A week after Smiles Inclusive’s (ASX:SIL) CEO quit, the company says its bankers have agreed – for the moment – to overlook any past breaches of their debt covenants.

The dental company said the day after it released the accounts and the CEO news, it realised it needed to be a bit clearer about its financial situation with shareholders.

In the half year accounts, Smiles said NAB was “considering” its request for a covenant waiver due to “significant events” in the first six months of the financial year.

Loan covenants are conditions that require the borrower to fulfil certain conditions or forbids them from taking certain actions while they owe money.

If they breach these conditions, they have to hope their debtor will waive the penalty.

Smiles did not say in the accounts what the covenants over their $16.6 million loan with NAB were, only that there was “significant risk in relation to the group’s ability to maintain compliance with these covenants”.

The company made a $1.6m loss in the six months to December 31, had negative cash flows of $4.7m, and cash of $1m.

The news was such a relief to investors they moved 1.4m shares today and pushed the price up 44 per cent to 20c. That got it away from the all-time lows of 10c, which it reached yesterday.

Smiles Inclusive shares since they listed in April 2018.

So much trouble, so little time

Smiles only listed on the ASX in April last year, raising $35 million from investors.

The troubles Smiles faced last year were many and varied.

They included the unexpected deaths of two key people, the failure to set up staff rostering, and underestimating how much time it takes to upgrade systems.

One big problem was a legal dispute in a business Smiles acquired in April last year, which they say wasn’t disclosed before the deal was done.

Smiles bought a mobile dental surgery business for $7 million and six months later cancelled the services contract with the operators and seized five mobile dental vans.

Smiles says the acquired company was fined for X-raying children’s mouths without a radiation user licence in 2016, but because it wasn’t disclosed before the deal and it’s hurt revenue, they’ve started a lawsuit against the seller for multiple breaches of the acquisition agreement.