Aca Joe, a fast-growing manufacturer, retailer and licensor of colorful, rugged-looking casual wear, said Thursday that its independent auditor intends to qualify the company's financial report because it is uncertain "of the company's ability to continue as a going concern."
In a statement, the San Francisco-based company said it has not yet resolved with the auditor, Touche Ross & Co., how to account for certain assets relating to its January acquisitions of two New York licensees.
At issue, according to the company, are $5 million in unspecified intangible assets and $1 million in Aca Joe trademark rights that were bought by the company.
The company added that it expects to report an operating loss of about $5 million on sales of about $23 million for the fiscal year ended Jan. 31. Net income in the previous year was $860,998 on revenue of $12.8 million. For the nine months ended Nov. 2, 1986, Aca Joe had a net loss of $2.7 million on sales of $16.2 million.
Walter A. Singer, chairman and chief executive, noted that the company "is late in our filing (of the financial results) because of this question of the intangibles. We hope the issue will be resolved in the next couple of days . . . and we feel that the company will continue forward."
A Touche Ross employee said it would be inappropriate for the company to comment. However, an accounting source who asked not to be named said a "going-concern qualification" is not uncommon for younger companies that have experienced rapid growth. Generally, he said, accountants qualify a report in such a way if they are concerned, for instance, about immediate profitability.
Aca Joe said it is reviewing its financial alternatives with its lenders and financial advisers.
The company earlier had said it was unable to finish its audited financial statements for the fiscal year ended Jan. 31 in time to file its annual 10-K report with the Securities and Exchange Commission. In Thursday's statement, it added that the quarterly 10-Q for the first period also has been delayed.
Previously, the company has acknowledged that earnings have suffered from inadequate supplies at stores because of its sole reliance on founder Joseph (Acapulco Joe) Rank's manufacturing operations in Mexico. According to analyst Jonathan H. Ziegler of Sutro & Co. in San Francisco, those ties have been scaled back and a network of worldwide sources developed.
Although Ziegler said he has at times seen "some turnaround potential" for Aca Joe, "my biggest discouragement is that I never saw customers in the stores."