By Observer Staff

April 7, 2002 | 8:00 p.m

Over the past 15 years, Robert Guccione's once-lucrative porn

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.