Auditor Warns General Media’s Future in Doubt

General Media Inc., the men’s magazine publisher headed by Bob Guccione Sr., said its auditor has “substantial doubt” about its ability to stay in business because its debt exceeded assets at the end of last year.

The company, which owns Penthouse magazine, warned it won’t have enough funds to repay $52 million of notes that mature at the end of this year. It lost $8.1 million last year before gains, and its total liabilities exceeded assets by $56.7 million, according to a Securities and Exchange Commission filing.

General Media’s revenue fell about 25% to $79 million last year because of the sale of its automotive magazines and a decline in circulation at Penthouse and its affiliated publications. In an effort to turn itself around, the company said it has boosted the cover price of some magazines and cut its work force, among other moves.

The New York-based company’s cash fell to $5.7 million last year from $6.4 million. The company said it expects to be able to make its semiannual interest payment of $2.8 million June 30 and Dec. 31, though it warned it doesn’t have enough funds to repay the notes, and it can’t guarantee that it will find a source of funding.

If the company can’t repay the notes, the trustee could take control of General Media, according to the filing.

General Media included the warning from its auditor, Grant Thornton, in its 10-K filing with the SEC.

Circulation of Penthouse and its five affiliated publications has been on the decline, falling to about 1.4 million last year from about 2 million four years earlier, General Media said.