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With only just more than $300,000 in the coffers as of 10 days ago and following a high-volume sell-off of shares on Friday, dental practice Smiles Inclusive (ASX: SIL) has placed its shares in a trading halt pending the announcement of a capital raising.
Early last week the Gold Coast Bulletin revealed the company had another capital raising planned to pay off a loan to National Australia Bank (ASX: NAB), even though no mention of this had been made to the ASX, drawing the ire of Smiles' more antagonistic joint venture partners.
The embattled company said an announcement would relate to the outcome of the institutional component of the accelerated entitlement offer, which could mean shares will be suspended until 25 September.
Before the trading halt was announced, SIL shares had recovered somewhat to six cents each, up from the four-cent low they had hit after a rapid sale of shares on Friday.
In a press release this morning, one of the company's most vocal joint venture partners, Dr Arthur Walsh, alleged the financial answers provided by Smiles to the ASX previously have been "plain wrong".
"We smell something fishy. It is called profit smoothing using fancy management accruals. Instead, better to focus on cold hard cash or the lack of it," he said.
"Buyer beware. Smiles told the ASX that it generated $540k EBITDA at a practice level in July. There is zero possibility of that.
"The numbers published by Smiles are wrong. Smiles actually made a sizeable loss after corporate overheads, not a small EBITDA profit. The cash burn rate tells you the truth."
Another JVP, Dr John Camacho, says Smiles' mention of its $1.191 million Bartercard Trade dollars in addition to its $323,344 left in cash as at 13 September was a "sign of desperation".
"It gets worse. Under cross examination from ASX the Company now admits going forward it will burn through a lot more cash," says Camacho.
"We predict it is creditors and dentists who will get burned next. It is inevitable. That may explain why it appears dentists are now big sellers of Smiles shares."
Camacho responded to the update highlighting JVPs like him would be raising concerns directly to Smiles shareholders and all Smiles dentists.
"Maxing out on the credit card yet again, this shambles cannot continue," he said.
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