For retail investors there is something very reassuring about putting funds into the health sector; it benefits society, it's relatively stable, and demand for health services is only likely to increase with a growing and ageing population.
So the idea of an acquisition-driven company building a network of dental practices nationwide, in partnership with dentists adding value through combined marketing and support services, hardly sounds like a disaster in the making.
Furthermore, the 2018 initial public offering (IPO) for Gold Coast-headquartered Smiles Inclusive (ASX: SIL) was led by founding CEO Mike Timoney, who had extensive experience building successful dental companies such as Totally Teeth and Dental Partners, now known as Maven Dental Group.
It was a compelling enough business proposition to entice dental joint venture partners (JVPs) around the country to join in the first place, but these were decisions many would come to regret.
Infighting between different board factions, glaringly questionable corporate governance, and financial guidance that continued to miss the mark, led to the dwindling of fortunes and an atmosphere of enmity between the dentists and the corporation.
The mismanagement of Smiles Inclusive left many dental partners in the lurch about their futures, and those who were shareholders had to grapple not only with a rapidly declining share price, but the dilution of their stakes through capital raises.
The unprofitable group struggled to pay back its debts to National Australia Bank (ASX: NAB), now described by administrators as the priority lender, although there are other creditors who have been pushing / albeit unsuccessfully to date / to make their rival claims heard as well.
Smiles Inclusive's long, grinding path to decay culminated in the appointment of Deloitte as administrators in November 2020; the same company that had previously been engaged by NAB as a secured creditor to undertake a review of the group. At a creditors' meeting in November, administrator Tim Heenan noted these engagements did not compromise the administrators' independence, and would not be subject to a review or challenge.
At that same meeting, Heenan indicated Smiles may have been potentially insolvent at the end of 2019.
The story of Smiles Inclusive is a cautionary tale of how big promises and experienced executives are no guarantee for business success, particularly in an industry that is so relationship-driven and localised. The same red flags in this timeline will undoubtedly appear again with future IPOs, but knowing how to spot the signs will hopefully help others avoid the same fate.
15 March 2018
Smiles Inclusive launches $35m IPO, underwritten by Morgans
Founded by Michael Timoney, Smiles Inclusive launches an Initial Public Offering (IPO) to raise $35 million and list on the Australian Stock Exchange.
The Gold Coast-based company hopes to build one of Australia's largest dental roll-ups, with funds from the IPO to be deployed towards acquiring 52 dental practices across Australia, in conjunction with $36 million from a finance facility with NAB Health Corporate.
The practices will trade under the company's 'Totally Smiles' brand, with the group's structure following the footsteps of other successful listed dental roll-ups Pacific Smiles (ASX: PSQ) and 1300 Smiles (ASX: ONT).
It is an IPO that is fully underwritten by Morgans with shares to be purchased at $1 per share. Investors are told to expect $57.6 million in gross practice revenue, $5.8 million in pro forma NPAT, and a statutory loss of $300,000 in FY18.
The company sets the goal to target dividend payments of between 40-60 per cent of NPAT, with dividends planned to commence in FY19.
Of note, the company detailed potential risks to investors as part of its Prospectus:
"An investment in the Group is in large an investment in its key management personnel. The loss of key members of management, a change in the senior management team or the failure to attract additional skilled individuals to key management roles, could have a material adverse effect on the Group's operations, including its relationships with practitioners and suppliers."
"Avoid this investment": Dental advisor warns would-be Smiles investors to stay away
Graham Middleton, leading dental business advisor with Synstrat Group, tells dental practitioners to "avoid this investment" in Smiles after the company announces its IPO.
Middleton says he is sceptical of the company's prospectus forecast that it would lift net profit after tax by more than half to $5.8 million and that it could see net practice revenue jump by around 15 per cent to $41.4 million.
"These forecast increases in a financial year which is almost over are of a magnitude which stretch our imagination," Middleton says.
"Increases remotely approaching this magnitude simply don't occur in dentistry across a large number of practices in a single year.
"I have never observed net profit growth occurring across a large number of practices of 50.5% in a single year or anything like it; not even in periods of high inflation, and going back some years, when there was a shortage of dentists!"
The industry veteran concludes Smiles' projections are not credible and advised dentists to "steer well clear of this float".
26 April 2018
Smiles Inclusive lists on the ASX
After raising $35 million at $1 per share, Smiles Inclusive debuts on the ASX with the ticker SIL.
The company debuts with a market capitalisation of $57.9 million, and is led by founder and CEO Michael Timoney (who owns 16.7 per cent of the company after listing), chairman David Herlihy, deputy chairman David Usasz, and deputy CEO and executive director Tracy Penn..
Smiles intends to continue growing via acquiring additional practices, investing in the technology and equipment at existing practices, and increasing the revenue of acquired assets by improving chair utilisation, enhancing patient experience, and direct marketing initiatives.
27 April 2018
Smiles announces Indooroopilly Dental Centre acquisition on first day of trading
On its first official day of trading on the ASX, Smiles announces it has entered into an agreement to acquire the Indooroopilly Dental Centre in Brisbane for between $3 million and $3.5 million; the company's first acquisition post-listing.
The company also confirms it has completed 49 of the 52 acquisitions in its initial portfolio prior to listing, with the remainder expected to be completed "imminently". The total cost of all the acquisitions is estimated at $66 million, with vendors re-investing approximately $21 million to become joint venture partners.
"We share the same interest as our JV partners in growing the business, so we have hit the ground running by integrating practices into our network before the sales were completed," says CEO and founder Mike Timoney.
"Dental practitioners have embraced the concept that they can sell their practice to Smiles Inclusive and keep a continuing economic interest and profit share as JV partners, which is a unique business model."
Against the backdrop of an Australian dental services market that is expected to generate revenue of more than $10 billion in FY18, following an annual growth rate of more than 3 per cent over the past years, management and funds are bullish on Smiles' prospects.
"The Totally Smiles business model offers value for patients, dental practitioners, JV partners and investors," says Timoney.
"Our aim is to create one of Australia's leading dental groups by aligning the interests of dental practitioners with the company, and providing the highest standard of dental care for patients."
"Smiles Inclusive attracted significant interest from institutional and retail investors based on the joint venture business model and growth prospects in a highly fragmented market," adds Morgans executive director Philip Lee.
30 April 2018
Smiles hits all-time high closing share price
At $1.03 per share, Smiles Inclusive achieves the highest closing share price it will ever see in what is to become a chequered history.
The share price is just three cents higher than its IPO of $1 per share.
29 May 2018
One acquisition falls through for Smiles
One of the 52 proposed 'initial portfolio' acquisitions by Smiles has fallen through after the seller was unable to obtain a release of the encumbrances.
Despite the acquisition failing, Smiles announces it has completed the acquisitions for 52 other practices, including the Indooroopilly Dental Centre.
Smiles has more than 250 employees across the national network, while more than contracts have been issued to practitioners and service providers.
The re-branding of practices has also commenced, with one practice in north Queensland having moved to the 'Totally Smiles' branding. Smiles expects that re-branding will be completed across its network by September 2018.
The group continues to seek new joint venture partners and is progressing discussions with practices, highlighting plans to host five seminars for more than 490 dentists and dental practice owners over May and June.
"We have made good progress integrating our first practices onto a scalable management platform with a lean corporate office providing management, marketing and technology support," says Timoney.
30 July 2018
Smiles revises EBITDA loss
Smiles Inclusive announces expectations for an EBITDA loss, excluding acquisition costs, of $1,000 for the 2018 financial year.
This expected result is ahead of the prospectus statutory forecast of a $161,000 EBITDA loss, although the forecast for net practice revenue is down 40 per cent at just over $6 million.
Most of the decline in expected revenue is attributed to the timing of acquisitions, although net cash flows were down $2.3 million on prospectus forecasts due in part to "higher than anticipated acquisition costs".
The group notes it had $2 million in cash reserves as of the end of June and undrawn debt of $24.6 million.
The company also provides NPAT guidance of at least $6 million for FY19.
23 August 2018
A hiccup in practice settlements gives Smiles a few teething problems, causing it to fall short of prospectus revenue forecasts.
As anticipated in its July announcement, the group's reported net practice revenue dropped significantly down to $6 million, as did practice EBITDA down to $1.86 million from a previous forecast of $3.2 million.
The is what the company reports in its press release to the ASX, also emphasising activiites designed to lift sales such as focusing on new sales channels including outbound call centre activity and corporate dentistry services.
But in a more detailed Appendix 4E report, Smiles Inclusive notes a net loss of $4.98 million, which is almost 17 times greater than the statutory loss anticipated in the prospectus.
Smiles also mentions a "minor disruption in the process of consolidating a small number of practices within the initial portfolio".
22 October 2018
Leaders bullish despite statutory setbacks
Despite the company's ballooning loss reported just two months prior, chairman David Herlihy and CEO Mike Timoney are emboldened by performance ahead of the prospectus forecast when acquisition costs aren't taken into account.
They claim Smiles Inclusive's maiden earnings announcement represented a positive start based on a business model that aligns the interests of joint venture partners and shareholders.
"With the acquisition and integration of the initial portfolio now successfully completed, a platform is in place for the efficient integration of new acquisitions to contribute to revenue growth and scale benefits," they state in the annual report.
"Smiles Inclusive has an active acquisition pipeline in place and in the near term intends to commence a number of acquisitions that will be timed to coincide, allowing the company to integrate a number of new practices into the portfolio at the same time and maximise integration efficiencies.
"The company currently has $19.3 million in undrawn acquisition facilities, cash on hand and cashflow from operations to assist in the funding of proposed acquisitions."
Timoney has almost 9.7 million shares, Usasz 1.33 million, Herlihy 500,000 and Penn 412,000. Over the course of the coming month the value of those shares will be slashed in half.
31 October 2018
Cash flow rates start to raise questions over profit forecasts
Smiles Inclusive publishes its quarterly report with a $3.86 million net operating cash outflow for the three months to 30 September 2018, with the cash coming in below expectations due to isolated issues at a small number of joint venture partner practices.
One of these include an entity related to a joint venture partner being fined for "administering radiation without a user licence in 2016, well before the acquisition of the practice by Smiles".
"The proceedings were not disclosed prior to completion, and have had a negative impact on the revenues of the business through the loss of patients," the company says in a business update.
"Smiles has obtained legal advice and commenced a claim against the vendor of the relevant practice in respect of multiple breaches of the acquisition agreement."
21 November 2018
Lessons learned from patchy integration, but is it too late?
Smiles Inclusive shares have been plummeting since its quarterly cash flow statement just over three weeks ago, but they're about to plunge even further.
The group cuts its FY19 NPAT forecast by almost two thirds to $2.3 million, and the tone has changed. In its last profit forecast the company included the disclaimer that guidance excluded "any benefits that may result from accretive acquisitions".
Now the latest forecast "does not include the impact of future acquisitions and their associated costs".
On 16 November, Smiles Inclusive had just completed the acquisition of three Gold Coast practices for $3.4 million, and now has $4 million worth in advanced negotiations.
The Gold Coast-headquartered group reports it is learning the lessons from the integration of 52 practices into the Totally Smiles brand, helping it develop a "methodology to reduce integration risks and costs and drive improved performance from future acquisitions".
"The focus on building a connected national network within our first 120 days has given us insights into the strengths and weaknesses of each practice, and identified important improvements to our integration approach," says Timoney.
"These lessons have strengthened the foundations of the business and will help us to drive performance improvement and streamline the integration of future acquisitions.
"The benefits of this approach are gathering momentum with average daily revenue increasing by 8 per cent over the financial year to date and a number of organic growth initiatives being implemented."
At the AGM Tracey Penn is elected to the board, as are Peter Evans and Joshua Lowcock.
Shareholders vote to make KPMG the company's auditor, while an employee share plan is withdrawn before the AGM.
31 December 2018
Smiles closes out first calendar year as a listed company at $0.27 per share
Smiles Inclusive finishes its first calendar year as a listed company with a share price of $0.27 per share.
The company will never achieve this price again.
31 January 2019
Smiles sees an increase in cash inflows for the second quarter, but profitability is drilled down by acquisition spending.
Cash inflows rise 9 per cent on the previous quarter to reach $12.7 million, but this falls $500,000 short of expectations as a result of lower than expected trading over the Christmas-New Year period.
By this time Smiles' shares have lost more than 70 per cent of their value since the IPO.
28 February 2019
Smiles founder and CEO Mike Timoney resigns
The founder and CEO of Smiles Inclusive announces his resignation from the top role, but says he will stay on board as a director of the company.
He says the undisclosed legal proceeding and deaths of two key people within the first 180 days of operations had distracted management efforts in ensuring key foundations were in place and operating effectively.
"The impact of a number of significant events over the last six months drew management attentions away from ensuring that key processes and systems were firmly bedded down," he says.
"We are however now fully committed to this and to continuing the organic growth initiatives previously outlined and executing additional operational efficiencies."
Tony McCormack is appointed to the role of COO, having held the same position at ASX-listed Australian Agricultural Company from April 2016 to April 2018
After Paul Innes announced his resignation from the CFO role in December 2018, an executive search recruits Emma Corcoran to fill his shoes, with plans to commence in May 2019.
"The turnaround plan being implemented is a priority and the Board is confident that it will deliver a substantial improvement in business performance over time," Smiles reports in the business update.
"The company expects to report a statutory loss of between $0.5m and $1m for FY19 as these actions take place."
1 April 2019
Opposing camps on the Smiles Inclusive board try to wrench one another from their posts in a scramble for leadership.
Former CEO Mike Timoney issues a press release claiming attempts from "renegade directors" to prevent a requisition notice that seeks to remove new chairman David Usasz and director Tracey Penn.
Timoney hopes to use an extraordinary general meeting on 22 May to hold resolutions for removing Usasz, Penn and any director appointed on or after 25 March.
Meanwhile, a second requisition, backed by major shareholder Lev Mizikovsky and Smiles Inclusive joint venture partner Jonathan Hamilton, aims to remove Timoney and Herlihy from the company.
11 April 2019
Smiles' joint venture partners are hopeful the current board upheaval paves the way for an "amicable solution" to a problem they allege has cost around $20 million in lost profit share.
Australian Aged Dental Care, which trades as Australian Mobile Dental Care, was one of 56 practices acquired by Smiles Inclusive in a joint venture in April last year when mobile clinics were brought under the brand Smiles OnSite.
The company's general counsel Cabral Douglas says $2.8 million of the $7 million in proceeds from the sale were reinvested for growing the business, which was expected to benefit greatly from a Medicare scheme called the Child Dental Benefits Schedule (CDBS), wherein $1,000 worth of dental treatments are given to children aged two to 17 over two years.
However, the company was hit with fines of almost $200,000 in August for illegally X-raying children in New South Wales, and its directors and employees - including Douglas who was COO at the time - were fired in October.
Smiles alleges the directors failed to disclose radiation court proceedings during the takeover, but Douglas refutes the claim and in court documents notes only two schools cancelled the service in the relevant period.
"Since acquiring the business back in April, Totally Smiles had not even bothered to obtain a Radiation Management License, and operated for several months in violation of the relevant provisions of the Radiation Act 1990 which is a criminal offence," Douglas said at the time.
As such, Douglas lodges proceedings against Smiles in the Supreme Court seeking $20 million in damages for breaches of the business sale agreement and employment contracts.
17 April 2019
Smiles has commenced legal proceedings against Mike Timoney, alleging serious misconduct and breaches of the law.
This follows the completion of an interim investigation into the conduct of Timoney, who remains on the board along with former chair David Herlihy.
The latter claims he resigned in late March protesting "ongoing abuse of good governance by the renegade directors". The company rejects Herlihy's claim and is seeking to remove both him and Timoney from the board.
23 May 2019
The shareholders of Smiles Inclusive have their say over the future of the board.
Mike Timoney and David Herlihy have been removed by shareholders at the company's extraordinary general meeting.
Over 64 per cent of votes cast on the resolutions were in favour of removing Mike Timoney.
The two removed directors announce plans to challenge the result of the vote.
Two other directors of Smiles Inclusive survive the board spill, with 56 per cent of votes cast in favour of keeping Tracy Penn as a director, and 57 per cent support David Usasz remaining on the board.
29 May 2019
The board of Smiles threatens to take Mike Timoney to court over his campaign to undermine the results of the extraordinary general meeting (EGM).
Smiles receives a notice from Timoney stating his intention to convene another EGM, seeking to oust three directors including chairman David Usasz.
4 June 2019
Mike Timoney makes it clear he will not go quietly, with continued allegations there were voting irregularities at the EGM where he and former chairman David Herlihy were removed from the board.
Timoney alleges electronic proxy votes from a major shareholder were switched in the final hours before a deadline on 20 May.
Smiles categorically rejects the Timoney Associates' assertions of irregularities in the voting process, with its own investigations indicating the 'major shareholder' referred to is actually two separate shareholders controlled by one family.
14 June 2019
Mike Timoney's attempt to hold a second vote over the board's future is withdrawn.
A bloc led by Timoney also trys to install Clinical Advisory Committee head Dr John Camacho on the board, and remove chairman David Usasz and director Tracy Penn, but shareholders think otherwise.
However, in a statement Camacho says a second EGM will be convened in 10 days' time if the current "behind the scenes diplomatic discussions" do not result in a different way forward.
Dr Arthur Walsh, another supporter of the Timoney-Camacho bloc, calls for a dentist/JVP-led solution.
21 June 2019
Smiles is poised to raise $1.2 million with the funds to go towards the group's turnaround plan and meet its working capital requirements.
26 August 2019
Three partners of Smiles criticise the company over alleged non-payment to creditors and seek clarity over the company's solvency.
Joint venture partners John Camacho and Arthur Walsh write to the Australian Securities and Investments Commission (ASIC) at length about the matter, claiming Smiles' board and management refused to answer simple questions regarding the operation's solvency.
Arthur Bushell of Future Care Mobile Dental Services claims his company is still owed $330,000 from a $1.1 million transaction when the business was sold to Smiles.
2 September 2019
The plaque accumulates on financial results after Smiles announces that losses have ballooned by 281 per cent in FY19 to $18.9 million.
The company cites a $13.7 million impairment of assets and an underlying loss which worsened by 60 per cent to $4.5 million.
Revenue reportedly skyrockets 405 per cent to $30.6 million but there is little explanation given about what caused that surge
The result takes the market by surprise.
6 September 2019
The ASX questions Smiles over whether its significant $18.9 million loss was something the company should have alerted shareholders about earlier.
The watchdog asks whether Smiles considers the loss "information which is material to the price or value of SIL's securities within the meaning of listing rule 3.1".
Smiles says it was not material, resting its case on the fact that the company formally withdrew all guidance on 24 April 2019.
10 September 2019
Aggrieved joint venture partner John Camacho expresses a alternative view on Smiles' $13.7 million impairment charge, suggesting it should be closer to $40 million.
"Simple maths shows Smiles goodwill impairment should be closer to $40 million, not $14 million," Camacho says.
"The dental practices, before a whopping $11 million of other costs, make $4 million EBITDA a year. A typical dental practice sells for 4x-5xs. Its not rocket science to work out what the correct goodwill number is ($16-$20 million).
"Nor does it take long to calculate, certainly not six months. Smiles has had the numbers at its finger tips for ages. So why did Smiles delay?"
12 September 2019
Business News Australia shares the words of Graham Middleton - the leading dental business advisor who foresaw the demise of Smiles back in 2018.
The struggling dental care group manages to raise $1.2 million in June at $0.14 per share, but questions are swirling about whether the Gold Coast company has plans for more raisings in the pipeline.
The questions come on the back of a Gold Coast Bulletin report published on 17 September detailing how the company had flagged a second capital raising round to pay off a loan from National Australia Bank (ASX: NAB).
This allegation raises the ire of the same JVPs who have persistently drilled the company over its financial reporting and governance - John Camacho and Arthur Walsh.
19 September 2019
The Australian Stock Exchange (ASX) asks embattled dental care group Smiles Inclusive (ASX: SIL) if it should be listed. The company's response raises more questions than it provides answers.
Smiles chairman David Usasz notes the Gold Coast company only had $323,344 in cash as at the end of 13 September.
This compares to $1.6 million at the end of June and implies the company has been burning cash to the tune of around $130,000 a week.
20 September 2019
Shares in the cash-strapped group fall by almost a third before the company announces a temporary trading halt at 2:17pm AEST.
Chairman David Usasz responds to the ASX's query about the issue, claiming the company is not aware of any information that can explain the massive drop.
He clarifies Smiles is continuing to assess capital raising options, however the proposals under consideration would "not have a material effect on the price or value" of shares.
In response to speculation surrounding plans for a second capital raising, Usasz says Smiles is exploring all funding avenues open to it, including debt and equity.
1.4 million shares are traded in a single day, representing almost 20 times the average level over the five days prior.
23 September 2019
Dental practice Smiles Inclusive places its shares in a trading halt pending the announcement of a capital raising.
Before the trading halt is announced, SIL shares recover somewhat to six cents each, up from the four-cent low they had hit after a rapid sale of shares the week prior.
25 September 2019
Smiles announces plans to raise $3.3 million - roughly the value of its most recent market capitalisation - to execute a turnaround strategy.
The company plans to issue around 66.6 million shares at five cents each, representing more than a 25 per cent premium to the low of less than four cents on 20 September.
26 September 2019
Two Sydney-based dental entrepreneurs who sold their business to Smiles Inclusive (ASX: SIL) in 2018 lodge a claim against the embattled company over alleged non-payment.
Smiles' acquisition of Future Care Dental Group (FCDG) was part of a 2018 spending spree backed by an April IPO that saw the Gold Coast company expand its scope to 56 dental practices nationwide.
Arthur Bushell and Christian Perez of FCDG sold the company to Smiles for $1.1 million in December 2018 but claim they are still owed $330,000.
1 October 2019
Smiles statutory results show a loss of $31 million in FY19, and its chairman David Usasz flags a "significant risk" that the company won't meet debt covenants with NAB.
Usasz says if the group does not continue as a going concern, it may not be able to realise its assets and extinguish liabilities in the ordinary course of operations.
2 October 2019
The ASX calls on Smiles Inclusive to provide copies of all email communications with its auditors KPMG since August 30 in the wake of the surprise $31 million loss announcement.
Usasz indicates the surprise result was last-minute in nature.
The former owners of Sydney-based FCDG serve the company with a statutory demand for payment of debt.
Arthur Bushell and Christian Perez claim they are still owed $330,000 by the company.
31 October 2019
Smiles Inclusive reveals its cash burn averaged more than $416,000 per month in the first quarter of FY20, which is more than the amount of cash it held in the bank at the end of the period.
It also announces its cash outflows totalled $12.963 million for the September quarter.
26 November 2019
Smiles Inclusive shares are trading at close to record lows and management is pulling out all stops to improve shareholder sentiment ahead of the company's AGM.
In a Totally Smiles newsletter released, management seeks to lift the mood by drawing attention to new initiatives including a "Brand Blueprint" - a digital marketing review that will bring social media in-house, along with training programs and the hiring of new support staff.
The company's market capitalisation is now only marginally higher than the $3.3 million it raised in October.
28 November 2019
Shares in Smiles Inclusive are rallying for the third straight day after Totally Smiles announces three longstanding litigation matters relating to Smiles Onsite's closure in October 2018 have been withdrawn.
The plaintiffs' General Counsel Cabral Douglas says an extensive negotiation process has not only delivered an agreement to settle all matters pending before the various courts, but also a comprehensive plan to grow the mobile dentistry business nationally.
5 December 2019
Smiles Inclusive claims victory in another legal matter after the Supreme Court of Queensland sets aside a statutory demand served by the former owners of FCMD.
The company was awarded costs in connection to the application for setting aside the statutory demand.
Former FCMD owners Arthur Bushell (pictured) and Christian Perez claim they are still owed $330,000 by the company, but Smiles disputes this.
10 December 2019
Smiles Inclusive's cash position receives a well needed boost after the company sells two practices in Queensland's Lockyer Valley region to 1300 Smiles (ASX:ONT).
The practices in Gatton and Laidley are sold by SIL subsidiary Totally Smiles for an undisclosed sum, and the group is also considering selling its Gympie and Toowoomba practices as part of a turnaround strategy.
The Australian Stock Exchange questions the liquidity of Smiles Inclusive after net cash outflows balloon 150 per cent to $3.2 million in the December quarter.
The dental company has just $709,000 in cash at the end of the quarter.
In a letter sent earlier this month to Smiles CFO Emma Corcoran, the ASX said it was possible to conclude the company "may not have sufficient cash to continue funding its operations" if spending is in line with expectations.
In response, Smiles chairman David Usasz attributes the worse results to seasonality, but concedes the chance of continued negative operating cash flows remains "relatively high".
19 February 2020
Townsville-based 1300 Smiles (ASX: ONT) reveals SIL was previously in its sights.
"Shareholders will also be aware that another listed dental services organisation here in Australia suffered some terrible troubles in the past year," 1300 Smiles managing director Dr Daryl Holmes OBE said in a letter to shareholders yesterday, as a clear reference to Smiles Inclusive.
"We considered acquiring that entire company but decided the risks were too great.
10 March 2020
Smiles reveals it has an ace up its sleeve after receiving a binding agreement from a sophisticated investor to raise $430,000 for working capital.
The company says the investor has also promised a further $570,000 later in the half.
23 March 2020
Smiles appoints two new executives
Smiles Inclusive appoints former Primary Dental CEO Michelle Aquilina as deputy chief executive officer of Totally Smiles, along with Mark O'Brien - formerly of Junior Adventures Group - as general manager of operations.
14 April 2020
Smiles Inclusive CEO Tony McCormack resigns within a week of announcing the majority of its workforce had been stood down.
The group even went as far as announcing its board, executive, senior management and the majority of support staff would be on "stand down".
At the time, McCormack flagged the possibility the JobKeeper payment would be their only remuneration for the foreseeable future.
Recently appointed Totally Smiles deputy CEO Michelle Aquilina is propelled into the top role at the group.
With extensive strategic, operational and financial business experience spanning over 30 years, we are very fortunate to have an extremely able candidate to fill the role of Chief Executive Officer and Managing Director in Michelle Aquilina," says chairman David Usasz.
"Tony agreed to help the business at a difficult time inheriting an exceptionally difficult set of circumstances and a very hostile environment.
"His leadership, knowledge, skills, unwavering diligence and hard work has resolved many significant issues, contributed to improvements in the Company's systems and processes and enabled a better understanding of the elements needed for the sustainable success of the Smiles business model."
15 May 2020
Smiles Inclusive reports it will be reopening all its dental centres nationwide.
CFO and company secretary Emma Corcoran resigns today, just a month after former CEO Tony McCormack resigned.
Corcoran joined the Gold Coast-based company in May last year in the midst of executive in-fighting that led to founder and then chairman Mike Timoney being kicked off the board.
29 May 2020
In an exclusive interview with Business News Australia, the founder of Smiles Mike Timoney describes the debacle as a personal tragedy and has little faith the company will survive.
1 June 2020
An amended quarterly cash flow statement shows Smiles has much less cash than previously thought.
With its shares already suspended from trading, a March quarter update released on 30 April claimed the company had net cash from operating activities of $500,000.
It now turns out the real figure was a cash outflow of $614,000, representing an error of more than $1.11 million.
For most companies on the ASX a mistake of this degree would mean little, but the 1.1-cent per share sell-off from founder Mike Timoney indicates the group is only worth $1.59 million.
Smiles also corrects its cash for the end of the quarter to $145,000, whereas it was previously reported as $242,000.
26 June 2020
Australia's corporate watchdog takes steps to force Smiles to lift its game.
If a court order arises at the request of the Australian Securities and Investments Commission (ASIC) and Smiles Inclusive doesn't comply, the consequences could range from pecuniary penalties to a winding up of the company.
The fact was revealed on page three of Smiles' response to an ASX grilling when the Gold Coast-based group was asked about compliance with listing rules relating to disclosing information that could have a material impact on the value of shares.
3 August 2020
Dentists Dr John Camacho and Dr Arthur Walsh team up with other disgruntled partners in a bid to overthrow the board.
8 September 2020
Smiles Inclusive (ASX: SIL) concedes it probably won't pay the remainder of a $19 million loan to NAB on time.
SIL has until Friday 11 September to pay back $12 million to the bank - a deadline that raised questions from the share market operator, along with queries about whether a planned capital raising would also be used to pay back a separate $700,000 loan.
In its query sent on 26 August, the ASX claimed it had received market intelligence that a loan had been made by an SIL employee and sought clarification on several other concerns.
Australia's corporate watchdog takes legal action against Smiles Inclusive (ASX: SIL) over its inability to produce an audited financial report for the December 2019 half, delivering on a threat made three months ago.
The announcement comes after the shock departure of director Peter Evans on 24 September, when former Pacific Smiles Group founding executive Dr Genna Levitch was also appointed to the board.
9 October 2020
Despite missing the 11 September deadline to pay back more than half of its $19 million debt to NAB, Smiles Inclusive announces plans to raise $8 million to repay the bank in part.
The embattled dental practice network tells shareholders it has entered into an agreement with Angus Aitken and John Murray-led Aitken Murray Capital Partners (AMCP) for the raise.
The raise comprises a fully underwritten rights issue at an issue price of 2.5 cents per share, which will see 320 million more shares issued.
12 October 2020
Joint venture partner (JVP) Aged Dental Care dropped a $20 million case against Smiles in November last year with its legal representative singing the praises of leadership renewal, but now its tune has changed.
"According to the terms of the settlement deed, the 5 three-chair surgery mobile clinics were due to be relaunched on or before 1 February 2020," the JVPs General Counsel Cabral Douglas says.
"However, to date, no significant strides have been made in this regard, and as a result my clients have, once again, lost confidence in the management team, this time led by chairman David Usasz.
"On 2 September 2020, I issued the company with a formal Notice of Breach, followed by serving them with a Statutory Demand today, with further legal action likely to follow for substantial damages."
20 October 2020
Smiles is dealt a new blow by the corporate watchdog.
The company receives a determination from the Australian Securities and Investments Commission (ASIC) preventing the company from using a transaction-specific prospectus to raise capital until 19 October 2021.
The order will make it extremely challenging for the embattled group to go ahead with an $8 million capital raise designed to pay down debt to National Australia Bank (ASX: NAB), which would dilute an already eroded stake for shareholders by putting out 320 million new shares.
23 October 2020
Smiles Inclusive is given a slight reprieve on a $12 million debt repayment that was due on 11 September, but all transaction accounts with lender National Australia Bank (ASX: NAB) will need to be closed ahead of new deadlines in November.
By 4 November the dental group will have to pay back the $12 million plus amounts owing under a credit card facility with the bank, which currently stands at $137,819, as well as reasonable expenses borne by NAB.
29 October 2020
Smiles finally produces the elusive FY19 half year result.
It tells a story of a company with massive net losses, at $13.6 million on 31 December 2019, but the auditor isn't fully convinced the company can continue to operate as a going concern.
According to KPMG's Independent Auditor's Report, the firm says it does "not express a conclusion on the accompanying Interim Financial Report of the Group".
The auditor describes how Smiles is "critically dependent" upon achieving a number of assumptions to continue.
6 November 2020
There are now only three board members left at flailing Gold Coast-based dental group Smiles Inclusive (ASX: SIL) following the exit of director Peter Fuller (pictured below) after just 16 months in the role.
10 November 2020
The local anaesthetic of turnaround promises finally wears off for Smiles Inclusive (ASX: SIL), as its inability to pay back a $12 million loan to National Australia Bank (ASX: NAB) triggers the appointment of voluntary administrators.
Impeded by severe limitations on raising capital and operations that have run at a loss, the Gold Coast-based company confirms it has not been able to raise the funds needed to repay amounts due under a deed with NAB.
As a result, NAB terminated the release deed having earlier cancelled and demanded full payment of all amounts owing to it under its facilities on 19 October 2020.
17 November 2020
Smiles Inclusive JVPs raise concerns that they, their employees and shareholders could be left high and dry by the dental group's voluntary administration.
Prior to the company's voluntary administration a group of requisitioning shareholders were attempting to organise a board coup to turn their fortunes around.
Now those hopes have been dashed and aggrieved dentists are threatening a class action they believe is worth $80 million.
These alleged amounts owing are worth around four times what SIL needs to pay National Australia Bank.
21 December 2020
Lawyer alleges $100m+ in damages could be due
Legal counsel Cabral Douglas sends a letter to SIL shareholders advising he has been asked by substantial shareholders to explore the prospects of bringing a class action against Smiles Inclusive, and possibly its advisers and directors.
Douglas claims to represent 47 per cent of the top 20 shareholders in the company.
"What we have seen is one of the biggest, and certainly the swiftest corporate collapses in modern Australian history, which is even more alarming when one considers the dental sector which otherwise been a safe investment, resilient, and recession proof," says Douglas.
"I would expect the corporate watchdog ASIC to take a keen interest in the case, and I'm eagerly awaiting Deloitte's final report which should make for interesting reading.
"So far, We have not done a forensic damages assessment but on a preliminary prima facie basis I would estimate that we could be looking at damages in excess of $100 million."
19 January 2021
Michelle Aquilina steps down from her CEO role as the group passes to new hands, after ten months at the helm of the company.
2 February 2021
A group of creditors and shareholders led by Dr Henry Chen, claiming be owed approximately $7 million by Totally Smiles and with an alternative administration proposal that has been rebuffed by Deloitte and NAB, seek orders to be able to see the confidential Genesis Capital agreement.
The group also seeks orders to bring forward a second creditors meeting to be held before expected settlement of the Genesis deal later this month.
However, their hopes are dashed by Justice Martin of the Queensland Supreme Court in Brisbane, who dismisses their requests on the grounds it is ultimately the administrators' decision about how to best proceed, and not the creditors' choice.
"If the National Australia Bank isn't on your side, you're going to have difficulties," the judge said during proceedings.
He also dismissed the request from the group of creditors to see the Genesis terms, given it would be an ineffective use of administrators' powers if they were to ignore matters of confidentiality.
3 February 2021
Dr Chen claims Genesis Capital settlement may be delayed
After claims brought by Dr Henry Chen and others were dismissed in court yesterday, their attempts to put an alternative deed of company arrangement (DOCA) to creditors prior to an asset sale are not yet done and dusted.
Chen tells Business News Australia the administrators at Deloitte informed joint venture partners of their intention to extend the settlement deadline for the sale to Genesis Capital.
"They're trying to apply to the court to have an extension and I believe that's the second time that they have done so," he says.
A spokesperson for the administrators has described the extension as a possibility, but is still firmly in the camp of the deal made with Genesis.
"The terms of the agreement with Genesis are set and there is no intention at present to vary these terms," the spokesperson says.
"Nonetheless, the Administrators may seek to extend the end of the convening period beyond 26 February to enable this transaction to complete."
If an extension is given, this would allow a creditors' meeting tentatively set for 26 February to take place. Chen says he is disappointed at yesterday's court decision, and he has urged the administrators to act "in the best interests of all creditors".
"I don't think they really should have an objection to do so...if they really are confident the Genesis deal is the right deal, then why not let the creditors vote for it?" he says.
"All we were asking for from the court was to effectively let the creditors - myself being one of them, but then along with all the creditors including NAB - have a chance at voting for the future of the company without all the assets being sold already.
"Deloitte is supposed to be acting in the best interests of all creditors, not just NAB, so that's certainly disappointing that the judge doesn't agree."
In the court yesterday, Deloitte described the proposed DOCA as uncertain, unworkable and impractical, but Chen believes it is "fully executable and presents a better value for all the creditors".
"Deloitte themselves almost admit that under the current proposal all the unsecured creditors get zero, so in our DOCA the unsecured creditor does get not a lot of money but still some," he claims.
Another Smiles Inclusive shareholder who has asked to remain anonymous describes it as a "shame" that no DOCA was provided by the administrators to creditors.
"I believe that it is a fundamental right that we should all be able to vote on all the options available for the creditors. That wasn't allowed," the shareholder says.
15 February 2021
Smiles asserts employees in sold practices will keep their jobs, but shares have "no value"
More than three months after its last ASX announcement, Smiles Inclusive formally informs the market of the deal to sell 26 practices - around half the total - to Genesis Capital.
The company confirms completion of the sale is scheduled for no less than five business days from 24 February 2021, although both the administrators and Genesis are committed to settling as soon as possible and may choose bring the date forward.
However, there is a provision in the asset sale agreement (ASA) that the completion timeframe can be extended if required.
Smiles confirmed Deloitte had received 20 expressions of interest for the sale of individual practices and 63 for the sale of grops of practices, but that was whittled down to a shortlist of seven parties on 7 December and then just two on 22 December.
The group notes the full commercial terms of the transaction are confidential, but there are some key points:
The transaction is not subject to any minimum acceptance threshold requirements. That is, the
sale of individual practices will complete for any practice where any relevant condition
precedent is satisfied.
All employees at those practices that complete will be offered employment on terms and
conditions no less favourable than their existing conditions and have continuity of service
recognised in full.
- Transferring JVPs will receive recognition of their financial interests in the practices.
The administrators noted they still anticipated a shortfall to creditors and, as such, consider the shares of SIL to have no value.
"Our utmost priority is to work closely with joint venture partners, management and practitioners to maintain operations and minimise business disruption during this transition period," voluntary administrator Luci Palaghia said.
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