        |   |            |   | (498    | )              |  |              |      |  |                       |         |   |  |   | (498    | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|NET INCOME (LOSS)                                                                                                                                |  | $      | (4,339  | ) |            | $ | 10,445  |                |  | $            | 281   |  | $                     | (10,726 | ) |  | $ | (4,339  | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  



18



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##### Table of Contents

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF LOSS

FOR THE TWO FISCAL QUARTERS ENDED SEPTEMBER 30, 2006

(in thousands)



|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------ | ------- | - | ---------- | - | ------- | -------------- |  | ------------ | ----- |  | --------------------- | ------- | - |  | - | ------- | -
|                                                                                                                                                 |  | Parent |         |   | Guarantors |   |         | Non-Guarantors |  | Eliminations |       |  | CondensedConsolidated |        
|OPERATING REVENUES:                                                                                                                              |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Circulation                                                                                                                                      |  | $      |        |   |            | $ | 135,893 |                |  | $            | 2,572 |  | $                     |        |   |  | $ | 138,465 |  
|Advertising                                                                                                                                      |  |        |        |   |            |   | 83,027  |                |  |              | 2,827 |  |                       |        |   |  |   | 85,854  |  
|Other                                                                                                                                            |  |        |        |   |            |   | 14,564  |                |  |              | 419   |  |                       |        |   |  |   | 14,983  |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total operating revenues                                                                                                                         |  |        |        |   |            |   | 233,484 |                |  |              | 5,818 |  |                       |        |   |  |   | 239,302 |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|OPERATING EXPENSES:                                                                                                                              |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Editorial                                                                                                                                        |  |        |        |   |            |   | 26,821  |                |  |              | 571   |  |                       |        |   |  |   | 27,392  |  
|Production                                                                                                                                       |  |        |        |   |            |   | 73,541  |                |  |              | 1,863 |  |                       |        |   |  |   | 75,404  |  
|Distribution, circulation and other cost of sales                                                                                                |  |        |        |   |            |   | 43,720  |                |  |              | 925   |  |                       |        |   |  |   | 44,645  |  
|Selling, general and administrative                                                                                                              |  |        |        |   |            |   | 55,298  |                |  |              | 1,871 |  |                       |        |   |  |   | 57,169  |  
|Depreciation and amortization                                                                                                                    |  |        |        |   |            |   | 7,772   |                |  |              | 40    |  |                       |        |   |  |   | 7,812   |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total operating expenses                                                                                                                         |  |        |        |   |            |   | 207,152 |                |  |              | 5,270 |  |                       |        |   |  |   | 212,422 |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|OPERATING INCOME                                                                                                                                 |  |        |        |   |            |   | 26,332  |                |  |              | 548   |  |                       |        |   |  |   | 26,880  |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|OTHER INCOME (EXPENSE):                                                                                                                          |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Interest expense                                                                                                                                 |  |        | (47,926 | ) |            |   | (80     | )              |  |              |      |  |                       |        |   |  |   | (48,006 | )
|Senior subordinated notes to be issued                                                                                                           |  |        |        |   |            |   |        |                |  |              |      |  |                       |        |   |  |   |        |  
|Amortization of deferred debt costs                                                                                                              |  |        | (3,397  | ) |            |   |        |                |  |              |      |  |                       |        |   |  |   | (3,397  | )
|Other income, net                                                                                                                                |  |        |        |   |            |   | 495     |                |  |              | 32    |  |                       |        |   |  |   | 527     |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|Total other income (expense)                                                                                                                     |  |        | (51,323 | ) |            |   | 415     |                |  |              | 32    |  |                       |        |   |  |   | (50,876 | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED
OPERATIONS |  |        | (51,323 | ) |            |   | 26,747  |                |  |              | 580   |  |                       |        |   |  |   | (23,996 | )
|                                                                                                                                                 |  |        |         |   |           
|PROVISION (BENEFIT) FOR INCOME TAXES                                                                                                             |  |        | (7,382  | ) |            |   | 12,861  |                |  |              | 175   |  |                       |         |   |  |   | 5,654   |  
|                                                                                                                                                 |  |        |         |   |           
|EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES                                                                                                  |  |        | 12,130  |   |            |   | 405     |                |  |              |      |  |                       | (12,535 | ) |  |   |        |  
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|INCOME (LOSS) FROM CONTINUING OPERATIONS                                                                                                         |  |        | (31,811 | ) |            |   | 14,291  |                |  |              | 405   |  |                       | (12,535 | ) |  |   | (29,650 | )
|                                                                                                                                                 |  |        |         |   |           
|LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES                                                                                           |  |        |        |   |            |   | (2,161  | )              |  |              |      |  |                       |         |   |  |   | (2,161  | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  
|                                                                                                                                                 |  |        |         |   |           
|NET INCOME (LOSS)                                                                                                                                |  | $      | (31,811 | ) |            | $ | 12,130  |                |  | $            | 405   |  | $                     | (12,535 | ) |  | $ | (31,811 | )
|                                                                                                                                                 |  |        |         |   |            |   |         |                |  |              |       |  |                       |         |   |  |   |         |  



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##### Table of Contents

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE TWO FISCAL QUARTERS ENDED SEPTEMBER 30, 2007

(in thousands)



|                                                     |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|---------------------------------------------------- |  | ------ | ------- | - | ---------- | - | ------- | -------------- |  | - | ------------ | - | --------------------- | - | - |  | - | ------ | -
|                                                     |  | Parent |         |   | Guarantors |   |         | Non-Guarantors |  |   | Eliminations |   | CondensedConsolidated |  
|Cash Flows from Operating Activities:                |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|Net cash provided by (used in) operating activities  |  | $      | (52,988 | ) |            | $ | 47,399  |                |  | $ | 1,241        |   |                       | $ |  |  | $ | (4,348 | )
|                                                     |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|                                                     |  |        |         |   |           
|Cash Flows from Investing Activities:                |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|Purchases of property and equipment                  |  |        |        |   |            |   | (686    | )              |  |   | (119         | ) |                       |   |  |  |   | (805   | )
|Proceeds from sale of assets                         |  |        |        |   |            |   | 389     |                |  |   |             |   |                       |   |  |  |   | 389    |  
|Investment in Mr. Olympia, LLC                       |  |        | (300    | ) |            |   |        |                |  |   |             |   |                       |   |  |  |   | (300   | )
|                                                     |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|Net cash used in investing activities                |  |        | (300    | ) |            |   | (297    | )              |  |   | (119         | ) |                       |   |  |  |   | (716   | )
|                                                     |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|                                                     |  |        |         |   |           
|Cash Flows from Financing Activities:                |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|Due to (from) affiliates                             |  |        | 54,944  |   |            |   | (54,944 | )              |  |   |             |   |                       |   |  |  |   |       |  
|Payment of deferred debt costs                       |  |        | (942    | ) |            |   |        |                |  |   |             |   |                       |   |  |  |   | (942   | )
|                                                     |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|Net cash provided by (used in) financing activities  |  |        | 54,002  |   |            |   | (54,944 | )              |  |   |             |   |                       |   |  |  |   | (942   | )
|                                                     |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|                                                     |  |        |         |   |           
|Effect of exchange rate changes on cash              |  |        |        |   |            |   |        |                |  |   | 106          |   |                       |   |  |  |   | 106    |  
|                                                     |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|Net Increase (Decrease) in Cash and Cash Equivalents |  |        | 714     |   |            |   | (7,842  | )              |  |   | 1,228        |   |                       |   |  |  |   | (5,900 | )
|Cash and Cash Equivalents, Beginning of Period       |  |        |        |   |            |   | 58,522  |                |  |   | 1,892        |   |                       |   |  |  |   | 60,414 |  
|                                                     |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  
|Cash and Cash Equivalents, End of Period             |  | $      | 714     |   |            | $ | 50,680  |                |  | $ | 3,120        |   |                       | $ |  |  | $ | 54,514 |  
|                                                     |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |        |  



SUPPLEMENTAL CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE TWO FISCAL QUARTERS ENDED SEPTEMBER 30, 2006

(in thousands)



|                                                             |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|------------------------------------------------------------ |  | ------ | ------- | - | ---------- | - | ------- | -------------- |  | - | ------------ | - | --------------------- | - | - |  | - | ------- | -
|                                                             |  | Parent |         |   | Guarantors |   |         | Non-Guarantors |  |   | Eliminations |   | CondensedConsolidated |  
|Cash Flows from Operating Activities:                        |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|Net cash provided by (used in) operating activities          |  | $      | (51,601 | ) |            | $ | 31,826  |                |  | $ | 287          |   |                       | $ |  |  | $ | (19,488 | )
|                                                             |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|                                                             |  |        |         |   |           
|Cash Flows from Investing Activities:                        |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|Purchases of property and equipment                          |  |        |        |   |            |   | (1,548  | )              |  |   | (114         | ) |                       |   |  |  |   | (1,662  | )
|Proceeds from sale of assets                                 |  |        |        |   |            |   | 198     |                |  |   |             |   |                       |   |  |  |   | 198     |  
|Investment in Mr. Olympia, LLC                               |  |        |        |   |            |   | (300    | )              |  |   |             |   |                       |   |  |  |   | (300    | )
|                                                             |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|Net cash used in investing activities                        |  |        |        |   |            |   | (1,650  | )              |  |   | (114         | ) |                       |   |  |  |   | (1,764  | )
|                                                             |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|                                                             |  |        |         |   |           
|Cash Flows from Financing Activities:                        |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|Proceeds from revolving credit facility borrowings           |  |        | 68,000  |   |            |   |        |                |  |   |             |   |                       |   |  |  |   | 68,000  |  
|Term loan and revolving credit facility principal repayments |  |        | (40,000 | ) |            |   |        |                |  |   |             |   |                       |   |  |  |   | (40,000 | )
|Due to (from) affiliates                                     |  |        | 27,576  |   |            |   | (27,576 | )              |  |   |             |   |                       |   |  |  |   |        |  
|Payment of deferred debt costs                               |  |        | (3,975  | ) |            |   |        |                |  |   |             |   |                       |   |  |  |   | (3,975  | )
|                                                             |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|Net cash provided by (used in) financing activities          |  |        | 51,601  |   |            |   | (27,576 | )              |  |   |             |   |                       |   |  |  |   | 24,025  |  
|                                                             |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|                                                             |  |        |         |   |           
|Effect of exchange rate changes on cash                      |  |        |        |   |            |   |        |                |  |   | 154          |   |                       |   |  |  |   | 154     |  
|                                                             |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|Net Increase in Cash and Cash Equivalents                    |  |        |        |   |            |   | 2,600   |                |  |   | 327          |   |                       |   |  |  |   | 2,927   |  
|Cash and Cash Equivalents, Beginning of Period               |  |        |        |   |            |   | 17,279  |                |  |   | 2,312        |   |                       |   |  |  |   | 19,591  |  
|                                                             |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  
|Cash and Cash Equivalents, End of Period                     |  | $      |        |   |            | $ | 19,879  |                |  | $ | 2,639        |   |                       | $ |  |  | $ | 22,518  |  
|                                                             |  |        |         |   |            |   |         |                |  |   |              |   |                       |   |   |  |   |         |  



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##### Table of Contents

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

Introduction

The following is a discussion of our financial condition and results of operations for the fiscal quarter and two fiscal quarters ended September 30,
2007. This discussion should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and the Notes thereto. The accompanying Managements Discussion and Analysis of Financial Condition and Results of Operations
excludes the results of our discontinued operations for the fiscal quarter and two fiscal quarters ended September 30, 2007 and 2006, respectively. See Note 9, Discontinued Operations, in the Notes to Unaudited Condensed
Consolidated Financial Statements included herein for a discussion regarding discontinued operations.

Executive Summary

We are a leading publisher in the field of celebrity journalism and health and fitness magazines. Our publications includeStar, Shape, Mens Fitness, Fit
Pregnancy, Natural Health, Muscle & Fitness, Muscle & Fitness Hers, Flex, National Enquirer, Globe, Country Weekly, Mira!, Sun, National Examiner,and other publications. Our magazines comprise approximately 22% of total U.S.
and Canadian circulation for audited weekly publications. For the two fiscal quarters ended September 30, 2007, total average newsstand and subscription circulation per issue for all of our publications that are currently published and have a
frequency of six or more times per year is approximately 8.0 million copies.

For the two fiscal quarters ended September 30, 2007 and 2006,
approximately 54% and 58%, respectively, of our total operating revenues were from circulation. Single copy sales accounted for approximately 83% and 84% of such circulation revenues in the two fiscal quarters ended September 30, 2007 and 2006,
respectively, and the remainder was from subscription sales.

Our advertising revenues are generated by national advertisers, including sports nutrition
products, automotive, entertainment, packaged goods, pharmaceutical, sports apparel, beauty and cosmetics, fashion and direct response. For the two fiscal quarters ended September 30, 2007 and 2006, approximately 38% and 36%, respectively, of
our total operating revenues were from advertising.

Our primary operating costs and expenses are comprised of editorial, production, distribution,
circulation and other cost of sales and selling, general and administrative expenses. The largest components of our costs are related to production, which includes printing and paper expenses, and circulation. Editorial costs include salaries and
costs associated with manuscripts and photographs. Circulation costs primarily include the costs associated with subscription fulfillment, subscription postage and newsstand transportation.

Following the announcement on February 8, 2006 by the Company that its previously issued financial statements included or otherwise summarized in its Annual Report
on Form 10-K for the fiscal year ended March 31, 2005 and its Quarterly Reports on Form 10-Q for each of the quarters ended June 30, 2005 and September 30, 2005 should no longer be relied upon, we have obtained amendments and waivers
of certain provisions of our credit agreement and have successfully completed consent solicitations pursuant to which holders of a majority in principal amount of each series of our senior subordinated notes agreed to waive defaults under our
indentures as a result of our failure to comply with our reporting obligations under the indentures. In addition, our credit ratings have been downgraded and we have implemented cost savings initiatives and revenue enhancement opportunities
(Management Action Plan) during the quarter ended March 31, 2007 that are expected to result in $19.0 million to $20.0 million of cost savings and $17.0 million to $18.0 million of revenue enhancements during fiscal year 2008. Cost
savings include the rationalization of unprofitable subscriptions, production savings and headcount reductions. Revenue enhancements include cover price increases on selected titles other than Star and advertising rate increases in our
Tabloid, Womens Health and Fitness and Celebrity Publications other than Star. As of September 30, 2007, we believe that a majority of the above-mentioned cost savings initiatives and approximately $12.0 million of the revenue
enhancement opportunities are on track to be achieved during fiscal year 2008. We may not ultimately be able to realize some of these initiatives.

On
April 4, 2006, our board of directors committed to a plan (the Plan) to restructure certain of our operations. The Plan was adopted to improve our profitability and future net cash flows, and includes: discontinuing the publication
of Celebrity Living Weekly, MPH and Shape En Espanol, the relocation of the operations associated with National Enquirer from New York City back to Boca Raton, Florida, centralizing certain operations, and reducing
certain other operating, general and administrative expenses. The Companys relocation plan involved the termination of approximately 50 employees. This activity resulted in a charge of $3.9 million for the fiscal quarter ended June 30,
2006, which included $2.3 million for termination benefits, $0.1 million for costs associated with the relocation of employees, $0.6 million for facility closures and $0.9 million for deferred rack cost write-offs. During the fourth quarter of
fiscal year 2007, we discontinued the publication of Looking Good Now. We discontinued the publication of Weekly World News effective with the August 27, 2007 issue. The discontinuance of Weekly World News resulted in total
charges of $0.3 million in the fiscal quarter and two fiscal quarters ended September 30, 2007. These charges consisted of $0.2 million related to the write-off of



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##### Table of Contents

deferred rack costs and $0.1 million related to the termination of a consultant contract and employee termination benefits. The total loss from discontinued
operations, net of taxes, was $0.8 million and $2.2 million for the two fiscal quarters ended September 30, 2007 and 2006, respectively. Operating results of these publications have been classified as discontinued operations for all periods
presented. See Note 9, Discontinued Operations, for a discussion regarding discontinued operations.

RESULTS OF OPERATIONS

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



|                                        |  |                              |         |   |                                   |   |         |                    |  |   |                    |   |  |   |         |  
|--------------------------------------- |  | ---------------------------- | ------- | - | --------------------------------- | - | ------- | ------------------ |  | - | ------------------ | - |  | - | ------- | -
|                                        |  | For the Fiscal Quarter Ended |         |   | For the Two Fiscal Quarters Ended |  
|                                        |  | September 30, 2006           |         |   | September 30, 2007                |   |         | September 30, 2006 |  |   | September 30, 2007 |  
|Operating Revenue                       |  |                              |         |   |                                   |   |         |                    |  |   |                    |   |  |   |         |  
|Celebrity Publications                  |  | $                            | 35,341  |   |                                   | $ | 33,375  |                    |  | $ | 64,135             |   |  | $ | 65,083  |  
|Tabloid Publications                    |  |                              | 37,424  |   |                                   |   | 36,908  |                    |  |   | 72,036             |   |  |   | 71,591  |  
|Womens Health and Fitness Publications |  |                              | 20,349  |   |                                   |   | 25,489  |                    |  |   | 41,081             |   |  |   | 47,845  |  
|Distribution Services                   |  |                              | 7,782   |   |                                   |   | 8,145   |                    |  |   | 15,101             |   |  |   | 15,884  |  
|Corporate/Other                         |  |                              | 26,317  |   |                                   |   | 30,357  |                    |  |   | 51,543             |   |  |   | 57,124  |  
|Intersegment Eliminations               |  |                              | (2,383  | ) |                                   |   | (2,360  | )                  |  |   | (4,594             | ) |  |   | (4,481  | )
|                                        |  |                              |         |   |                                   |   |         |                    |  |   |                    |   |  |   |         |  
|Total Operating Revenue                 |  | $                            | 124,830 |   |                                   | $ | 131,914 |                    |  | $ | 239,302            |   |  | $ | 253,046 |  
|                                        |  |                              |         |   |                                   |   |         |                    |  |   |                    |   |  |   |         |  
|                                        |  |                              |         |  
|Operating Income (Loss)                 |  |                              |         |   |                                   |   |         |                    |  |   |                    |   |  |   |         |  
|Celebrity Publications                  |  | $                            | 8,861   |   |                                   | $ | 9,970   |                    |  | $ | 9,673              |   |  | $ | 18,359  |  
|Tabloid Publications                    |  |                              | 17,456  |   |                                   |   | 18,325  |                    |  |   | 30,313             |   |  |   | 34,192  |  
|Womens Health and Fitness Publications |  |                              | 7,207   |   |                                   |   | 10,067  |                    |  |   | 15,181             |   |  |   | 19,083  |  
|Distribution Services                   |  |                              | 2,265   |   |                                   |   | 2,036   |                    |  |   | 3,755              |   |  |   | 3,806   |  
|Corporate/Other                         |  |                              | (13,550 | ) |                                   |   | (9,040  | )                  |  |   | (32,042            | ) |  |   | (17,786 | )
|                                        |  |                              |         |   |                                   |   |         |                    |  |   |                    |   |  |   |         |  
|Total Operating Income                  |  | $                            | 22,239  |   |                                   | $ | 31,358  |                    |  | $ | 26,880             |   |  | $ | 57,654  |  
|                                        |  |                              |         |   |                                   |   |         |                    |  |   |                    |   |  |   |         |  

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

Operating Revenue

Total operating revenue
was $131.9 million and $124.8 million for the fiscal quarters ended September 30, 2007 and 2006, respectively, representing an increase in revenue of $7.1 million, or 5.7%. This increase was primarily attributable to a $5.1 million increase in
our Womens Health and Fitness Publications, a $4.0 million increase in our Corporate/Other segment and a $0.4 million increase in net operating revenues relating to our Distribution Services. These items were partially offset by a $2.0 million
decrease in our Celebrity Publications and a $0.5 million decrease in our Tabloid Publications.

Single copy revenue consists of copies distributed
primarily by four wholesalers, which we estimate represent 85% of the newsstand distribution market, as well as several smaller wholesalers who represent the remaining 15%. Operating revenue generated by these wholesalers is included in the
Celebrity Publications, Tabloid Publications, Womens Health and Fitness Publications and Corporate/Other segments. In the fiscal quarter ended September 30, 2007 one wholesaler accounted for greater than 10% of our total operating revenue
and in the aggregate accounted for 11.3% of our total operating revenue. In the fiscal quarter ended September 30, 2006, two wholesalers each accounted for greater than 10% of our total operating revenue and in the aggregate accounted for 36%
of our total operating revenue. Our operating results could be materially affected if one or more of these wholesalers stopped distributing our publications. We have service agreements with our wholesalers, which provide incentives to maintain
certain levels of service. Three of these wholesaler service agreements require at least 120 days prior notice of termination, with terms expiring on December 31, 2007. The fourth wholesaler service agreement requires at least 60
days prior notice of termination, with a term expiring on December 31, 2007. The Company has not received or sent a notice of termination associated with these four wholesaler service agreements.

Operating Expense

Total operating expense was $100.6 million and
$102.6 million for the fiscal quarters ended September 30, 2007 and 2006, respectively, representing a decrease of $2.0 million, or 2.0%. This decrease in operating expense is primarily due to a $1.7 million combined decrease in editorial and
production expense and distribution, circulation and other cost of sales and a $0.6 million reduction in depreciation expense, primarily due to certain assets becoming fully depreciated.



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The implementation of our Management Action Plan in the fourth quarter of fiscal year 2007 and the continuation of cost
savings associated with the results of our restructuring plan implemented in the first quarter of fiscal year 2006 resulted in a $2.4 million combined decrease in editorial and production expense and distribution, circulation and other cost of
sales. This was partially offset by a $0.7 million increase in direct costs of services related to our Distribution Services segment.

Selling, general and
administrative expenses were affected by a combined $1.8 million increase in expenses related to advertising expenses and sales promotions, partially offset by a $1.8 million decrease in costs incurred in connection with the restatement of the
Companys financial statements for the fiscal year ended March 31, 2005 and the fiscal quarters ended June 30, 2005 and September 30, 2005 (the Restatement). The increase in advertising expenses and sales promotions
was primarily attributable to our increase in advertising revenues.

Interest Expense

Interest expense was $24.8 million and $23.7 million for the fiscal quarters ended September 30, 2007 and 2006, respectively, representing an increase of $1.2 million, or 4.9%. This increase in interest expense
is primarily attributable to a higher effective weighted-average interest rate on our term loan and revolving credit facility during the fiscal quarter ended September 30, 2007 of 8.7% as compared to 8.2% for the prior years comparable
period and a higher average outstanding balance during the fiscal quarter ended September 30, 2007 when compared to the prior years comparable period.

Senior Subordinated Notes to be Issued

As discussed in Note 7, Senior Subordinated Indebtedness, in the Notes to Unaudited
Condensed Consolidated Financial Statements, we failed to meet a specified leverage ratio under our indentures as of September 30, 2007. As a result, we expect to elect to issue a total of $20.0 million of 2009 Notes and 2011 Notes to the
existing holders of the Notes (as defined below in Liquidity and Capital Resources) and therefore we recorded a liability at a fair market value of $17.3 million included in senior subordinated notes to be issued, net of discount, in the
accompanying Unaudited Condensed Consolidated Balance Sheets and a related expense of $17.3 million included in senior subordinated notes to be issued in the accompanying Unaudited Condensed Consolidated Statements of Loss.

Discontinued Operations

In order to improve our profitability and
future net cash flows, in April 2006, we discontinued the Celebrity Living Weekly, MPH and Shape En Espanol publications in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). During the fourth quarter of fiscal year 2007, we discontinued the publication of Looking Good Now. We discontinued the
publication of Weekly World News effective with the August 27, 2007 issue. Operating results of these publications have been classified as discontinued operations for all periods presented. These publications were previously included in
the Corporate/Other segment. See Note 9, Discontinued Operations, in the Notes to Unaudited Condensed Consolidated Financial Statements herein for further discussion.

Income Taxes

We recorded a $3.9 million income tax expense for the fiscal quarter ended September 30, 2007.
This expense is primarily the result of an increase in the valuation allowance. The increase in valuation allowance is caused by the amortization of indefinite-lived intangibles. This amortization creates additional deferred tax liabilities, which
cannot be considered a future source of taxable income to support the realization of deferred tax assets within the net operating loss carryforward period, thus requiring an increase to the valuation allowance.

Celebrity Publications Segment

Operating
Revenue

Total operating revenue in the Celebrity Publications segment was $33.4 million for the fiscal quarter ended September 30, 2007,
representing a decrease of $2.0 million, or 5.6%, from the prior years comparable period. This decrease in revenue was primarily attributable to a decrease in operating revenue for Star of $1.6 million, primarily due to a $2.3 million
decrease in Star circulation revenue, partially offset by a $0.6 million increase in Star advertising revenue.



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Operating Income

Operating income in the Celebrity Publications segment increased in the fiscal quarter ended September 30, 2007 by $1.1 million, or 12.5%, to $10.0 million from the prior years comparable period. The operating income increase was
attributable to rate base reductions and other cost savings initiatives for Star that were part of the Management Action Plan initiated in the fourth quarter of fiscal year 2007. The Star rate base reduction resulted in decreased
subscription and production related costs of $0.5 million and $1.8 million, respectively. The other cost savings initiatives resulted in lower Star editorial-related expenses and sales promotion expenses of $0.6 million and $0.1 million,
respectively. These expense reductions were partially offset by the above mentioned revenue decrease.

Tabloid Publications Segment

Operating Revenue

Total operating revenue in
the Tabloid Publications segment decreased slightly to $36.9 million for the fiscal quarter ended September 30, 2007 as compared to the prior years comparable period.

Operating Income

Operating income in the Tabloid Publications segment increased in the fiscal quarter ended
September 30, 2007 by $0.9 million, or 5.0%, to $18.3 million from the prior years comparable period. This increase in operating income is primarily attributable to a combined $1.2 million decrease in production expense and distribution,
circulation and other cost of sales due to the successful implementation of our Management Action Plan initiated in the fourth quarter of fiscal year 2007 and was partially offset by a $0.4 million increase in editorial expense due to higher
salaries and costs associated with manuscripts and photographs.

Womens Health and Fitness Publications Segment

Operating Revenue

Total operating revenue in
the Womens Health and Fitness Publications segment was $25.5 million for the fiscal quarter ended September 30, 2007, representing an increase of $5.1 million, or 25.3%, from the prior years comparable period. This increase was
primarily attributable to Shape operating revenues which included: a $4.7 million increase in advertising revenue and a $0.5 million increase in newsstand revenue, partially offset by $0.1 million decrease in subscription revenue.

Operating Income

Operating income in the Womens Health and
Fitness Publications segment increased in the fiscal quarter ended September 30, 2007 by $2.9 million, or 39.7%, to $10.1 million from the prior years comparable period. This increase was primarily attributable to the above mentioned
revenue increase, partially offset by a $1.0 million increase in production and transportation-related costs resulting from production of larger book sizes to accommodate the increased advertising pages and a $1.2 million increase in advertising
commissions and salaries.

Distribution Services Segment

Operating Revenue

Total operating revenue in the Distribution Services segment was $5.8 million, net of
eliminations, for the fiscal quarter ended September 30, 2007, representing an increase of $0.4 million, or 7.1%, from the prior years comparable period. This increase was primarily attributable to an increase in services related to the
racking of magazine fixtures for certain customers during the fiscal quarter ended September 30, 2007.



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Operating Income

Operating income in the Distribution Services segment decreased in the fiscal quarter ended September 30, 2007 by $0.2 million, or 10.1%, to $2.0 million from the prior years comparable period. This decrease in operating income
is primarily attributable to an increase of $0.7 million in direct costs of the services, partially offset by the above mentioned revenue increase. The $0.7 million increase in direct cost of services is attributable to additional headcount in
preparation for upcoming projects relating to the racking of magazine fixtures.

Corporate/Other Segment

Operating Revenue

Total operating revenue in the
Corporate/Other segment was $30.4 million for the fiscal quarter ended September 30, 2007, representing an increase of $4.0 million, or 15.4%, from the prior years comparable period. This increase is primarily attributable to a $2.9
million increase in the Mr. Olympia event operating revenue, a $0.7 million increase in Mens Fitness advertising revenue and a $0.7 million increase in operating revenue related to the publication of our Mini-Mag
astrological calendars. We did not recognize any revenue for the Mr. Olympia event and our Mini-Mag astrological calendars in the prior years comparable period as the event and publication occurred in the prior years third fiscal
quarter.

Operating Loss

Operating loss
decreased in the fiscal quarter ended September 30, 2007 by $4.5 million, or 33.3%, to $9.0 million, from the prior years comparable period. This decrease in operating loss is primarily due to the above mentioned revenue increase as well
as a $1.7 million decrease in Restatement-related costs, a combined $1.2 million decrease (excluding the Mr. Olympia event production costs) in editorial and production expense and distribution, circulation and other cost of sales due to the
successful implementation of our Management Action Plan initiated in the fourth quarter of fiscal year 2007, as well as the continuation of cost savings associated with the results of our restructuring plan implemented in the first quarter of fiscal
2006 and a $0.4 million reduction in depreciation expense primarily due to certain assets becoming fully depreciated. These costs were partially offset by a $1.8 million increase in production costs associated with the Mr. Olympia event and a
$0.6 million increase in advertising commissions and salaries.

Comparison of Two Fiscal Quarters Ended September 30, 2007 vs. Two Fiscal
Quarters Ended September 30, 2006

Operating Revenue

Total operating revenue was $253.0 million and $239.3 million for the two fiscal quarters ended September 30, 2007 and 2006, respectively, representing an increase in revenue of $13.7 million, or 5.7%. This
increase was primarily attributable to a $0.9 million increase in our Celebrity Publications, a $6.8 million increase in our Womens Health and Fitness Publications, a $5.6 million increase in our Corporate/Other segment and a $0.9 million
increase in net operating revenues relating to our Distribution Services.

Single copy revenue consists of copies distributed primarily by four
wholesalers, which we estimate represent 85% of the newsstand distribution market, as well as several smaller wholesalers who represent the remaining 15%. Operating revenue generated by these wholesalers is included in the Celebrity Publications,
Tabloid Publications, Womens Health and Fitness Publications and Corporate/Other segments. In the two fiscal quarters ended September 30, 2007 one wholesaler accounted for greater than 10% of our total operating revenue and in the
aggregate accounted for 11.8% of our total operating revenue. In the two fiscal quarters ended September 30, 2006, two wholesalers each accounted for greater than 10% of our total operating revenue and in the aggregate accounted for 36% of our
total operating revenue. Our operating results could be materially affected if one or more of these wholesalers stopped distributing our publications. We have service agreements with our wholesalers, which provide incentives to maintain certain
levels of service. Three of these wholesaler service agreements require at least 120 days prior notice of termination, with terms expiring on December 31, 2007. The fourth wholesaler service agreement requires at least 60 days prior
notice of termination, with a term expiring on December 31, 2007. The Company has not received or sent a notice of termination associated with these four wholesaler service agreements.

Operating Expense

Total operating expense was $195.4 million and
$212.4 million for the two fiscal quarters ended September 30, 2007 and 2006, respectively, representing a decrease of $17.0 million, or 8.0%. This decrease in operating expense is primarily due to a decrease in



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selling, general and administrative expense of $8.5 million, a $7.2 million combined decrease in editorial and production expense and distribution,
circulation and other cost of sales and a $1.3 million reduction in depreciation expense, primarily due to certain assets becoming fully depreciated.

The
implementation of our Management Action Plan in the fourth quarter of fiscal year 2007 and the continuation of cost savings associated with the results of our restructuring plan implemented in the first quarter of fiscal year 2006 resulted in a $8.3
million combined decrease in editorial and production expense and distribution, circulation and other cost of sales. This was partially offset by a $1.1 million increase in direct costs of services related to our Distribution Services segment.

The implementation of our Management Action Plan in the fourth quarter of fiscal year 2007 and the continuation of cost savings associated with the
results of our restructuring plan implemented in the first quarter of fiscal year 2006 further resulted in a $0.8 million decrease in sales promotion-related costs included in selling, general and administrative expense. The decrease in selling,
general and administrative expense was also attributable to a $2.9 million decrease in restructuring expense and a $6.5 million decrease in Restatement-related costs. These decreases were partially offset by a $1.5 million increase in advertising
expense primarily attributable to our increase in advertising revenues.

Interest Expense

Interest expense was $49.5 million and $48.0 million for the two fiscal quarters ended September 30, 2007 and 2006, respectively, representing an increase of $1.5
million, or 3.1%. This increase in interest expense is primarily attributable to a higher effective weighted-average interest rate on our term loan and revolving credit facility during the two fiscal quarters ended September 30, 2007 of 8.6%,
as compared to 8.2% for the prior years comparable period, and a higher average outstanding balance during the two fiscal quarters ended September 30, 2007 when compared to the prior years comparable period.

Senior Subordinated Notes to be Issued

As discussed in Note 7,
Senior Subordinated Indebtedness, in the Notes to Unaudited Condensed Consolidated Financial Statements, we failed to meet a specified leverage ratio under our indentures as of September 30, 2007. As a result, we expect to elect to
issue a total of $20.0 million of 2009 Notes and 2011 Notes to the existing holders of the Notes (as defined below in Liquidity and Capital Resources) and therefore we recorded a liability at a fair market value of $17.3 million included
in senior subordinated notes to be issued, net of discount, in the accompanying Unaudited Condensed Consolidated Balance Sheets and a related expense of $17.3 million included in senior subordinated notes to be issued in the accompanying Unaudited
Condensed Consolidated Statements of Loss.

Discontinued Operations

In order to improve our profitability and future net cash flows, in April 2006, we discontinued the Celebrity Living Weekly, MPH and Shape En Espanol publications in accordance with the provisions of
SFAS No. 144. During the fourth quarter of fiscal year 2007, we discontinued the publication of Looking Good Now. We discontinued the publication of Weekly World News effective with the August 27, 2007 issue. Operating
results of these publications have been classified as discontinued operations for all periods presented. These publications were previously included in the Corporate/Other segment. See Note 9, Discontinued Operations, in the Notes to
Unaudited Condensed Consolidated Financial Statements herein for further discussion.

Income Taxes

We recorded a $3.4 million income tax expense for the two fiscal quarters ended September 30, 2007. This expense is primarily the result of an increase in the
valuation allowance, partially offset by a statutory change in the effective state tax rate. The increase in valuation allowance is caused by the amortization of indefinite-lived intangibles. This amortization creates additional deferred tax
liabilities, which cannot be considered a future source of taxable income to support the realization of deferred tax assets within the net operating loss carryforward period, thus requiring an increase to the valuation allowance.



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Celebrity Publications Segment

Operating Revenue

Total operating revenue in the Celebrity
Publications segment was $65.1 million for the two fiscal quarters ended September 30, 2007, representing an increase of $0.9 million, or 1.5%, from the prior years comparable period. This increase in revenue was primarily attributable to
an increase in operating revenue for Star of $1.2 million, primarily due to an increase in advertising revenue of $2.4 million, partially offset by a decrease in circulation revenue of $1.2 million.

Operating Income

Operating income in the Celebrity Publications
segment increased in the two fiscal quarters ended September 30, 2007 by $8.7 million, or 89.8%, to $18.4 million from the prior years comparable period. The operating income increase was attributable to the above mentioned operating
revenue increase and rate base reductions and other cost savings initiatives for Star that were part of the Management Action Plan initiated in the fourth quarter of fiscal year 2007. The Star rate base reduction resulted in decreased
subscription and production related costs of $2.1 million and $3.3 million, respectively. The other cost savings initiatives resulted in lower Star editorial-related expenses and sales promotion expenses of $1.2 million and $0.5 million,
respectively.

Tabloid Publications Segment

Operating Revenue

Total operating revenue in the Tabloid Publications segment decreased slightly to $71.6 million
for the two fiscal quarters ended September 30, 2007 as compared to the prior years comparable period.

Operating Income

Operating income in the Tabloid Publications segment increased in the two fiscal quarters ended September 30, 2007 by $3.9 million, or 12.8%, to $34.2 million from
the prior years comparable period. This increase in operating income is primarily attributable to a $1.3 million decrease in restructuring charges, a combined $2.5 million decrease in production expense and distribution, circulation and other
cost of sales due to the successful implementation of our Management Action Plan initiated in the fourth quarter of fiscal year 2007 and a $0.5 million decrease in litigation charges. These items were partially offset by a $0.6 million increase in
editorial costs due to higher salaries and costs associated with manuscripts and photographs.

Womens Health and Fitness
Publications Segment

Operating Revenue

Total
operating revenue in the Womens Health and Fitness Publications segment was $47.8 million for the two fiscal quarters ended September 30, 2007, representing an increase of $6.8 million, or 16.5%, from the prior years comparable
period. This increase was primarily attributable to a $7.5 million increase in advertising revenue, partially offset by a $0.4 million decrease in merchandising revenues and a $0.3 million decrease in subscription revenue.

Operating Income

Operating income in the Womens Health and
Fitness Publications segment increased in the two fiscal quarters ended September 30, 2007 by $3.9 million, or 25.7%, to $19.1 million from the prior years comparable period. This increase was primarily attributable to the above mentioned
revenue increase, partially offset by a $1.2 million increase in production and transportation-related costs resulting from production of larger book sizes to accommodate the increased advertising pages and a $1.3 million increase in advertising
commissions and salaries.

Distribution Services Segment

Operating Revenue

Total operating revenue in the Distribution Services segment was $11.4 million, net of
eliminations, for the two fiscal quarters ended September 30, 2007, representing an increase of $0.9 million, or 8.5%, from the prior years comparable period. This increase was primarily attributable to an increase in services related to
the racking of magazine fixtures for certain customers during the two fiscal quarters ended September 30, 2007.



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Operating Income

Operating income in the Distribution Services segment increased in the two fiscal quarters ended September 30, 2007 by $0.1 million, or 1.4%, to $3.8 million from the prior years comparable period. This increase in operating
income is primarily attributable to the above mentioned revenue increase coupled with a $0.2 million decrease in restructuring charges, partially offset by an increase of $1.1 million in direct costs of the services. The $1.1 million increase in
direct cost of services is attributable to additional headcount in preparation for upcoming projects relating to the racking of magazine fixtures.

Corporate/Other Segment

Operating Revenue

Total operating revenue in the Corporate/Other segment was $57.1 million for the two fiscal quarters ended September 30, 2007, representing an increase of $5.6 million, or 10.8%, from the prior years
comparable period. This increase is primarily attributable to a $2.9 million increase in the Mr. Olympia event operating revenue, a $1.3 million increase in Mens Fitness advertising revenue, a $0.7 million increase in operating
revenue related to the publication of our Mini-Mag astrological calendars and a $0.3 million increase in operating revenues associated with reductions of sales taxes. We did not recognize any revenue for the Mr. Olympia event and our Mini-Mag
astrological calendars in the prior years comparable period as the event and publication occurred in the prior years third fiscal quarter.

Operating Loss

Operating loss decreased in the two fiscal quarters ended September 30, 2007 by $14.3 million, or 44.5%, to $17.8
million, from the prior years comparable period. This decrease in operating loss is primarily due to the above mentioned revenue increase as well as a $1.4 million decrease in restructuring charges, a $6.5 million decrease in
Restatement-related costs, a combined $2.5 million decrease (excluding the Mr. Olympia event production costs) in editorial and production expense and distribution, circulation and other cost of sales due to the successful implementation of our
Management Action Plan initiated in the fourth quarter of fiscal year 2007, as well as the continuation of cost savings associated with the results of our restructuring plan implemented in the first quarter of fiscal 2006, and a $1.0 million
reduction in depreciation expense primarily due to certain assets becoming fully depreciated. These costs were partially offset by a $1.8 million increase in production costs associated with the Mr. Olympia event.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity
are cash generated from operations and amounts available to be borrowed under our credit agreement dated as of January 30, 2006 (as amended, the 2006 Credit Agreement).

As of September 30, 2007, we had cash and cash equivalents of $54.5 million, $60.0 million outstanding on the revolving credit facility under the 2006 Credit Agreement (which represents the full amount available
to be borrowed under the revolving credit facility), and a working capital deficit of $3.7 million. The decrease in working capital deficit of $14.1 million from $17.8 million at March 31, 2007 to $3.7 million at September 30, 2007,
primarily resulted from: (i) a $7.2 million decrease in accrued interest, which occurred because our 2006 Credit Agreement requires us to pay interest at least every 90 days, or sooner if our interest lock-in period is less than 90 days, which
increased the amount of cash interest paid during the two fiscal quarters ended September 30, 2007, (ii) a $5.9 million increase in trade receivables primarily as a result of the increase in our advertising revenues, (iii) a $4.3
million decrease in current accrued expenses and other liabilities, (iv) a $1.3 million decrease in accounts payable, and (v) a $1.8 million increase in prepaid expenses and other current assets. These items were partially offset by a $5.9
million decrease in cash and cash equivalents.

We currently believe that available funds and cash flows generated by operations, if any, will be
sufficient to fund our working capital and capital expenditure requirements for at least the next 12 months. We believe that available cash at September 30, 2007 should help mitigate future possible cash flow requirements. Our revolving credit
commitment matures in January 2012 and our term loan matures in January 2013 but both will mature on February 1, 2009 if we do not refinance our outstanding 10.25% senior subordinated notes due 2009 (the 2009 Notes) on or prior to
February 1, 2009. In addition, the revolving credit agreement and the term loan under the 2006 Credit Agreement both will mature on October 15, 2010 if we do not refinance our outstanding 8.875% senior subordinated notes due 2011 (the
2011 Notes and, together with the 2009 Notes, the Notes) on or prior to October 15, 2010.



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On June 14, 2006, we announced that we were implementing a strategy to refocus the Company and devote its full
resources to growing its core brands. As part of this strategy we announced that we would explore the sale of our five market leading special interest titles  Muscle & Fitness, Flex, Muscle & Fitness Hers, Country
Weekly, and Mira!. These publications collectively represented total revenues and operating income of $42.9 million and $14.5 million, respectively, for the two fiscal quarters ended September 30, 2007. As a result of the
Restatement, the implementation of this strategy was delayed.

As part of re-examining the implementation of this strategy after the completion of the
Restatement, the board of directors of the Company decided to explore a full range of strategic alternatives, including the raising of capital, the refinancing of our existing debt or other transactions that could materially change our capital
structure, in addition to the potential sale of the special interest titles mentioned above. There can be no assurance that the exploration of these strategic alternatives will result in a transaction. We do not intend to disclose developments with
respect to the exploration of strategic alternatives unless and until our board has approved a specific transaction.

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

Cash Flows

Net cash used in operating activities was $4.3 million for the two fiscal quarters ended September 30, 2007, as compared to $19.5 million for the two fiscal quarters ended September 30, 2006. During the two fiscal quarters ended
September 30, 2007, net cash used in operating activities was primarily attributable to a net loss of $17.9 million, a $7.2 million decrease in accrued interest, which occurred because our 2006 Credit Agreement requires us to pay interest at
least every 90 days, or sooner if our interest lock-in period is less than 90 days, which increased the amount of cash interest paid during the fiscal quarter ended September 30, 2007, a $6.7 million increase in trade receivables (primarily as
a result of the increase in our advertising revenues), a $4.4 million decrease in accrued expenses and other liabilities, a $1.8 million increase in prepaid expenses and other current assets, a $1.3 million decrease in accounts payable and a $1.2
million decrease in deferred revenues. These items were partially offset by $32.8 million of non-cash expenses (excluding amortization of deferred rack costs), a $2.3 million net decrease in deferred rack costs and a $2.0 million increase in the
management fee payable. During the two fiscal quarters ended September 30, 2006, net cash used in operating activities was primarily attributable to a $31.8 million net loss, a $12.8 million decrease in accrued expenses and other current
liabilities (primarily as a result of decreased accruals for rack costs, due to third party publishers, and retail display pockets and allowances), a $7.0 million decrease in accounts payable, a $4.1 million decrease in accrued interest and a $5.1
million increase in trade receivables. These items were partially offset by a $12.9 million decrease in inventories (resulting from our efforts to more efficiently manage our inventory levels), $18.2 million of non-cash expenses (excluding
amortization and write-off of deferred rack costs), a net decrease in deferred rack costs of $7.5 million, and a $2.0 million increase in the management fee payable.

Net cash used in investing activities was $0.7 million for the two fiscal quarters ended September 30, 2007 as compared to $1.8 million for the two fiscal quarters ended September 30, 2006. Net cash used in
investing activities for the two fiscal quarters ended September 30, 2007 was primarily attributable to $0.8 million for purchases of property and equipment and $0.3 million related to the investment in Mr. Olympia, LLC, partially offset
by $0.4 million related to proceeds from the sale of fixed assets. The uses of cash for investing activities for the two fiscal quarters ended September 30, 2006 were primarily attributable to $1.7 million for purchases of property and
equipment and $0.3 million related to the investment in Mr. Olympia, LLC, partially offset by $0.2 million related to proceeds from the sale of fixed assets.

Net cash used in financing activities was $0.9 million for the two fiscal quarters ended September 30, 2007, as compared to $24.0 million of cash provided by financing activities for the two fiscal quarters ended September 30,
2006. Net cash used in financing activities for the two fiscal quarters ended September 30, 2007 consisted of payments of $0.9 million related to deferred debt costs. Net cash provided by financing activities for the fiscal quarter ended
September 30, 2006 primarily consisted of borrowing of $68.0 million on the revolving credit facility, partially offset by repayments of $40.0 million on the revolving credit facility and $4.0 million relating to the payment of deferred debt
costs.

Credit Agreement and Subordinated Indebtedness

The 2006 Credit Agreement includes a $60.0 million revolving credit facility and a $450.0 million term loan commitment. As of September 30, 2007, we had borrowed the full amount available under the revolving credit facility and the
term loan commitment We have the option to pay interest at the JP Morgan Chase Bank N.A. (JP Morgan) prime rate plus 2.25% or at the London interbank offering rate (LIBOR) plus 3.25%. As of September 30, 2007, all of our
borrowings were based on LIBOR. Our effective weighted- average interest rate on our term loan and revolving credit facility during the fiscal quarter and two fiscal quarters ended September 30, 2007 was 8.7% and 8.6%, respectively.



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The 2006 Credit Agreement includes certain representations and warranties, conditions precedent, affirmative covenants,
negative covenants and events of default. The negative covenants include financial maintenance covenants comprised of a leverage ratio, a senior secured leverage ratio, a consolidated interest expense coverage ratio, and capital expenditure limits.
The 2006 Credit Agreement also contains certain covenants that, subject to certain exceptions, restrict paying cash dividends, incurring additional indebtedness, creating liens, making acquisitions or other investments, entering into certain mergers
or consolidations and selling or otherwise disposing of assets. The Company has obtained a number of waivers and amendments to the 2006 Credit Agreement since January 30, 2006. Although there can be no assurances, the Company anticipates that,
based on current projections, its operating results for the remainder of fiscal year 2008 will be sufficient to satisfy the financial covenants, as amended, under the 2006 Credit Agreement.

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

We are required to meet
specified leverage ratios as of September 30, 2007 and 2008 relating to our Notes.

We failed to meet the specified leverage ratio of 8:1 as of
September 30, 2007 and, as required under our indentures, we expect to elect to issue a total of $20.0 million of 2009 Notes and 2011 Notes to the existing holders of the Notes. As of September 30, 2007, we recorded a liability at a fair
market value of $17.3 million included in senior subordinated notes to be issued, net of discount, in the accompanying Unaudited Condensed Consolidated Balance Sheets and a related expense of $17.3 million included in senior subordinated notes to be
issued in the accompanying Unaudited Condensed Consolidated Statements of Loss.

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

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

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

The Notes are unconditionally guaranteed, on a senior subordinated basis, by substantially all of our domestic subsidiaries. The indentures under which the Notes were
issued require that 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 Notes on a senior
subordinated basis. Subordinated note guarantees are joint and several, full and unconditional and general unsecured obligations of the note guarantors. Subordinated note guarantees are subordinated in right of payment to all existing and future
senior debt of the note guarantors, including the 2006 Credit Agreement, and are also effectively subordinated to all secured obligations of note guarantors to the extent of the assets securing such obligations, including the 2006 Credit Agreement.
Furthermore, the indentures permit note guarantors to incur additional indebtedness, including senior debt, subject to certain limitations. See Note 12, Supplemental Condensed Consolidating Financial Information, in the Notes to
Unaudited Condensed Consolidated Financial Statements in this Form 10-Q.

Contractual Obligations

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes: An Interpretation of FASB Statement
No. 109 (FIN 48), on April 1, 2007. As a result, we have recorded $3.6 million as a current liability.



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The Company failed to meet the specified leverage ratio of 8:1 as of September 30, 2007 and, as required under the
indentures, the Company expects to elect to issue a total of $20.0 million of 2009 Notes and 2011 Notes to the existing holders of the Notes. The impact that the $20.0 million of senior subordinated notes as of September 30, 2007 are expected
to have on the Companys liquidity and cash flow in future periods is as follows (in thousands):



|                                                      |  |                        |        |                  |   |           |  |           |        |                   |   |       |  |   |  
|----------------------------------------------------- |  | ---------------------- | ------ | ---------------- | - | --------- |  | --------- | ------ | ----------------- | - | ----- |  | - | -
|                                                      |  | Payments Due by Period
|                                                      |  | Total                  |        | Less Than 1 Year |   | 1-3 Years |  | 4-5 Years |        | More Than 5 Years
|$20.0 million of senior subordinated notes, principal |  | $                      | 20,000 |                  | $ |          |  | $         | 14,500 |                   | $ | 5,500 |  | $ | 
|$20.0 million of senior subordinated notes, interest  |  |                        | 3,624  |                  |   | 1,645     |  |           | 1,838  |                   |   | 141   |  |   | 
|                                                      |  |                        |        |                  |   |           |  |           |        |                   |   |       |  |   |  
|Total contractual obligations                         |  | $                      | 23,624 |                  | $ | 1,645     |  | $         | 16,338 |                   | $ | 5,641 |  | $ | 
|                                                      |  |                        |        |                  |   |           |  |           |        |                   |   |       |  |   |  



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Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the fiscal quarter ended September 30,
2007, there were no significant changes related to the Companys market risk exposure since March 31, 2007.

Item 4. Controls and Procedures

Pursuant to Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), as of March 31, 2005, the Companys management performed an evaluation, under the supervision and with the participation of the Companys principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 15d-15(e)). Disclosure controls and procedures are designed to ensure that the information required to be disclosed in our
reports that we file or submit under the Exchange Act is (i) accumulated and communicated to our management (including the principal executive officer and principal financial officer) as appropriate to allow timely decisions regarding required
disclosures, and (ii) recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Based upon that evaluation, our principal executive officer and principal financial officer concluded that a
material weakness existed in our internal control over financial reporting as of March 31, 2005. It was determined that the material weakness in internal control over financial reporting as of March 31, 2005 related to the fact that
we lacked a sufficient complement of personnel with a level of financial reporting expertise commensurate with our financial reporting requirements to resolve non-routine or complex accounting matters. This material weakness continued to exist as of
September 30, 2007.

Subsequent to March 31, 2005, the Companys board of directors and management took steps to remediate the material
weakness described above, including the hiring in December 2005 of a new chief financial officer who served from January 2006 to August 2006. That chief financial officer, as part of his review of the Companys accounting practices, found
a number of issues which he brought to the attention of the Companys board of directors and senior management. Consequently, on February 8, 2006, the board of directors concluded that the Companys previously issued financial
statements included or otherwise summarized in its Annual Report on Form 10-K for the fiscal year ended March 31, 2005 and its Quarterly Reports on Form 10-Q for each of the quarters ended June 30, 2005 and September 30, 2005 should
no longer be relied upon.

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

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

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

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



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On August 20, 2007, the audit committee of the board of directors of the Company concluded that the Companys
previously issued financial statements for fiscal year 2006 and the subsequent three quarters should no longer be relied upon because of the omission of certain footnote disclosure. See Note 12, Supplemental Condensed Consolidating
Financial Information, in the Notes to Unaudited Condensed Consolidated Financial Statements in this Form 10-Q.

In light of the material weaknesses
described above, the Company performed additional procedures to ensure that its Unaudited Condensed Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles. Accordingly, management has concluded
that the Companys Unaudited Condensed Consolidated Financial Statements for the periods covered in this Form 10-Q are fairly stated in all material respects in accordance with generally accepted accounting principles.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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

Item 6. Exhibits

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

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

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



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SIGNATURES

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



|                        |  |  |  |                                                                       |  | 
|----------------------- |  |  |  | --------------------------------------------------------------------- |  | 
|                        |  |  |  | AMERICAN MEDIA OPERATIONS, INC. Registrant                           
|                        |  | 
|Date: November 14, 2007 |  |  |  |                                                                      
|                        |  | 
|                        |  |  |  | /s/ DAVID J. PECKER                                                  
|                        |  |  |  | David J. Pecker Chief Executive
Officer (principal executive officer)
|                        |  | 
|Date: November 14, 2007 |  |  |  |                                                                      
|                        |  | 
|                        |  |  |  | /s/ JOHN F. CRAVEN                                                   
|                        |  |  |  | John F. Craven Chief Financial
Officer (principal financial officer) 



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Exhibit Index



|               |  |                                                                                                                                                                                       
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                           
|               | 
|Exhibit 31.1   |  | Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                    
|               | 
|Exhibit 31.2   |  | Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                    
|               | 
|Exhibit 32     |  | Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.