Smiles auditor questions dentist loan months after Gold Coast dental roll-up said it was paid

A leaked email shows Smiles Inclusive’s auditor raising questions about a loan owed to a dentist months after the company reported having paid him for the sale of his former clinics.

A LEAKED email shows Smiles Inclusive’s auditor raising questions about a loan owed to Dr Henry Chen months after the company reported having paid him for the sale of his former clinics.

Gold Coast-based dental group Smiles Inclusive listed in April, 2018 under a partnership model whereby dentists sold their practices and reinvested 40 per cent of the proceeds in return for a share of the profits from their clinics.

In December last year Smiles announced it had sold Dr Henry Chen’s former practices in Gatton and Laidley for $1.863 million. Under the terms of Dr Chen’s revenue sharing agreement he was owed $745,000 from the sale of those clinics.

The company reported the settlement of those sales 13 days later.

Former Smiles CEO Mike Timoney has questioned whether Dr Henry Chen was paid. Picture: Annette Dew

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In mid-May former CEO Mike Timoney claimed Dr Chen still had not been paid the money owed to him.

Mr Timoney said the sale of the Laidley and Gatton clinics resulted in an unsecured loan to Dr Chen, which was the reason the company had not released its half-year results and its shares were suspended from trading on March 2.

A Smiles spokesman at the time told the Bulletin: “All financial obligations were settled at the time of sale in December last year”.

However, the Bulletin can reveal that the company’s auditor George Stylianou, of KPMG, wrote to former Smiles CFO Emma Corcoran on Saturday, February 29, about a loan owed to Dr Chen.

Smiles reported negative cashflow of $614,000 for the third quarter. Photo: iStock

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“Based on our previous discussions with yourself and Tony (McCormack - former CEO), Henry (Chen) was willing to work with the group on the loan repayments,” the email reads.

“Do you think that he would be open to signing off on our confirmations including statement such as ‘the repayment of this loan will not be demanded until such time that the amount can be repaid out of the Company’s working capital without compromising the ability to continue as a going concern’.”

Sources told the Bulletin the loan referred to proceeds owned to Dr Chen from the sale of his former practices.

Smiles CEO Michelle Aquilina, through a spokesman, declined to comment on the email nor say when the company’s half-year results would be released.

Dr Chen could not be reached.

Just two days after the auditor’s email Smiles announced it was not able to finalise its half-year results. Its shares were suspended from trading on March 2 and have not been traded on the ASX since.

The shares listed for $1 and last traded for just 3.5 cents.

Earlier this month the company revised its third-quarter cashflow report stating it did not have $500,000 in positive cashflow as previously reported but rather negative cashflow of $614,000.

Neither cashflow report lists a loan owed to Dr Chen although there is a third party loan listed for $1.485 million.