09 November 2022
Fellow CDI holders of Structural Monitoring Systems PLC,
We were saddened to learn that Mr. Rick Duerloo, our only true independent director and a President of Pratt & Whitney, resigned from the Board on the morning of 8 November after a disagreement regarding how the Board used his name in the AGM and EGM notices that were filed with ASX and sent to everyone.
There is no sugarcoating this, it is a tremendous loss for Structural Monitoring Systems as he was the only Director who 1) was independent of the company and 2) the only Director who has any actual aerospace experience. We do not know what caused the final break, but on Saturday he forwarded us an email he sent to both Mr. Love and ASX contesting the use of his name and signature against the EGM resolutions and several AGM resolutions. We are in the process of figuring out what to do with our counsel, but this turn of events only further underscores the need for real oversight and governance of management and the Board that is independent of Mr. Mclarty and Mr. Wright’s influence.
We also do not feel it is appropriate that the familial relationship between Mr. Mclarty and Mr. Love has remained undisclosed, as Mr. Mclarty’s wife is the niece of Mr. Love’s wife. This Board is now made up of 4 members who are either former employees (Mr. Wall), current employees (Mr. Love and Mr. Wright) or the company’s historical capital markets broker (Mr. Mclarty). If Mr. Miletic were to join, we’d be adding a member who is working as a consultant to the company through his company MEMKO. With these people in charge, we are confident that things are never going to change, we will all suffer more dilution used to fund their salaries and fees while the technology continues to age.
Tulip Bay’s patents, which SMS has the exclusive rights to, only have a few more years of protection. As such, this EGM and AGM are really the last best chance we have to establish a lead in the global aviation structural health monitoring industry. If we are unable to build a big enough lead, all we will have accomplished is to have used far too much shareholder money to push the technology through FAA approval so that a better capitalized rival can take it to fruition. We feel strongly that this will happen without direct intervention right now in the governance of this company.
Many of us know that contracts for small numbers of test planes are set to be announced in very short order as the company’s executives have made sure to imply that to certain investors as a way to try to win votes over the last few weeks, and this has filtered back to us through a few channels. These coming orders are not their success, they are the success of people like Mr. Poutier and Mr. Lynch-Staunton who have been working behind the scenes for years. This Board vote should not be decided by these (very likely) sweetheart contracts to airlines. If this EGM effort fails, things will very likely continue on as they have and SMS will remain a lifestyle company that doesn’t live up to its vast potential.
Structural Monitoring Systems has not only ignored Mr. Duerloo’s request to correct the record to CDI Holders, but they have so far failed to disclose that Mr. Duerloo resigned. We are perplexed as to the wanton disregard to disclosure of material information to the market, especially so before the meetings next week. It’s a shame it has come to this, it never had to be this way but for the egos of a few entrenched lifestyle directors.
We have included both the letter we sent to the company’s counsel, Gadens, on 8 November and the email we received from Mr. Duerloo on 5 November below.