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Struggling dental care business Smiles Inclusive (ASX: SIL) managed to raise $1.2 million in June at $0.14 per share, but did the Gold Coast company have plans for more raisings in the pipeline?
Within 2.5 months the share price shed half its value in response to a surprise $19 million loss - a result that followed harsh criticism from company partners and creditors who questioned Smiles' solvency.
The ASX asked whether such an unexpected result - arising from a $13.7 million impairment - could have been released to shareholders earlier.
Chairman David Usasz said the board only became aware of this after the close of trade on 30 August, which implies it would have been a last-minute inclusion in the unaudited report in less than three hours.
Now there may be another twist in the Smiles saga, after the Gold Coast Bulletin yesterday reported the company had flagged a second capital-raising round to pay off a loan from National Australia Bank (ASX: NAB).
This allegation has raised the ire of the same joint venture partners (JVP) who have persistently drilled the company over its financial reporting and governance - John Camacho and Arthur Walsh, ever the thorn in the side of a company trying to disseminate the optimistic vision of a turnaround.
"Yesterday media outlets reported that Smiles is planning a capital raise to repay bridging loans to NAB," says Walsh.
"However, this material fact has never been disclosed to the ASX and to investors."
Camacho says the JVPs' understanding is that as far back as mid-April the company knew it was in deep trouble.
"How long has the Smiles Board sat on this price sensitive information? And when did Smiles first realise it needed to raise significant funds?" asks Camacho.
"Just two weeks ago the Company was telling the world via a response to an ASX Query that Smiles made a profit in July, yet 4 days later it couldn't even pay its staff on time. What is the real truth?"
Walsh claims Smiles Inclusive was down to its last $600,000 in March, and since then it has racked up close to another $4 million in hard losses.
"Unsecured creditors, including the dentists and unsuspecting practice vendors, are keeping the company afloat," he says.
"Creditors are on tenterhooks while Smiles is keeping the ASX in the dark on multiple fronts."
"On behalf of all creditors, we ask what was Smiles closing cash balance on Friday 6th September 2019 ahead of payments to dentists and staff totalling $1.5 million? All stakeholders, investors and the market have a right to know."
These questions emerge after reports several dentists who work with Smiles weren't paid last week. Walsh claims only "dog ate my homework" excuses were offered by Smiles directors when under pressure from staff
"On Friday night the Smiles Board refused to confirm the firm's solvency. We conclude Smiles has finally run out of cash," says Walsh.
"We note fellow Smiles dentists have publicly stated they believed the administrative error was an 'unlikely explanation'.
"We agree. Drip feeding payments to dentists over 4 days, making the same mistake four days in a row, on consecutive days? Really?"
Smiles director Peter Fuller offered an explanation to one Brisbane JVP.
"Emma Corcoran our CFO failed to put all the JVP payments into the automated payment run," says Fuller.
"By the time this mistake was found [sic]. The bank cut off time had passed.
"The missed payments were then put on the next payments run."
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