SINGAPORE—Auditors of Inno-Pacific Holdings say current and potential financial crises threaten the company's viability as a going concern.
According to The Business Times, the firm lost S$1.89 million (U.S. $1.1 million) in 2003, and it faces an ongoing dispute over a tax liability of S$3.38 million (U.S. $2 million) assessed over several years.
Additionally, franchisees of Inno-Pacific's only revenue-generating subsidiary, Garden Grove, Calif.- based Shakey's, Inc., sued the 61-unit pizza chain for $20 million in a breach of covenant suit in 2002.
Shakey's Inc. claims the lawsuit lacks merit and is defending against the charges. Its chairman, Wong Chin-Yong, was sued for fraud by the franchisees, but the charged was dismissed in February.
A trial in the Shakey's case was scheduled for late March, but was moved to May.
In a report filed with the Singapore Stock Exchange, Inno-Pacific's auditors, Deloitte & Touche, wrote that the company faces a grim fate if it can't fight off the tax liability charge.
"Pending the final settlement of these assessments, we have presently not been able to satisfy ourselves as to the recoverability of the amount of tax suspense," the auditors wrote.
Additionally, the auditors noted that should Shakey's franchisees prevail in the lawsuit, Inno-Pacific lacks the ability to meet potential settlement obligations.
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