GenesisIntermedia.com (GENI) said fashionmall.com (FASH) rejected its acquisition offer, but indicated that the companies are working on forming a strategic alliance.

In December, fashionmall.com received a

cash offer of $3.50 a share from

Narax

, a Beverly Hills, Calif., merger and acquisitions firm. Marketing and advertising company GenesisIntermedia.com then disclosed that it had acquired 7% of fashionmall.com, and

doubled the Narax bid, offering $7 a share in cash and stock. Based on the stock portion of GenesisIntermedia's offer and its Nasdaq closing price yesterday, the deal would have been worth $7.64 a share.

On Jan. 22, GenesisIntermedia.com said it sold 298,000 shares, or 56% of its shares of fashionmall.com, to increase liquidity, while reaffirming its interest in the online retailer. "The sale of FASH shares, however, is no way an indication of waning interest in the transaction and we have no present plans to dispose of the remainder of our FASH shares," the company said in a press release.

Shares of both companies were down in recent

Nasdaq

trading, as fashionmall.com fell 9 cents, or 4.3%, to $2.16, and GenesisIntermedia.com dipped 44 cents, or 2.3%, to $19.13.