Frequently Asked Questions
Who is Drake?
Drake Management, Drake Private Investments LLC and Drake Special Situations LLC, along with a few other entities collectively known as "Drake" are a group of affiliated permanent capital vehicles that Anthony Faillace uses to invest across private and public markets. Drake and its affiliates have no outside investors and manage investments solely for Anthony Faillace.
At one point Drake did manage external capital in the form of hedge funds, mutual funds and separately managed accounts, but our involvement with Structural Monitoring Systems PLC has always been through entities that are 100% owned and funded by Anthony Faillace. Drake has operated in its current form for over a decade.
Why did shares move from Drake Special Situations to Drake Private Investments?
Drake Special Situations and Drake Private Investments are two investment entities 100% owned by Anthony Faillace, and as such there was no change in beneficial ownership when the transfer occurred. Due to a change in personnel, we unfortunately didn't file the necessary forms at the time and have since made this clear to the ASX through a filing.
We have also updated ASX on the number of shares we hold (~22.38mm), as we had previously reduced our position in Structural Monitoring Systems by ~6.5% from our highest total shareholding. This is consistent with reductions we have made in our aggregate equity portfolio due to our market view. Drake remains far and away the largest shareholder of SMS, and is committed to the future of the company.
What is the history of Drake and Structural Monitoring Systems?
Our involvement in Structural Monitoring Systems dates back to 2011 when we were approached by Toby Chandler with this opportunity. Over the years, Toby approached Drake with a number of investment opportunities that he claimed were overlooked and undervalued because they were listed in Australia. Unfortunately, the track record on these investments has not met expectations.
Contrary to comments we have heard recently, Mr. Chandler never represented, spoke for, nor worked for Drake. In October of 2021, Drake was the catalyst behind the Board's removal of Mr. Chandler as we believed that someone with aerospace experience would be a more appropriate CEO for the future of SMS and CVM.
Why have you not made a release through the ASX yet?
Our counsel reached out to ASX on 31 July 2022 and filed the Open Letter to Shareholders. However, we have now been told by ASX that we may not submit EGM communications by way of the ASX filing process. In the United States, all communications from the company and, in our case, activist shareholders, would be filed with the US Securities and Exchange Commission's EDGAR database and available immediately for shareholders in the form of 8-K Current Reports, Schedule 13-D filings and other proxy notices.
As such, we are exploring other methods to reach Structural Monitoring Systems shareholders and will hopefully be able to reach out in due course either electronically, via Australia Post or both.
Why are certain shareholders receiving communication from Drake and others are not?
Although we have validly requested the Shareholder Registery from Structural Monitoring Systems, the company is now taking the view that they do not need to provide it to Drake. The ASX mandates that companies provide share registers for the nominal fee of $250 AUD, yet despite out best efforts they will not provide us with the information.
When we eventually do come into possession of the Shareholder Registry, we will do out best to reach out as soon as possible to all shareholders. In the interim, the only thing we can do is send emails to those whose email address we have. Please send us an email at email@example.com or fill out the Contact Us page so we can keep you up to date
Why have you chosen to release emails as part of your campaign?
We do not take the act of posting our communication with the company lightly. In this particular instance we believe it is necessary to ensure that clear evidence is offered in order to get ahead any misinformation that might circulate from other parties.
Who is responsible for the changes that started in October 2021?
Drake was initially responsible for stopping Toby Chandler's ill advised raise and then ultimately forcing him out of the Company. While Bryant Mclarty seems to be getting the credit, he did not get involved until several days after Drake initiated its first Requisition in 2021 and had already come to an 8-part agreement with the Board of Directors that involved the removal of Toby Chandler. The 8-part agreement was initially proposed on October 10th, 2021. The 9-part agreement that resulted a few days later is the previously agreed 8-part agreement plus an additional point allowing Bryant Mclarty to join the Board temporarily.
Any assertion otherwise is misinformation
What is your vision for Structural Monitoring Systems?
Structural Monitoring Systems deserves to be run by experienced industry professionals who can make the most of the opportunity that CVM presents. This will take a strong board made up of a majority of independent people who can reasonably evaluate the business opportunities and advise current and future management on how to proceed.
We do not claim to have aerospace industry experience, instead we can bring both shareholder representation and significant corporate governance experience to the Board. Our interests are 100% aligned with other shareholders, and that is an important part of the conversation.
As for the CVM commercialization vision, we have a number of ideas on how to proceed forward along multiple paths with OEMs and airlines, but given that our voice will be just one of the five Board members, we plan to offer the ideas in a Board context and listen to feedback from true professionals from the space. We also believe that laying the ideas out here would allow the current Directors to claim our ideas as their own. However, we do remain happy to discuss on the phone.
Is Drake prepared to support the company in any future capital raises?
With Bryant Mclarty and Sam Wright affiliated with Structural Monitoring Systems we will not offer any financial support to the company. We are willing and able to support SMS when we believe it is back on the right path toward commercialization of CVM. With no faith that the current situation will lead us to commercialization of CVM, we are obligated to use our ~18% shareholding to affect the changes needed. If not us, then who?
The only exception to this would be taking our full entitlement under a pro-rata offering in an instance where the current Board decided to raise money in an ill-conceived and rushed manner leading to a share price so low as to the underlying value of the company. We have concerns that the board may seek to place shares in "friendly" hands to maintain control of the company which would not be in the best interests of all shareholders
To our knowledge, there is no cause for the company to raise money while the membership of the Board of Directors is in dispute and AEM continues to be profitable. We urge the current Board to do the right thing and hold an EGM within the original statutory timeframe per our Notice of Requisition on 12 July 2022.
Why did Drake not take up its pro-rata entitlement during the last fundraising in March of 2022?
Simply put, the company had not lived by the terms of the agreement we struck in October of 2021 with the Board and Bryant Mclarty and we had major concerns about the direction things were headed. These concerns have been completely validated over the last two months as Bryant Mclarty and Sam Wright continue to violate the terms of the agreement they were party to.
There seems to be some misunderstanding related to Drake's right to participate in future entitlements and/or share placements. To be clear, the October 2021 agreement gives us the right to participate on a pro-rata basis. We at no time gave the company any commitments that we would participate in any future capital raises and any assertion that we were obligated to do so is false. Our support, like that of any serious investor, has always been contingent on the performance of the company, the price of the offering, and our judgement of the company's future prospects. Given the lack of commitment by the Board to upholding the agreement from October 2021, as well as the offering price, we determined to forgo our right at the March capital raise.
When Andrew Roberto and Heinrich Loechteken are placed on the Board, will Drake control the company?
No, and Drake has no desire to control the company. As an industry executive, Heinrich has been a long-time shareholder of SMS from afar and has no ties to Drake whatsoever outside of Structural Monitoring Systems. Drake only seeks to facilitate the creation of a Board of Directors that will be able to assist management in implementing a well thought out plan for the future global commercialization of CVM in the aerospace industry and beyond.
In fact, we do not view it as a long term requirement for Drake to have a representative on the Board beyond the period it takes to sort things out and ramp to commercialization. When Mr. Roberto and Mr. Loechteken join the Board, Drake will be represented by just one of five directors, which is in-line with our shareholding of ~18%.
Mr. Loechteken is an independent shareholder in Structural Monitoring Systems. He will be a valuable addition to the Board in his own right, and has no affiliation with Drake beyond a mutual desire to supercharge the commercialization of CVM. Prior to June of 2022, no one at Drake had ever met or spoken to Mr. Loechteken. He was asked to join our effort solely because he is a large shareholder of SMS and has years of experience in the aviation industry.
Will Structural Monitoring Systems remain listed on the ASX?
We have received this question a number of times. We have no intention of changing anything regarding the listing of ASX at this time, and had honestly not contemplated a change in venue. While Structural Monitoring Systems is a UK domiciled company listed on the ASX with all operations in North America, much of the investment capital for SMS has come from Australia and we would never intentionally do anything to disadvantage Australian shareholders. With that said, there may be a time when the company has grown to a point where a dual-listing in the United States might make sense, and that would have to be done through an American Depository Receipt structure (which is very similar to the CDI structure used to list in Australia). If this were to ever happen, we would envision shares trading in both venues and it would have no impact on Australian shareholders.
Again, we would like to stress that this is a future, potential scenario and we are only mentioning it because we have had a number of questions regarding listing venue. We have no plans in the near term to make any changes whatsoever to venue.
What is your long term vision for the Board? Do you need to keep two Australian representatives?
As mentioned earlier, Structural Monitoring Systems is a UK PLC and, as such, is known as a Foreign Company for ASX purposes. When we filed our requisition in October, we were under the impression the company needed two Australian directors, however it has come to light recently that there is no requirement for an Australian on the Board given SMS's foreign status.
With that said, the long term goal of this company is the full and profitable commercialization of CVM, and we view it as imperative to assemble the right group on the Board level to help management regardless of nationality. We are cognizant of the incredible support that Australian shareholders have given SMS, and would ideally like to find at least one highly qualified Australian aviation or aerospace industry executive to join. We have put out some preliminary overtures, but given the Board drama at the moment, we really do need to get things settled before that process can begin in earnest.
To be clear, the first priority right now is to put an experienced and qualified Board with a majority of independent directors in place to move forward.
What about Mr. Ross Love?
As we mentioned in our shareholder letter, we do not agree with the way Bryant Mclarty and Sam Wright jammed Mr. Love's appointment through the Board. With that said, we were initially optimistic that, given his resume, Mr. Love would prove to be a valuable addition to the team. After a call with Mr. Love in July 22nd, we remained cautiously optimistic that he could bring a career's worth of experience and process in consulting to help the company formalize a CVM commercialization strategy. Our conversation on July 22nd was encouraging as he suggested the addition of Andrew Roberto to the board without the need for an EGM would be beneficial to the company, not just because of the end of the distraction but because "he could bring a lot to the table."
In an effort to find common ground, during a follow up call on July 26th we were surprised to hear his tone had changed, which we can only assume is the result of pressure from Bryant Mclarty and Sam Wright over the weekend. Even so, we followed up the call with a request to the Board to add Andrew Roberto during the upcoming Board Meeting on July 27th (US) / July 28th (Australia). While this was met with complete silence, on Friday July 29th, as a sign of good faith we advised the company that we had withdrawn the vote on Resolution 5 so that Mr. Love would remain with the company.
Unfortunately, not two days later Mr. Love put out an update on the ASX that made no mention of Drake's negotiated right to appoint a Board Member, but also backtracked on previous comments he had made about "leaving the decision regarding the Board composition to the shareholders at an EGM." His disregard for previous Board commitments and unwillingness to allow the largest shareholder to call a meeting based on some yet undisclosed potential technicality should be a huge concern to everyone. At this point, three weeks, into his tenure as Executive Chairman, it seems that Mr. Love is more interested in governing the company with Bryant Mclarty and Sam Wright than forging a path forward that all shareholders, not just Drake, can believe in.
With so many shareholders, ourselves included, questioning the way forward, Drake considers it is extremely poor corporate governance to not seek a clear directive from shareholders at an EGM.
In your "Precipitating Events" section, you only released a small number of emails and are asking us to believe that they represent the material events in the unfolding drama to date, why should we trust that?
This is a great question, and instead of asking you to trust us, please review the following screenshots taken directly from Microsoft Outlook showing the entirety of our interactions with Bryant Mclarty and Sam Wright to date. As you can tell, this has been an incredibly one-sided affair in regard to outreach and responses
Given the amount of disclosure we have now made, we believe the onus is clearly on Bryant Mclarty to prove to shareholders that he has been communicating with his largest shareholder in an appropriate manner. He is unable to do so, because he never did.
Emails received from Bryant Mclarty:
Emails sent by Drake to Bryant Mclarty
Emails received by Sam Wright
Emails sent by Drake to Sam Wright