Martha Stewart Living Omnimedia’s had an 86.2 percent decrease in net profits this past quarter.

The losses translated to $931,000 or two cents a share in the three months to 30 June from $6.74 million or 16 cents a share a year earlier.

Revenues dropped to 16.3 percent to $65.8 million.

"During an exceptionally difficult quarter, our talented team responded to the challenges presented by the effects of Martha Stewart's personal legal situation," said president and chief executive Sharon Patrick.

Patrick conceded that the company would continue to face financial difficulty until Martha Stewart’s legal circumstances improve.

The company forecast a loss of 15 cents a share in the third quarter and a loss of 18 cents for the full 2003 year.

"We recognise that the challenges we face are likely to persist for some time," said chief financial officer James Follo.

By early Monday afternoon, Martha Stewart shares had dropped 25 cents, or 3.13 percent, to $7.73.

Martha Stewart Living Omnimedia said it had appointed an experienced corporate lawyer, Thomas Siekman, to the board of directors to help it cope with the crisis.

Stewart scandal

Company sales and profits have dissolved as Stewarts’s once spotless reputation has become eroded by charges of an insider trading scandal.

Stewart resigned as chairman and chief executive of her company 4 June, shortly after she was charged with securities fraud.

She pleaded not guilty in court to charges of conspiracy, obstruction of justice and securities fraud, all linked to personal stock trade she made in December 2001.

She is also charged with destroying documents and lying to investigators examining her sale of 4,000 shares from US biotechnology company ImClone, headed at the time by her friend Sam Waksal.

The indictment against Stewart states that she sold the stock after receiving an illegal tip that the company's cancer drug, Erbitux, was going to be rejected by the US Food and Drug Administration.

Waksal pleaded guilty at the end of May to insider trading and has been sentenced to a minimum seven years' jail.

Stewart's trial has been set for 12 January next year.