Gold Coast business: Genesis completes takeover of failed Gold Coast dental group Smiles Inclusive

Genesis Capital has taken control of failed Gold Coast dental group Smiles Inclusive.

GENESIS Capital has taken control of failed Gold Coast dental group Smiles Inclusive.

General Dental Holdings, registered in NSW, has been formed as the holding company for the new entity, which will continue to trade as Totally Smiles.

The two directors of GDH are listed as Michael Caristo and Christopher Yoo, who are the partners at Genesis Capital.

General manager Mark O’Brien informed suppliers on March 8 about the move to take over operations from Deloitte, which had been administering the business since November last year.

Smiles fell into voluntary administration after being unable to pay back $20m to NAB.

Michael Caristo and Christopher Yoo.

Deloitte then ran a campaign to sell the business revealing Genesis as their pick in January.

Joint venture partner Jonathan Hamilton, who runs a practice in Melbourne with wife Dr Jade Sun, welcomed the change to Genesis.

“I’ve seen everything Genesis is offering and it gives me a great deal of comfort that it’s a legitimate proposal,” he told the Bulletin.

“I think Deloitte and Genesis have worked well together and achieved an excellent result for the JVPs. We are finally feeling like we may see the company we originally wanted to be a part of.”

Mr Hamilton said it was highly likely their practice would become part of General Dental Holdings.

Jonathan Hamilton and Dr Jade Sun and their son William Hamilton.

It is not known where the new entity will be based.

Smiles was based in Burleigh Heads but left its offices at the end of October after coming to an arrangement with landlord Andrew Federowsky, which he says was later breached.

Genesis has succeeded in taking control after a group of joint-venture partners opposed to the sale of Gold Coast dental group Smiles Inclusive had its court application dismissed in February.

The group, led by Dr Henry Chen, originally applied to the Supreme Court seeking to prevent the sale to Genesis Capital going through before creditors could hold a vote on its proposal to buy the company.

That was amended on February 1 to an application asking for the convening period for a second creditors’ meeting to be within five days of February 8 rather than February 26.

However, Justice Glenn Martin in the Supreme Court in Brisbane dismissed the application and awarded costs to the administrators.

EARLIER: FEBRUARY 9

FAILED Gold Coast dental group Smiles Inclusive entered a deal to pay outstanding rent weeks before falling into ­administration owing $30,000 to its landlord.

Andrew Federowsky, co-founder of trade exchange Bartercard, offered space at 38-40 Township Dve to Mike Timoney when he was in the process of preparing Smiles to list in April 2018. The 300sq m Township Dve premises acted as Smiles’ base for its 50-plus management team and back office support staff.

Mr Federowsky said after COVID hit in March, the ASX-listed firm, once valued at $60m, stopped paying rent for its Burleigh headquarters.

Smiles Inclusive’s business was heavily affected by COVID, with it forced to close surgeries in different centres for months at a time.

Mr Federowsky said after three months, he contacted Smiles’ leasing management to start negotiations with the company but communication “was pretty bad”.

He said there was poor engagement for another three months before he became fed up.

“I started getting a bit more impatient and I was copying in the chairman and CEO because people were just not communicating,” he said. “Finally someone must have pressed the green light in the organisation to negotiate.”

Mr Federowsky said he was able to make a deal for a ­“severely discounted” lease settlement that would see Smiles vacate his premises by the end of October – a year earlier than its original lease.

Settlement included Mr Federowsky keeping office furniture, Bartercard trade dollars and cash in three instalments.

“They made the first payment and then the company went into voluntary administration (without making the two other payments),” he said.

“I’m glad I took other bits and pieces (furniture) because otherwise I would have been out of pocket even more.”

Mr Federowsky is one of many unsecured creditors to Smiles Inclusive unlikely to see a return from the group’s sale. NAB, owed $20m, is first in line for creditor payments.

Mr Federowsky said he had supported the group because of his relationship with founding CEO Mr Timoney. He was an investor in his previous company, Dental Partners.

EARLIER: FEBRUARY 5

A GROUP of joint-venture partners opposed to the sale of Gold Coast dental group Smiles Inclusive has had its court application dismissed.

The group, led by Dr Henry Chen, originally applied to the Supreme Court seeking to prevent the sale to Genesis Capital going through before creditors could hold a vote on its proposal to buy the company.

That was amended on February 1 to an application asking for the convening period for a second creditors’ meeting to be within five days of February 8 rather than February 26.

The JVPs hoped this would increase the likelihood of a second meeting being held before the sale was finalised.

However, on Tuesday Justice Glenn Martin in the Supreme Court in Brisbane dismissed the application and awarded costs to the administrators.

JVP group spokesman Andrew Johnson said: “Our clients’ DOCA (deed of company arrangement) proposal remains waiting for the second meeting of creditors to vote on the future of the company.”

A spokesman for the administrators said they would not be recommending the DOCA to creditors.

EARLIER: FEBRUARY 2

A GROUP of Smiles Inclusive joint-venture partners says it cannot show its detailed plan to buy out the failed Gold Coast dental group because it would be too “confusing”.

Smiles fell into voluntary administration in November after being unable to pay back $20m to NAB.

Last month, voluntary ­administrators from Deloitte revealed their pick to take over the company was ­Genesis Capital.

Despite having profit-­sharing agreements with Smiles, joint-venture partners (JVPs) were unable to vote as unsecured creditors.

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Deloitte’s decision prompted JVPs headed by Dr Henry Chen and Dr Rajendra Jasthi to apply to the Supreme Court seeking orders to prevent the sale going through before creditors had a chance to vote on their preferred option.

Dr Chen and Dr Jasthi are pushing for a second creditors’ meeting to allow creditors to have their say on the Genesis proposal and their own deed of company arrangement (DOCA).

This calls for $4m to be paid to the NAB with the remaining debt to be reduced to $6.5m with existing shareholders to retain 5 per cent of the total stock in a restructured entity.

Unsecured creditors would get 5 per cent on a pro-rata basis and 90 per cent of stock would be held by the JVP syndicate headed by Dr Chen and Dr Jasthi.

The JVPs would get a share of the profits and commission.

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JVP Jonathan Hamilton, who is not part of the JVP group looking to buy Smiles, said it was not possible to determine if the JVP group’s proposal was superior to the Genesis offer without seeing the full DOCA document.

“It’s a bit counter intuitive. If it truly is the best outcome for the JVPs I would absolutely look at it and might support it but there are no details,” he said.

A spokesman for the JVPs, Andrew Johnson, of Greystones Lawyers & Corporate Advisors, said it would be “counter productive” to release the full DOCA to the JVPs before securing a second creditors’ meeting.

A second Supreme Court hearing is due on Tuesday.

“Rather than send out something, we’d be better off to wait for the court,” he said.

“It’s not that there’s anything confidential … The DOCA is a 40-page legal document, it’s confusing and probably needs a summary.”

In response to Bulletin questions, Mr Johnson said he would send the full DOCA to Mr Hamilton.

Deloitte said last month the Genesis deal offered the best outcome for creditors, employees, stakeholders and the future of the business.

EARLIER: JANUARY 21

AN alternative proposal for the buyout of failed Gold Coast dental group Smiles ­Inclusive would give shareholders 5 per cent of the shares in a recapitalised company.

This is part of the proposal by a group of joint-venture partners (JVP) headed by Dr Henry Chen and Dr Rajendra Jasthi.

It has applied to the Supreme Court seeking orders to prevent the sale of Smiles to Genesis Capital going ahead because creditors have not had the chance to vote on the agreement or any other proposed transaction.

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The group’s proposal, called a deed of company arrangement (DOCA), calls for:

● A second creditors meeting to vote on the sale proposals including the Chen DOCA.

● $4m paid to NAB in return for the release of security held over 16 practices with encumbrances to remain in place on a further 10.

● Remaining NAB debt to be reduced to $6.5m.

● Existing shareholders to retain 5 per cent of the total stock in a restructured entity.

● Unsecured creditors to get 5 per cent on a pro-rata basis.

● 90 per cent of stock to be held by the JVP syndicate.

● All JVPs to be offered a buyout option and professional services agreements including a profit-sharing component.

Bid spokesman Andrew Johnson, of Greystones Lawyers and Corporate Advisors, said the proposal had the support of a number of shareholders, JVPs and unsecured and secured creditors.

“The DOCA provides for an injection of $4 million in capital and adoption of $6.5 million in debt plus favourable arrangements for JVPs, creditors and shareholders,” he said.

A spokesman for the administrators said they were confident the Genesis proposal provided the best outcome “for all creditors”.

Smiles fell into voluntary administration in November after being unable to pay back the NAB $20m.

EARLIER: JANUARY 19

A LAST-ditch court challenge to the sale of Gold Coast dental group Smiles Inclusive to a Sydney investment company won’t stop the administrators going ahead with the deal.

On Friday, administrators Luci Palaghia and Timothy Heenan wrote to joint-venture partners (JVPs), dentists and employees naming Genesis Capital as the successful bidder for the company’s assets.

A bid led by Pacific Smiles co-founder Alex Abrahams was not accepted.

Friday’s letter prompted a group of JVPs led by Dr Henry Chen to lodge an application in the Supreme Court in Brisbane seeking orders for the administrators to put an alternative proposal called a deed of company arrangement (DOCA) before creditors for a vote.

The groups says their proposal, backed by Smiles’ largest shareholder Phi Long Investment Pty Ltd and practices with combined revenue of $25 million, offers a better return to secured and unsecured creditors, including shareholders, than the proposal by Genesis.

It calls for the recapitalisation of Smiles and giving JVPs the choice of either being rewarded through the payment of high commission rates, up to 70 per cent, or reverting to their original profit-sharing agreements.

It follows a group of 32 dentists and/or JVPs writing to Deloitte in December stating they would rather leave the company than become part of a new corporate entity following two-and-a-half disastrious years listed on the ASX where the share price plummeted from $1 to as low as 3.5c.

However, Mr Heenan on Monday night told dentists and JVPs that the court case would not stop the administrators pushing ahead with the sale to Genesis as it does not involve an injunction against the sale.

A spokesman for the administrators on Tuesday said they were confident all options put forward had been considered.

“The Genesis Capital proposal provides the best possible outcome for all creditors and the best opportunity for the future for the business, its employees and other stakeholders,” he said.

Genesis is proposing to buy 26 of the 49 practices taken to the market by Deloitte after Smiles fell into voluntary administration in November.

The Bulletin understands Genesis managed to win over a number of dentists and JVPs by stating it would not seek to compel anyone who did not want to become part of the new entity to take part.

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To sweeten the deal and ensure that dentists and JVPs stay with the company, it also indicated it would put in place another form of profit sharing with the JVPs through the issuing of special classes of shares.

The profit-sharing agreements were put in place after dentists sold their practices to Smiles and reinvested 40 per cent of the proceeds back into the company.

However, despite those agreements the JVPs are listed as unsecured creditors and have been unable to vote on any of the bids for Smiles with the administrators opting for an asset sale.

Meanwhile, CEO Michelle Aquilina has resigned from Smiles.

She is the third CEO since the company listed and was listed as part of Mr Abrahams’ unsuccessful bid for the company.

EARLIER: JANUARY 18

ADMINISTRATORS to failed Gold Coast dental group Smiles Inclusive have chosen to accept Genesis Capital’s offer to buy the majority of the company’s assets.

It means that Pacific Smiles co-founder Alex Abrahams has failed to have his offer accepted by administrators Luci Palaghia and Timothy Heenan of Deloitte.

Ms Palaghia and Mr Heenan, in a letter to employees, dentists and joint-venture partners on January 15, said the next steps involve finalising the details of the Genesis deal and talks with stakeholders.
The commercial terms of the deal will remain confidential “for the time being”.

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The proposal is for a smaller company than the group Deloitte took to the market last year after Smiles fell into voluntary administration when it was unable to pay NAB back $20 million.

There are 26 practices included in the Genesis deal compared to the original 49 in November.

Genesis managed to win over a number of dentists and JVPs by stating that it would not seek to compel anyone who did not want to become part of the new entity to take part.

It follows a 32-strong group of dentists and/or JVPs writing to Deloitte in December stating they would rather leave the company than become part of a new corporate entity.

As part of the sale process, a number of one-on-one video conferences were held between the JVPs and dentists and the bidders.

Ms Palaghia and Mr Heenan said the feedback they received formed a key part of their decision-making process.

They said they will be in contact on January 18 with the “small number” of practices still trading that aren’t part of the Genesis deal about the next stage.

Genesis has confirmed that it will retain the “vast majority” of head office employees at Burleigh and all other employees will be offered employment “on terms no less favourable than current arrangements”.

However, a potential roadblock has emerged for the deal.

On January 15 Smiles dentist and JVP Dr Henry Chen filed an application in the Supreme Court in Brisbane seeking court orders for the administrators to consider a deed of company arrangement.

That would mean that all creditors, both secured and unsecured, would get a vote.

Currently the unsecured creditors, who are mainly the JVPs, are unable to vote.

EARLIER: JANUARY 15

SMILES dentists and investors are nervously awaiting an announcement from administrators for the failed Gold Coast-based dental group regarding its preferred bidder to take over the company.

A decision by voluntary administrators from Deloitte is due in the next few days on whether Genesis Capital or Apple, headed up by Pacific Smiles co-founder Alex Abrahams, will emerge as the preferred choice.

Smiles shares were suspended from trading on the ASX after it failed to release its half-year accounts, which followed a disastrous $31m net loss for FY2019.

The company was placed into voluntary administration in November after failing to pay NAB back $20m. Dentists and joint-venture partners — who are unable to take part in the decision to select the new owner — are owed $47m.

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The Bulletin has been told that Apple, which the Bulletin reported included Smiles CEO Michelle Aquilina in its bid, is in the box seat to beat out ­Genesis for the prize.

Ms Aquilina recently wrote to the Bulletin denying she was part of the bid and asking for the article to be taken down.

However, the Bulletin has been provided a slide from a presentation given to dentists by Apple that clearly shows Ms Aquilina as “MD designate” for “Apple Smiles Group”.

EARLIER: JANUARY 1

A COMPETING bid for a failed Gold Coast dental group is to come with baggage after it emerged the CEO may end up as a director of the new owner.

Michelle Aquilina, the ex-CEO of Primary Dental, took on the top job at Burleigh-based Smiles Inclusive in May, replacing Tony McCormack.

Ms Aquilina said at the time her twin priorities were turning the firm around and managing the COVID-19 impact.

Smiles shares had been suspended from trading on the ASX two months earlier after it failed to release its half-year accounts, which followed a disastrous $31m net loss for FY19.

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The company was placed into voluntary administration in November after failing to pay NAB back $20m.

Earlier this month the Bulletin revealed there were two competing bids for the company comprised of Genesis Capital and an entity led by Pacific Smiles co-founder Alex Abrahams.

It has now emerged Ms Aquilina is one of the directors being put forward as part of the Abrahams vehicle.

One of the dentists who attended presentations by both bidders earlier this month said he was surprised to see Ms Aquilina’s name put forward.

“I would prefer the new entity is a clean break from the past,” he said.

“It looks like she is set to profit from this whole chaos and ends up being a director in a new entity.”

Ms Aquilina could not be reached for comment. The experienced executive has history with Pacific Smiles.

She was operations and relationships manager at the company between 2006 and 2013.

According to her LinkedIn, she helped turn around the business during her seven-year stint stating she “helped drive profitability by opening 10 greenfield sites” and “drove operation alignment of the organisation through a new, consistent operating platform”.

Ms Aquilina left Pacific Smiles before it was listed on the ASX in 2014.

The company now has a market capitalisation of $383.78m and in its last trading update said patient fee growth was running at between 25 and 30 per cent for FY21.

Administrator Deloitte is to make a decision on the winning bid by mid-January. JVPs and dentists, owed $47m from the firm, are unable to vote.

EARLIER: DECEMBER 30

A FIERCE critic of a failed Gold Coast dental group says his former Perth practices have been stripped of equipment and permanently closed with staff terminated three days before Christmas.

Dr John Camacho, who sold two paediatric practices to Smiles Inclusive before its 2018 listing and reinvested 40 per cent of the proceeds back into the company, said administrator Tim Heenan of Deloitte called the five remaining staff on Tuesday to say they were no longer needed.

Smiles fell into administration in November after being unable to pay back $20 million to big bank NAB.

Since listing, the company has been plagued by problems including senior management changes, boardroom battles, lawsuits and practices shutting due to COVID-19.

Smiles Inclusive fell into voluntary administration in November. Photo: iStock

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Dr Camacho, who quit the company in April but remained a joint-venture partner, said second-hand dental equipment had been stripped from the practices to be auctioned off by Macquarie Bank which holds mortgages over the property.

His offers to buy back the practices and equipment to start operating again were refused, Dr Camacho said.

“They had the audacity to not even approach me in regards to a fair and reasonable consideration for buying back the practices,” Dr Camacho said.

“I also offered 25 cents in the dollar for second-hand dental equipment that was 10 years old which is essentially worthless.

“This is second-hand 10-year old equipment that is worth far more in situ than in a sales yard.”

The Bulletin made multiple requests to Deloitte for comment but received no response.

Dr Camacho claimed it would cost administrators more to transport, store and sell the equipment than they would be able to recoup at auction.

He said their actions were “unconscionable”.

Dr Camacho’s former practices traded under The Smile Club name in Mt Hawthorn and Karrinyup with 30 employees.

Dr Camacho said they were the “jewel in the crown” for the company and contributed eight per cent to the company’s turnover in FY19.

In October the practices were mothballed by Smiles after its last remaining dentist left with the company leaving a skeleton staff to look after patient records.

Dr Camacho, who claims to have lost millions of dollars since selling his practices to Smiles, said he was now prepared to walk away.

“I just accept the fact I’m part of a system that ain’t fair, cut my losses, which there are significant, walk away and say I’m done.”

Dr Camacho has been highly critical of Smiles management in the past.

In May, 2019 he failed in a bid to be elected to the board at an extraordinary general meeting called for by ex-CEO Mike Timoney and ex-chairman David Herlihy.

In April this year he was one of a number of dentists who quit the company claiming incompetence and false promises by the company.

EARLIER: DECEMBER 22

THE two parties vying to buy failed Gold Coast dental group Smiles Inclusive are private equity group Genesis Capital and Alex Abrahams, the co-founder of dental giant Pacific Smiles.

The Bulletin understands that the two bidders, which lodged binding offers for the company by the December 18 deadline set by the administrators, will present their offers to dentists and joint-venture partners on December 23.

The administrators are hoping to finalise a deal with one of the two parties by mid-January next year.

Smiles Inclusive trades as Totally Smiles and fell into administration in November after being unable to pay back NAB $20m.

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About $47m is owed to the joint venture partners, who reinvested 40 per cent of the proceeds back into the business when they sold their practices to Smiles.

Luci Palaghia and Tim Heenan of Deloitte Restructuring Services are acting as voluntary administrators.

The company has faced a huge amount of problems since listing on the ASX in April 2018 with profit downgrades, three chief executives in two years and boardroom battles.

Sydney-based Genesis Capital invests in the healthcare and technology sectors.

Its investments include Agilex Biolabs, Avance Clinical, SmartClinics and Cosmos Clinics.

Mr Abrahams founded Pacific Smiles in 2003 with Alison Hughes taking it from a small operation to a publicly-listed company with 42 dental centres when it made its debut on the ASX in 2014.

The company now has a market capitalisation of $383.78 million and in its last trading update said patient fee growth was running at between 25 and 30 per cent for FY21.

Shares in Smiles Inclusive were suspended in March and last traded at just 3.5 cents.

EARLIER: DECEMBER 14

MORE than one in three Smiles Inclusive dentists would refuse to work with any corporate buyer of the failed dental group.

Administrators from Deloitte are sifting through more than a dozen offers for the Burleigh-based company, which trades as Totally Smiles and fell into administration in November after being unable to pay back NAB $20m.

About $47m is owed to the joint venture partners, who reinvested 40 per cent of the proceeds back into the business when they sold their practices to Smiles, but they are listed as unsecured creditors.

The company has faced a huge amount of problems since listing on the ASX in April 2018 with profit downgrades, three chief executives in two years and boardroom battles.

A 32-strong group of dentists and/or JVPs have written to Deloitte demanding the right to buy their practices back from the group.

They say in some cases patient treatment has been cancelled or deferred due to “suppliers restricting trade with the administrators’’.

The dentists are also angry that the convening period for the second creditors’ meeting has been extended to February, prolonging the administration process.

“The overwhelming majority of dentists have expressed a desire to have their practices returned to them, and to retain their staff who they work alongside with,” the letter reads.

“The bitter experience of being unheard within this corporate group; being ignored and for many losing significant investments and the trust and confidence of their patients cause us to collectively say, we refuse to work with a new corporate buyer.”

They say they will cancel their FASA (facilities and supplies agreements) contracts with Smiles if a sale to a corporate buyer is pushed through.

“Prospective purchasers need to be aware that we will no longer work for others. We care too much for our patients, staff and our own sanity to again put our collective wellbeing into another’s hands.”

Twenty-three dentists out of a total of 63 have signed the letter.

The administrators ran an expressions-of-interest campaign for the 49-practice group last month.

Dr Michael Sawaya, who sits on the committee of inspection and signed the letter sent to Deloitte, said the dentists and JVPs want the chance to buy back their practices at market rates and run them independent of corporates.

“We have already lost so much so would rather not go through that (being part of a corporate) again.”

He said this would result in the NAB receiving payment in full.

A spokesman for the administrators said they have been pleased with the level of interest received to date.

“In response to initial expressions of interest, including in individual and groups of practices, a number of parties have been short-listed ahead of binding offers required by 18 December,” he said. “The convening period for the Administration has been extended to 26 February 2021 via a court application to provide the additional time to achieve a sale or recapitalisation and the best possible outcome for creditors, including employees, in the circumstances.”

EARLIER:

SMILES Inclusive joint-venture partners have raised fears their profit-sharing agreements could be torn up if the dental group is sold.

The board of the Burleigh-based company announced on Monday that it had opted for voluntary administration after being unable to pay back the NAB more than $12 million owed under its banking facilities.

Administrator Luci Palaghia, of Deloitte Restructuring Services, said their priority was to work with the JVPs, management and dentists to maintain operations while calling for expressions of interest for either the sale or recapitalisation of the business.

However, Melbourne-based JVP Jonathan Hamilton, said he was concerned with what a sale of the group could mean for his and his wife Dr Jade Sun’s profit-sharing agreement with the company.

Smiles listed on the ASX in March, 2018 as a network of dental practices after dentists sold their businesses to the company and reinvested 40 per cent of the proceeds back into the company. That worked out to $21 million being reinvested back into the business.

The agreements meant the JVPs would share in the profits, or lack thereof, of the company.

At the time founding CEO Mike Timoney said the business model was attractive to dentists who wanted to stay in the business but reduce their exposure to compliance and other risks.

Mr Hamilton said the company structure made the administration a “tricky process”.

“I think the best outcome for joint-venture partners would be for the agreements to remain in place and the company is able to recapitalise,” he said.

“A sale would be potentially more difficult because that sale is going to require the sale with the joint venture partnerships intact.”

Mr Hamilton said they would be forced to leave the company if his practice was sold and the joint-venture agreement was terminated.

Another JVP, who did not want to be named, said there is uncertainty over what compensation JVPs are entitled to if the business is sold and the agreements cancelled.

“This is just another chapter in a long story that wears you out in the long run,” he said.

“There have been endless attempts to try to survive.”

He said his preferred option would be to buy back his practice.

Smiles shares were suspended from trading on the ASX in March when they were just 3.5 cents.

The 2018 listing saw them valued at $1 each.

EARLIER: NOVEMBER 9

GOLD Coast dental group Smiles Inclusive has called in administrators after failing to meet multiple deadlines to pay the NAB back more than $12 million.

The Burleigh Heads-based company on Monday announced it had appointed Luci Palaghia and Tim Heenan of Deloitte Restructuring Services as voluntary administrators to Smiles Inclusive Ltd and Totally Smiles Pty Ltd.

The Bulletin understands staff and joint-venture partners were told at a 5pm Zoom meeting on Monday.

The move followed its main lender NAB cancelling its credit facilities and demanding full payment.

Smiles had previously agreed with the NAB to pay back more than $12 million of $19 million owed by November 3 but missed the deadline.

Chairman David Usasz said it had been unable to refinance the NAB debt in the required time frame.

“The Board will work with the Voluntary Administrators to put forward a Deed of Company Arrangement proposal for the benefit of all stakeholders,” he said.

CEO Michelle Aquilina said they made the decision to call in administrators to “secure the future of Totally Smiles”.

“Industry demand for oral health services remains strong and we will continue to provide services to the community across our network as we work through this process,” she said.

Ms Palaghia said they will be seeking expressions-of-interest for the sale or recapitalisation of the business.

Smiles listed on the ASX in March, 2018 with a network of dental clinics in an IPO that valued shares at $1 each.

Since then it has been beset by difficulties including poor financial results, boardroom battles with former dentists, legal cases and a revolving door of executives.

Shares were suspended from trading on the ASX in March this year when they were 3.5c after the company failed to deliver its half-year results.

Smiles announced in August a plan for the recapitalisation of the company and repayment of its NAB facilities.

However, the plan has been plagued with difficulties.

ASIC was forced to intervene to prevent the company from issuing what is called a “reduced content prospectus” for an $8 million capital raising and then Smiles’ own auditor refused to sign off on its half-year accounts when they were finally issued.

EARLIER: NOVEMBER 4

EMBATTLED Gold Coast dental group Smiles Inclusive has failed to update the market on whether or not it met Tuesday’s deadline to repay NAB $12 million in outstanding debt.

On October 28 Smiles announced through the ASX that it had agreed with the NAB to pay back more than $12 million of $19 million owed to the bank by November 3.

This involved the NAB forgiving more than $6 million in debt upon receipt of the $12 million-plus payment, which included credit card and JobKeeper facilities.

In the same announcement on October 28, Smiles’ auditor KPMG refused to sign off on its half-yearly accounts for FY20.

KPMG refused to issue a conclusion on the half-year report because it was unable to gather sufficient evidence to support assumptions upon which Smiles claimed to be a going concern.

Part of the reason for the disclaimer was that Smiles had flagged potential financiers would fund the repayment but failed to provide KPMG with information to back up its claim.

“A binding written agreement regarding the quantum, timing, terms and conditions of this arrangement was not available to us,” KPMG said in its report.

“Additionally, evidence regarding the ability of the potential financiers to honour the commitment, in the timeframes required by the Group was not available to us.”

On Wednesday Smiles did not update the market on whether or not it was able to make the payment.

A Smiles Inclusive spokesman said: “The Company will update shareholders in due course via ASX.”

If Smiles has failed to repay the NAB, it won’t be the first time it has missed a deadline.

On August 20 the company said it would pay back the NAB by September 11.

That deadline was later moved to November 9 before being moved forward to November 3.

Smiles shares have been suspended from trading on the ASX since March 2.

EARLIER: OCTOBER 28

GOLD Coast-based dental group Smiles Inclusive has finally announced its half-year results for FY20 close to eight months after they were due to be released.

The results showed a net statutory loss of $13.6 million for the six months to December 31 - up from a $1.6 million loss for the previous period.

Included in the loss were non-cash items including impairment of goodwill, property, plant and equipment totalling $5.5 million.

Auditor KPMG refused to issue a conclusion on the report because it was not able to gather sufficient evidence to support assumptions upon which Smiles claimed to be a going concern.

KPMG said these assumptions included Smiles flagging potential financiers to fund the repayment of its NAB facility and raise additional working capital.

“A binding written agreement regarding the quantum, timing, terms and conditions of this arrangement was not available to us,” KPMG said.

“Additionally, evidence regarding the ability of the potential financiers to honour the commitment, in the timeframes required by the Group was not available to us.

“Accordingly, we consider to not have gathered sufficient appropriate evidence regarding the implications of this on whether the going concern basis of preparation is appropriate.”

Smiles said it was in advanced negotiations with potential funders to repay NAB $12 million plus credit card and other expenses by November 3 - a deadline six days earlier than previously announced.

KPMG also raised concerns about a proposed rights issue where Smiles was seeking to raise $8 million ($7.6 million net of fees) to pay back NAB.

It referred to ASIC’s move to prevent Smiles issuing a prospectus for its capital raising without offering potential investors comprehensive information on its financial position.

KPMG said there uncertainty on whether Smiles could successfully raise the minimum amount of funds to complete the capital raising.

EARLIER: OCTOBER 20

MORE pressure has been heaped on the board of embattled Gold Coast dental group Smiles Inclusive with news that is has slightly more than two weeks to pay back NAB $12 million.

The company issued a statement to the ASX this morning announcing that under revised terms the NAB has agreed to discharge Smiles facilities totalling more than $19 million if it receives $12.347 by November 9.

Smiles missed the original deadline of September 11 announced as part of a broader plan to recapitalise the company by raising funds.

The company, headed up by CEO Michelle Aquilina, said the new agreement remained part of its recapitalisation plan and it is in “advanced negotiations” with funders to facilitate payments to NAB.

It follows action taken by ASIC earlier this month to prevent Smiles issuing a prospectus for its upcoming $8 million capital raising without offering potential investors comprehensive information on its financial position.

ASIC restricted the company from issuing what was called a “reduced-content prospectus” to raise new funds because of its failure to lodge the half-year results.

Smiles previously flagged plans to raise $8 million from investors fully underwritten by Aitken Murray Capital Partners by “on or around” December 7.

The plan was conditional on AMCP accepting the prospectus.

Smiles shares have been suspended from trading on the ASX since March 2 and ASIC has filed documents with the Magistrates Court seeking orders for the accounts

A hearing has been set for November 10 although ASIC has confirmed it would withdraw the case if it lodged its accounts no later than a week before the hearing date.

Smiles’ last cashflow report for the month of August showed positive cashflow of $42,000 although this was partly achieved through $671,000 in JobKeeper payments from the Federal Government.

The NAB deadline comes after former dentists at the company – Dr John Camacho, Dr Philip Makepeace and Dr Arthur Walsh – cancelled a planned meeting on October 23 where they were seeking to dump the current board, including chairman David Usasz and CEO Michelle Aquilina.

One of the reasons for the cancellation according to the three dentists was Smiles issuing 10.271 million shares at 2.5¢ per share to raise $256,000 for working capital and to pay back debt.

The dentists said this was not disclosed to shareholders and had been done to help shore up support for the board prior to the meeting.

They say they intend to reschedule the meeting no later than December 21.

Smiles said the meeting was an unnecessary and costly distraction from efforts to turnaround the business.

It said it had enough proxy votes to defeat the resolutions to replace the board meaning the result of the meeting was a foregone conclusion.

EARLIER: OCTOBER 20

THE hits just keep coming for embattled Gold Coast-based dental group Smiles Inclusive.

The company had its shares suspended from trading on the ASX in March after it failed to deliver its first-half results for FY20.

Then in September corporate regulator ASIC served it with documents filed in the Magistrates Court seeking orders for its half-year accounts in line with the Corporations Act.

The latest development on Tuesday involved ASIC intervening to ensure the company releases comprehensive information on its financial position when raising capital.

ASIC restricted the company from issuing what was called a “reduced-content prospectus” to raise new funds because of its failure to lodge the half-year results.

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Smiles previously flagged plans to raise $8 million from investors fully underwritten by Aitken Murray Capital Partners by December.

The plan was conditional on AMCP accepting the prospectus.

ASIC said the ability to issue the reduced-content prospectus, described as containing information relating only to the particular offer itself, was a privilege and not a right.

“Where a company fails to comply with its periodic disclosure obligations in a full, accurate and timely manner, ASIC will intervene to ensure that retail investors are protected,” the regulator said in a statement.

“In such circumstances, subsequent fundraisings should occur only with the benefit of a full prospectus so that there is adequate disclosure of a company’s prospects and financial position.”

A Smiles spokesman said: “Smiles Inclusive can proceed with the planned capital raising on the basis of working with the regulators and releasing a more detailed prospectus.”

The development followed former dentists at the company – Dr John Camacho, Dr Philip Makepeace and Dr Arthur Walsh – cancelling a planned meeting where they were seeking to dump the current board, including chairman David Usasz and CEO Michelle Aquilina.

Dr Makepeace said they cancelled the meeting, scheduled for Friday, because Smiles had failed to provide an up-to-date share register ahead of the EGM and had failed to disclose the issue of more than 10 million new shares.

Dr Walsh said the meeting would now be held in December, which would provide time for shareholders “to make a properly informed decision”.

However, Smiles said that the company had already received enough proxy forms to defeat the resolutions to replace the board meaning the result of the meeting was a foregone conclusion.

Smiles reported a loss of $31 million for FY19.

EARLIER:

UNDER-SIEGE Gold Coast dental group Smiles Inclusive has denied accusations it issued 10 million shares to stack the deck in its favour ahead of a crucial boardroom battle next week.

On October 15 the Burleigh Heads-based company published a statement to the ASX saying it had issued 10.271 million shares at 2.5¢ per share to raise $256,000 for working capital and to pay back debt.

The share issues did not require approval from shareholders as it was under the 15 per cent threshold of total shares allowable under listing rules.

The announcement brought forth accusations from former Smiles dentists Dr John Camacho, Dr Arthur Walsh and Dr Philip Makepeace that the share issue was intended to shore up support for the board ahead of a key vote on October 23.

The three dentists were seeking to have the board replaced at next Friday’s meeting saying it had let shareholders and, in particular, dentists down by failing to live up to its promises in the company prospectus.

Since listing in March 2018 the company had been plagued by problems, including lawsuits, poor financial results and boardroom battles.

Shares had been suspended from trading since March and ASIC had taken legal action against the company for its failure to release its FY20 first-half results.

In a statement Dr Camacho, Dr Makepeace and Dr Walsh said the share issue had only been disclosed after they asked for a copy of the register ahead of the meeting.

“Smiles directors are digging themselves an ever-deeper hole,” they said.

“The Smiles fiasco is doing untold damage to the hard-earned reputation, credibility and market values placed on the dental industry. We are committed to holding the perpetrators to account.”

A Smiles spokesman denied the company had breached ASX disclosure rules.

He said the statement from the dentists was “misleading and deceptive”.

“The shares issued by Smiles were part of the capital raising program that Smiles has previously announced,” he said.

“This raising is for the purposes of funding the turnaround program adopted by Smiles’ board, which is now seeing results.

“The number of shares issued total approximately 6% of the shares in the company. The proposition that the issuing of the shares was designed to defeat the resolutions to be proposed at the EGM on 23 October is simply not true.”

Earlier this month Smiles announced Aitken Murray Capital Partners (AMCP) had agreed to fully underwrite a rights issue raising $8 million at 2.5c per share, which would be used to pay back its main lender NAB owed more than $12 million.

Smiles said it expected the rights issue to completed “on or around” December 7.

The raising would see the number of Smiles shares triple with 320 million new shares issued.

EARLIER:

UNDER siege Gold Coast dental roll-up Smiles Inclusive has announced a new $8 million rights issue to pay back its main lender amid a looming board battle with rebel ex-dentists and court case with the corporate regulator.

The Burleigh-based company, which announced an FY19 loss of $31 million, today announced Aitken Murray Capital Partners (AMCP) has agreed to fully underwrite a rights issue raising $8 million at 2.5c per share, which will be used to pay back NAB.

Smiles said it expects the rights issue to completed “on or around” December 7.

The raising will see the number of Smiles shares triple with 320 million new shares issued.

The company has already failed to meet two deadlines agreed with NAB – the first on September 11 to pay back NAB $12.347 million and the second to close its accounts with the lender by September 30.

Smiles said while NAB has not granted an extension to the repayment dates, it remains in “productive discussions” with the bank and expects to provide an update in “coming days”.

It said it is working to refinance the $4.347 million the balance of the NAB debt and ensure it has working capital to “meet its objectives going forward”.

Smiles said it has repaid its temporary JobKeeper facility held with NAB for September.

Chairman David Usasz said the progress the company has made in turning around the business “has been instrumental” in enabling the company to sign the underwriting agreement.

AMCAP has agreed to subscribe to any shortfall in the rights issue and will take a 5 per cent fee of about $400,000 plus GST for undertaking the rights issue.

“Conditions to the Underwriting include AMCP being satisfied with due diligence and the Company’s prospectus,” Smiles said.

A prospectus will be lodged with ASIC and the ASX “in due course”.

News of the capital raising comes as the Smiles board, including Mr Usasz and CEO Michelle Aquilina, faces a challenge from ex-Smiles dentists Dr Camacho, Dr Philip Makepeace and Dr Arthur Walsh at an EGM on October 23.

The three are proposing to replace a board they say has not delivered on its promises.

The dentists also say there is a need for a forensic accounting firm to go through the books to ascertain a “true state of the finances”.

Smiles previously said the meeting is an “unnecessary and costly distraction for the Company when the performance of the business is beginning to improve”.

The Smiles board is also facing another threat from corporate regulator ASIC which has served it with documents filed in the Magistrates Court seeking orders for its half-year accounts in line with the Corporations Act.

A hearing is set for November 10.

Smiles shares have been suspended from trading on the ASX since March 2 after it failed to lodge its accounts.

Today Smiles said it expects to lodge its half-year accounts this month.

EARLIER:

THE corporate regulator is taking court action against embattled Gold Coast dental group Smiles Inclusive to force it to release its half-year financial results due more than six months ago.

On March 2, Smiles shares were suspended from the ASX after it failed to lodge its financial report for the six months to December 31. Since, the Burleigh Heads company had repeatedly said it was close to finalising the report.

On Thursday Smiles, to ASX, said the Australian Securities and Investments Commission had served it with documents filed in the Magistrates Court seeking orders for its half-year accounts in line with the Corporations Act.

A hearing was set for November 10.

Smiles said ASIC had confirmed it would withdraw the case if it lodged its accounts no later than a week before November 10. The company, working on a plan to raise capital and pay back lender NAB more than $12 million, said it expected to be in a position to lodge its accounts before the hearing.

EARLIER: SEPTEMBER 24

EMBATTLED Gold Coast dental group Smiles Inclusive has reshuffled its board again – this time replacing ex-Morgans executive Peter Evans with one of the founding directors from the Pacific Smiles Group.

Mr Evans is the latest in a long list of directors and executives that have come and gone from the Burleigh Heads-based company since it first listed in March 2018.

They include founding CEO Mike Timoney who was dumped from the board at an EGM last year, former deputy CEO Tracy Penn, who also left in 2019, and ex-CFO Emma Corcoran.

Mr Evans joined the board in August 2018 as an independent non-executive director following a 30-year career as a stockbroker.

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Mr Evans was in charge of the one-man independent committee that co-ordinated last year’s EGM where shareholders voted on boardroom changes, including the removal of Mr Timoney.

Mr Timoney and allies including Dr John Camacho had called for the meeting to spill the board after Mr Timoney was removed as CEO following poor financial results.

They had criticised Mr Evans for not being independent due to his ties to Morgans, which backed the board during the spill saying it was disappointed with the company’s performance under Mr Timoney.

The new non-executive director at Smiles is Dr Genna Levitch, who was an executive director at Pacific Smiles Group from 2001 to 2007.

In a statement on September 24, Smiles said Dr Levitch was one of Pacific Smiles’ founding executives, co-director and shareholder in the company.

Smiles said he had developed the strategy to grow the company from three practices with an annual turnover of $5 million to 17 practices generating revenue of $35 million.

It said Dr Levitch had early on in his career started a dental centre in Morisset on the North Coast in NSW and opened a practice in Weston in the Hunter Valley before co-founding a healthcare design and construction, which he sold out of in 2013.

Dr Levitch has purchased four million shares in Smiles at an undisclosed price.

Smiles chairman David Usasz said welcomed the appointment saying it would bring “significant financial and strategic expertise” to the company.

He thanked Mr Evans for his service to the board.

The appointment of Dr Levitch is effective from September 23 and comes after Smiles announced October 23 as the date for an EGM where shareholders will again vote on whether to retain or dump the board, including Mr Usasz and CEO Michelle Aquilina.

The meeting has been called for by ex-Smiles dentists Dr Camacho, Dr Philip Makepeace and Dr Arthur Walsh who say change is needed as the board has not delivered on its promises and there is a need for a forensic accounting firm to go through the books to ascertain a “true state of the finances”.

In a statement on September 23 Smiles said the meeting is an “unnecessary and costly distraction for the Company when the performance of the business is beginning to improve”.

Smiles shares are currently suspended from trading on the ASX as it has failed to file its results for the first half of FY20.

The company is currently undertaking a plan to recapitalise the company through a capital raising and paying back its lender NAB $12.347 million by the end of the month.

EARLIER: SEPTEMBER 15

SHAREHOLDERS and creditors to embattled Gold Coast dental group Smiles Inclusive have been left in the dark about how it plans to pay back its lender $12 million and recapitalise the company, a boardroom contender says.

Dr John Camacho is one of three ex-dentists at Smiles who intends challenging for a board position of the listed company on October 8.

Dr Camacho, Dr Arthur Walsh and Dr Philip Makepeace want to address what they say are substantial financial and corporate issues at the company.

They say that the board has not delivered on its promises and there is a need for a forensic accounting firm to go through the books to ascertain a “true state of the finances”.

Smiles shares have been suspended from trading on the ASX since early March after it failed to deliver its half-year results.

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The company’s full year ­result for FY19 showed a loss of $31 million.

Last month the company announced a plan to close its accounts with NAB by the end of this month after paying back $12.347 million of its $19 million debt by September 11. Smiles said it was part of a broader plan to recapitalise the company through a capital raising.

It said it was in advanced negotiations with a professional underwriter with a view to finalising the raising by the end of the month.

However, on Monday Smiles said it had not been able to meet the September 11 deadline and had asked NAB for an extension.

Dr Camacho said shareholders and creditors had no clear view of how the company would pay back NAB.

“All we have been told for months is that they are in the advanced stages of a recapitalisation,” he said. “Beyond that there has been no insight, no actual discussion around how that is going to happen.”

He said any capital raising would involve a massive dilution of existing shareholders.

The shares last traded at 3.5c but the last recorded sale involved former CEO Mike Timoney selling off his stake at a record low of 1.1c per share.

Smiles has 150 million shares on issue. If it chooses to raise $12 million at 2c per share that would involve issuing 600 million more.

EARLIER:

SMILES Inclusive has admitted to another reporting blunder – this time for stating a loan was repayable by December and then changing the date to after June this year.

The admissions are contained in Smiles’ response to another grilling by the sharemarket operator from Friday over its disclosure obligations.

The Burleigh Heads-based company was asked to explain why it stated in its annual report released in November last year that a $700,000 loan was repayable in December and then changed the date to ‘after June 30’ in its last quarterly cashflow report in July.

The ASX said it had received market intelligence that the terms of the loan agreement stipulated that it was repayable after January 31.

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In response Smiles said the loan was repayable after January 31, although it offered no explanation why the date was originally reported as December.

The company went on to say that the date was changed to after June 30 because that was the applicable reporting period covered by the cashflow report.

“Given the statement …(from July 31) relates to the balance date of 30 June, 2020, and given each of the loans is repayable upon agreement and had not been paid by that date, SIL determined that it was appropriate to disclose that the loans were therefore repayable after 30 June 2020,” the statement reads.

“SIL does however appreciate in hindsight that this may have caused some confusion but maintains the statement … is correct.”

Smiles said the loan was provided by “lenders associated with a dentist SIL has a long relationship with”.

Earlier this month Smiles announced a plan to raise capital, recapitalise the company and repay its main lender NAB back $12 million by September 11.

In response to a question from the ASX about how it planned to repay the funds, Smiles said these details will be provided “in due course”.

“SIL is still working to finalise and put into effect its capital raising and recapitalisation plan,” Smiles said.

“While this has taken longer than SIL had hoped, SIL remains optimistic the final stages of the plan will be agreed in the near future.”

Smiles said it plans to ask NAB for an extension to the repayment date, which it expects to receive.

Smiles shares have been suspended from trading on the ASX since March after the company failed to lodge its half-year accounts.

EARLIER:

THE latest cashflow report from embattled Gold Coast dental group Smiles Inclusive shows the company continues to burn through cash at a rapid pace despite substantial JobKeeper payments.

The first of its monthly reports released this afternoon shows the Burleigh-based company had negative cashflow of $560,000 in July.

Smiles, which has had its shares suspended from trading on the ASX since March after failing to file its half-year results, had just $152,000 in funding available, barely enough for a few weeks.

Customer payments came in at $2.8 million – $400,000 higher than the previous month – despite an adverse impact from the State of Disaster in Victoria.

Smiles received $636,000 in JobKeeper payments for the month.

However government funding and improved customer payments were not enough to stop the company from bleeding cash.

The company is banking on a recapitalisation plan to turn the situation around.

This involves a fully-underwritten capital raising by the end of this month and asset sales being used to pay back its main lender NAB $12.347 million.

The company has used $115,000 of the proceeds from the sale of its practice in Miranda, Sydney, to pay off part of the NAB debt. It says it will replace bank guarantees with those of third parties.

The $12.347 million bank payment is due by September 11.

EARLIER: AUGUST 12

AN October date has been set for a showdown between Smiles Inclusive and rebel dentists moving to replace the board.

On Monday the three dentists – Dr Arthur Walsh, Dr Philip Makepeace and Dr John Camacho said the EGM will be held on October 8 at a time and place to be advised.

A spokesman for Smiles said: “The Smiles Inclusive board and management are focused on our strategy to turn around the business and achieve sustainable growth into the future. We will respond to any formal notice calling a shareholder meeting if and when it is received.”

Last week Dr Walsh, Dr Makepeace and Dr Camacho issued a statement saying they are standing for election to the board to address financial and corporate issues at the company. They say they have the support of Smiles’ largest shareholder, Dr Nguyen Thu Van Trinh of Canberra.

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Dr Van Trinh has a 16.42 per cent stake in the Smiles share register through her company entities Phi Long Investment Pty Ltd and CDentist Pty Ltd.

The meeting date is more than a year after the first EGM held on May 22, 2019, in Brisbane.

That meeting resulted in former CEO Mike Timoney being dumped from the board and Dr Camacho – the only dentist standing – failing to be elected.

Mr Timoney had called to spill the board after accusing the then management in place of being “renegades” and failing to follow proper boardroom procedure.

The meeting also resulted in defeat for former chair and Timoney ally David Herlihy.

Dr Makepeace, who was not involved in the first spill, said shareholders were faced with a different scenario compared to the first EGM.

“It is a different set of circumstances. Mike Timoney’s involvement last time around was quite a block for a lot of people.

“He does not hold any interest in the company at all now (after selling his shares).”

Dr Camacho said the EGM is “one last opportunity to determine the state the company is in”.

“Ourselves as unsecured creditors, as JVPs, have absolutely no clarity or transperancy around what has happened to the financials of the company, ” he said. Since listing Smiles has been bedevilled by problems including profit downgrades, a falling share price, boardroom infighting, legal problems and a class-action lawsuit.

Smiles shares have been suspended since March 2 after the company failed to lodge its half-yearly accounts. Its FY19 result was a net loss of $31 million.

It released its four-quarter cashflow report recently showing customer receipts fell from $10.6m to $4.037m while at the same time operating costs declined from $5.7m to $1.4m.

Staff costs also fell to $2.154m net of JobKeeper payments, which came in at $1.3m.

The third quarter report, which initially showed positive cashflow of $500,000, had to be amended to negative cashflow of $614,000 after mistakes were found following questioning by ASIC.

EARLIER: SEPTEMBER 2

FORMER dentists from embattled Gold Coast dental group Smiles Inclusive are calling for the entire board to be removed in an extraordinary general meeting.

Dr Arthur Walsh, Dr Philip Makepeace and Dr John Camacho this morning issued a statement saying they are all standing for election to the board to address financial and corporate issues at the company. They say they have the support of Smiles’ largest shareholder, Dr Nguyen Thu Van Trinh of Canberra.

Vietnam-born Dr Van Trinh runs Gungahlin-based Shine Dentists, which she opened in 2004.

On May 5 she purchased 9.6 million shares in Smiles from former CEO Mike Timoney for 1.1c per share becoming the largest shareholder in the process.

This morning a substantial holder notice was filed with the ASX showing Dr Van Trinh has a 16.42 per cent stake in the Smiles share register through her company entities Phi Long Investment Pty Ltd and CDentist Pty Ltd.

In the notice she signs over power of attorney to Dr Walsh, Dr Makepeace and Dr Camacho for the purposes of voting her stake towards resolutions at a company meeting.

A 5 per cent share of the register is needed to call an EGM.

Smiles shares have been suspended since March 2 after the company failed to lodge its half-yearly accounts.

It released its four-quarter cashflow report on Friday showing customer receipts fell from $10.6m to $4.037m while at the same time operating costs declined from $5.7m to $1.4m.

Staff costs also fell to $2.154m net of JobKeeper payments, which came in at $1.3m.

The new call for an EGM comes more than 14 months after the last one was held and resulted in defeat for Mr Timoney who was dumped from the board and Dr Camacho who failed to get elected.

The three dentists calling for the new EGM have named their campaign ‘page 33’ – a reference to Smiles’ income statement in its prospectus prior to listing on the ASX.

The three have consistently maintained that the promises in the prospectus have not been delivered.

They also say they have engaged accounting firm RSM Australia to conduct a “rapid independent assessment” of the “trust state of Smiles’ financial condition and outlook”.

“The key findings of RSM’s assessment will be made public as a matter of urgency. We will also invite our JVP peers to provide feedback based on RSM’s findings,” Dr Walsh said.

Dr Makepeace said they take the lead from the “known fact” that the “best run” dental group in Australia is led by an experienced dentist – a reference to 1300SMILES founder Dr Daryl Holmes.

The three dentists last month delivered a submission to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into litigation funding and the regulation of the class action industry.

They say class actions can provide a “meaningful deterrent” or “pragmatic remedy” to corporate governance and financial issues.

EARLIER:

EMBATTLED Gold Coast dental group Smiles Inclusive took four days to tell shareholders its chief finance officer had resigned – and another half-week to realise its cashflow had dropped by $1.1 million.

The admissions are contained within a response to questions the ASX put to the company this month and released on Monday.

ASX says Smiles’ joint-venture partners were told on May 12 that CFO Emma Corcoran had resigned. It was officially announced three days later on May 15.

In response, Smiles said Ms Corcoran advised of her resignation on May 11, but it had not told ASX until May 15 because that was her “final formal day”.

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“The company (SIL) received Ms Corcoran’s resignation by email on 11 May 2020,” the Smiles statement reads. “Ms Corcoran continued to work for SIL after this date to assist with the half-year audit review and other handover matters.

“Her final formal day was 15 May 2020.”

Smiles said the resignation was voluntary.

The Smiles letter to the ASX reiterated the company position that it only became aware of the errors in its past cashflow reports on May 18.

Smiles lodged its March cashflow report on June 1, showing positive cashflow of $500,000.

However, the company later released a revised cashflow report showing it actually had negative cashflow of $614,000 – a difference of more than $1.1 million.

The company said the mistakes were a result of “transposition and flow through errors” made when the original reports were lodged.

The Bulletin has made multiple attempts to contact Ms Corcoran, but she has declined to comment.

The Bulletin is not suggesting Ms Corcoran is responsible for the errors in the March cashflow report.

An ASX spokesman said in general companies only needed to make announcements relating to senior leadership changes on the date it occurred, which in this case was May 15.

“The company in question appears to have advised the market when the change occurred, in compliance with this listing rule obligation,” he said.

However, he said the exception would be if the resignation would be expected to have a material effect on the share price.

Smiles shares have been suspended from trading on the ASX since March 2 and last traded at 3.5 cents.