empire has fizzled and is no longer the cash machine it once was.  As chairman and chief executive of General Media International

Inc., which publishes Penthouse, Mr.

Guccione could havesoldthe magazinefor perhaps half a billion dollars less

thantwo decades ago. But instead he held on, diversified into video and

Internet porn-and still somehow managed to lose money in the sex business.

General Media's recent filing of its 2001 financials with the Securities and

Exchange Commission shows a rapidly deteriorating income statement and balance

sheet.

The company now owes $51 million of senior debt, with

all the assets of the enterprise pledged toward that debt. It is paying 15

percent annually-the sort of interest payment one makes to keep the loan

sharks at bay. The balance sheet shows current liabilities of $34 million

and current assets of just $12 million, with a rapidly declining cash

supply of only $2.5 million.Overthe past five years, the company's

operating revenues have plummeted by tens of millions of dollars. Revenues for Penthouse and its sisterpublications

Forum,Variations, PenthouseComix and Penthouse Letters are down from $60

million in 2000 to $53 million in 2001.

Bythe1980's, Penthouse had

established a reputation as Playboy's trashier

cousin and boasted almost five million readers; today, the magazine has a

circulation of 652,000,withadrop of 100,000 in the past year alone. At one

time, the magazine was raking in $20 million a year and Mr. Guccione was living

high on the hog. For the year 2001,

the company reported a net loss of almost $10 million and cash flows that are equally negative. Not only is its bottom line sagging beyond repair, the Penthouse name long ago lost whatever

allure it may have held, even among purveyors of porn.

In addition to Mr. Guccione's salary of $1.7 million, the company

pays $500,000 to $600,000 annually toward the upkeep of his Upper East Side

townhouse-the place where he lives and entertains, a home which he bought and

renovated for more than $20 million. The company justifies this expense by

claiming the townhouse is used for "business meetings" and "client

entertainment." There's also the matter of a $3.2 million payment from the magazine to the parent company for expenses that

are not at all clear; there is no way of knowing how much of that went

toward the operations of the business.

How much longer can Mr. Guccione keep General Media afloat? This

year, the company is required to make an interest payment of about $7.5 million

and an amortization payment of $5.8 million, and it is unlikely that the cash

will be there to do that. The debt is due in just two years; it's only a matter

of time.