MEDIA BAY (MBAY)

[Hilander]

MediaBay Inc. Announces 2nd Quarter 2006 Financial Results:

August 18, 2006
MediaBay Inc. Announces Second Quarter 2006 Financial Results
CEDAR KNOLLS, N.J., Aug. 18 /PRNewswire-FirstCall/ -- MediaBay, Inc. (Nasdaq: MBAY) a digital media and publishing company specializing in the marketing of spoken audio entertainment, today announced financial results for the second quarter ended June 30, 2006.

The Company reported net sales of $1.1 million for the second quarter of 2006, down from $2.3 million in the second quarter of 2005. Net loss applicable to common stockholders for the three months ended June 30, 2006 was $13.1 million, or $1.24 per diluted common share, compared to a net loss of $3.0 million, or $0.49 per diluted common share for the three months ended June 30, 2005. The three months ended June 30, 2006 results included $11.8 million in non-cash charges related to the accretion of discount on mandatory redeemable preferred stock and an impairment charge for goodwill. Net sales were $2.6 million for the six months ended June 30, 2006, down from $5.6 million for the six months ended June 30, 2005. Net loss applicable to common stockholders for the six months ended June 30, 2006 was $15.7 million, or $1.49 per diluted common share, compared to a net loss of $22.2 million, or $4.36 per diluted common share for the six months ended June 30, 2005. The six months ended June 30, 2006 results included $11.8 million in non-cash charges related to the accretion of discount on mandatory redeemable preferred stock and an impairment charge for goodwill. The six months ended June 30, 2005 reflected $18.0 million in non-cash charges related to the Company's March 2005 financing, including a deemed dividend on preferred stock for the beneficial conversion feature and a loss on early extinguishment of debt.

About MediaBay, Inc.

MediaBay Inc. (Nasdaq: MBAY - News) is a digital media and publishing company specializing in spoken word and premium audio entertainment. The company maintains a library consisting of over 75,000 hours of content, including audio books from best-selling authors and the history of American Radio. Some of MediaBay's digital content partners include BBC, Blackstone, CBS Radio, Harper Collins, Hay House, Oasis, Penguin Audio, Random House, Simon & Schuster, Sound Room, and Zondervan. In addition to its popular Audio Book Club, MediaBay distributes its content through proprietary web sites including audiobookclub.com, radiospirits.com and Soundsgood.com as well as through partner channels including MusicNet, Real, MSN Music, Sirius Satellite Radio and XM Satellite Radio. For more information on MediaBay, please visit www.soundsgood.com, www.mediabay.com, www.radiospirits.com and www.radioclassics.com.

Certain statements in this Form 10-Q constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of our management for future operations are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," or "continue" or the negative thereof or variations thereon or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. These forward looking statements involve certain known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any results, performances or achievements expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations, include, without limitation our in ability to implement our strategy, the decision to seek strategic alternatives and the risks related thereto: our history of losses and declining revenues; our ability to license and sell new spoken word content, obtain additional financing, anticipate and respond to changing customer preferences, license and produce desirable content, protect our databases and other intellectual property from unauthorized access, and collect receivables; dependence on third-party providers, suppliers and distribution channels; competition; the costs and success of our marketing strategies, product returns, member attrition; risks relating to our capital structure and the other risk factors set forth in our annual report on Form 10-Kfor the period ended December 31, 2005 and quarterly report on Form 10-Q for the period ended June 30, 2006 other filings with the SEC. Undue reference should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update any forward-looking statements.



MEDIABAY, INC.
Condensed Consolidated Balance Sheets(Dollars in thousands)

June 30, December 31,
2006 2005
(Unaudited)

Assets
Current Assets:
Cash and cash equivalents $4,007 $8,243
Accounts receivable, net of allowances
for sales returns and doubtful
accounts of $1,775 and $1,533 at June 30,
2006 and December 31, 2005, respectively 501 691
Inventory 511 763
Prepaid expenses and other current assets 533 464
Royalty advances 534 523
Total current assets 6,086 10,684
Fixed assets, net 1,568 1,785
Other intangibles, net 38 42
Goodwill 4,030 6,156
$11,722 $18,667

Liabilities and Stockholders' Deficiency
Current Liabilities:
Accounts payable and accrued expenses $3,824 $4,969
Short-term debt, net of original issue
discount of $56 at June 30, 2006 and $52 at
December 31, 2005 53 32
Preferred dividend and interest payable 582 319
Redeemable preferred stock 21,063 --
Total current liabilities (Note 6) 25,522 5,320
Long-term debt, net of original issue discount
of $79 and $111 at June 30, 2006 and
December 31, 2005, respectively 580 608
Total liabilities 26,102 5,928

Commitments and Contingencies

Preferred stock, no par value, authorized
5,000,000 shares; 200 shares of
Series B issued and outstanding at
June 30, 2006 and December 31, 2005 and
21,063 shares of Series D issued and
outstanding at June 30, 2006 and
December 31, 2005 20 11,436
Common stock; no par value, authorized
300,000,000 shares; issued and
outstanding 10,516,444 at June 30, 2006
and December 31, 2005 121,681 121,681
Contributed capital 42,637 42,637
Accumulated deficit (178,718) (163,015)
Total common stockholders' deficiency (14,380) 12,739
$11,722 $18,667



MEDIABAY, INC.
Condensed Consolidated Statements of Operations(Dollars in thousands,
except per share data)
(Unaudited)


Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005

Sales, net of returns,
discounts and
allowances of $191 and
$277 and $615 and
$1,430 for the three
and six months ended
June 30, 2006 and 2005,
respectively $1,146 $2,272 $2,560 $5,625
Cost of sales 909 1,607 1,978 3,403
Gross profit 237 665 582 2,222
Expenses:
Advertising and promotion 203 401 715 787
General and administrative 1,556 2,013 3,596 3,588
Termination charges -- 697 -- 697
Depreciation and
amortization 149 17 300 43
Charge for impairment to
Goodwill 2,126 -- 2,126 --
Gain on settlement of
litigation (963) -- (963) --
Operating loss (2,834) (2,463) (5,192) (2,893)
Interest income 56 62 118 75
Interest expense 450 16 465 626
Accretion of discount on
mandatory redeemable
preferred stock 9,709 -- 9,709 --
Loss on early
extinguishment of debt -- -- -- 579
Loss before income
taxes (12,937) (2,417) (15,248) (4,023)
Income tax expense -- -- -- --
Net loss (12,937) (2,417) (15,248) (4,023)
Dividends on preferred
stock 143 533 454 738
Deemed dividend on
beneficial conversion
of Series D Preferred
Stock -- -- -- 17,423
Net loss applicable to
common shares $(13,080) $(2,950) $(15,702) $(22,184)

Basic and diluted loss
applicable to common
shares per common share: $(1.24) $(0.49) $(1.49) $(4.36)



MEDIABAY, INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)

(Unaudited)
Six months ended
June 30,
2006 2005


Cash flows from operating activities:
Net loss $(15,248) $ (4,023)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss on early extinguishment of debt -- 579
Non-current accrued interest and dividends
payable -- 140
Depreciation and amortization 300 43
Amortization of deferred financing costs
and original issue discount 29 210
Amortization of deferred member acquisition costs -- 13
Payment of accrued dividends through issuance of
common stock -- 14
Charge for impairment of goodwill 2,126 --
Accretion of discount on mandatory redeemable
preferred stock 9,709 --
Changes in asset and liability accounts:

Decrease in accounts receivable, net 190 631
Decrease in inventory 253 132
Increase in prepaid expenses (69) (194)
(Increase) decrease in royalty advances (11) 99
(Decrease) increase in accounts payable
and accrued expenses (975) 168
Net cash used in operating activities (3,696) (2,188)
Cash flows from investing activities:
Acquisition of fixed assets, including
development of websites (80) (580)
Net cash used in investing activities (80) (580)
Cash flows from financing activities:
Payment of preferred dividends (363) (53)
Proceeds from sale of Series D Preferred stock,
net of cash fees and expenses -- 31,528
Payment of long-term debt, including accrued
interest and dividends (35) (11,721)
Redemption of Series A and Series C
Preferred Stock -- (5,789)
Increase in deferred financing costs (62) (29)
Net cash (used in) provided by financing
activities (454) 13,936
Net (decrease) increase in cash and cash
equivalents (4,236) 11,168
Cash and cash equivalents at beginning of period 8,243 3,122
Cash and cash equivalents at end of period $4,007 $ 14,290
SOURCE MediaBay, Inc.
-0- 08/18/2006
/CONTACT: Tim Clemensen of Rubenstein Investor Relations,
[phone], [e-mail], for MediaBay, Inc./
/Web site: http://www.mediabay.com /
(MBAY)

CO: MediaBay, Inc.
ST: New Jersey
IN: PUB BKS CPR MLM ENT
SU: ERN

LD
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0627 08/18/2006 13:30 EDT http://www.prnewswire.com