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GenesisIntermedia announces third-quarter results

February 21, 2002

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VAN NUYS, Calif. - GenesisIntermedia Inc. (NASDAQ:GENI), mired in a NASDAQ investigation and facing a series of class-action lawsuits filed by investors, on Nov. 19 announced a net loss of $119,742,339 on revenue of $10,782,812 for the third quarter of 2001 ending Sept. 30. During the same quarter in 2000, the company lost $4,246,734 on revenue of $13,481,478.

According to statement filed with the Securities and Exchange Commission (SEC), GenesisIntermedia absorbed $89,374,221 in financial costs during the third quarter, which led primarily to the loss. The company had $50,000 in financing costs during the same quarter in 2000.

The bulk of the financial costs -- $89,099,221 - were taken by the company as part of a $100 million credit facility it entered with Riverdale LLC, a company owned by financier Carl Icahn, in July. The company and its founder and former chief executive officer, Ramy El-Batrawi, issued warrants for 5.5 million shares in GenesisIntermedia to Riverdale. The financing costs reflect the value of those shares at the time they were issued.

"Riverdale has stated it does not intend to fund the credit facility," the company announced in its third-quarter report. "We have been in discussions with Riverdale, but because of a number of changes in the business since the signing of the commitment letter Â… we do not believe we will have the ability to borrow against the credit facility."

The company closed its Centerlinq kiosk operation in September and will liquidate its assets. Available at more than 30 shopping malls nationally, the kiosks offered Internet and e-mail access, and ticket and coupon printing. GenesisIntermedia recognized a loss of $18,849,423 to sell all the Centerlinq assets and close down the operation, according to its third-quarter report.

NASDAQ halted trading in the company's stock on Sept. 28. The exchange, the SEC, and the Federal Bureau of Investigations are investigating the company's activities. At question is charges of irregular trading by El-Batrawi - who resigned in early October (See story: Changes made at Centerlinq company), accusations that company officials concealed payments to stock promoters who hyped the stock in order to artificially raise its price, and El-Batrawi's dealings with Ultimate Holdings Ltd. Ultimate, a major stockholder in the company, is operated by Saudi businessman Adnan Khashoggi, who was involved in the Iran-Contra scandal of the 1980s.

"The company is cooperating fully with the NASDAQ Stock Market, SEC, and FBI inquiries," stated GenesisIntermedia's third-quarter report. "The company can provide no assurance that the NASDAQ Stock Market will lift the suspension on trading of the Company's stock, and the NASDAQ Stock Market may decide to permanently disqualify the Company's stock from quotation.

"The company can also provide no assurance that the SEC, or other law enforcement authority, will not bring a legal proceeding against the company that could lead to financial penalties and other forms of relief," the statement continued. "Continued suspension of trading in the company's stock, disqualification of the company's stock from quotation, or a successful enforcement proceeding against the company, is likely to seriously reduce the price and impair the liquidity of the company's common stock, and to harm the company's business by making it difficult or impossible to raise new capital through the sale of securities."

Shares in GenesisIntermedia, which traded as high as $25 in late June, was down to $5.90 when trading was halted in September.