ASIC threatens court action against Smiles Inclusive
26 June 2020, Written by Matt Ogg
More than 3.5 months after Smiles Inclusive (ASX: SIL) was suspended from trading over its failure to produce an audited financial report for the December half, Australia's corporate watchdog is taking steps to force the struggling dental outfit 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 yesterday 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.
"For completeness, SIL also notes that it received notification from ASIC under section 1274 of the Corporations Act regarding the non-lodgement of the 31 December 2019 half-year financial report," the company said, with the CEO and CFO who oversaw the period in question having left in recent months.
"ASIC have not granted an extension for SIL to lodge the accounts and have advised of their intention to submit an application to the court in respect of SIL's default."
Section 1274 of the Corporations Act states that at the request of ASIC, a court may order a company to make good on a default of this nature if a fresh document hasn't been submitted within 14 days.
The trouble is that KPMG would need to sign off on the audited results, for a company whose own ASX announcements indicate it very likely ran out of money in April.
Smiles told the ASX it had addressed the underlying issues that led to mistaken cash flow statements for the third quarter that missed the mark by more than $1.11 million, through a review of its systems and resource capability.
"An experienced consultant with a background in senior finance and ASX listed organisation has been engaged to assist with SIL's reporting and to finalise the half-year financial report. The recruitment of a permanent CFO is also being progressed," the group said,
"From analysing the cash flow workings, the costs were related to staff expenses."
Smiles also revealed today 10 of the 93 dentists under its Totally Smiles brand had terminated their service agreements.
The company confirmed it was unknown when a transaction announced in April that would "materially improve its financial position" would be completed, as negotiation with potential investors are ongoing.
At the end of the quarter the group only had $145,060 in cash to its name, along with $23.36 million worth of financing facilities withdrawn that needed to be paid back; predominantly to its lender National Australia Bank (ASX: NAB).Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Author: Matt Ogg