During the quarter:
* Structural Monitoring Systems Ltd (“SMN” or “the Company”) is continuing with ongoing negotiations and contractual review related to the ultimate execution of a strategic agreement with a major aerospace organisation. Upon execution, this agreement will work to provide the scale, visibility and commercial path to ultimately securing global licensing/royalty revenues related to the provision and use of CVM™ technology by major aerospace companies. Whilst this agreement was not executed prior to 31 December 2016, as envisaged, the Company remains very positive regarding the current state and maturity of negotiations, and looks forward to visible completion of proceedings, and execution of the agreement.
* SMN remains involved in multiple other programmes and negotiations, as previously highlighted in various communications. The Company will continue to provide relevant and material updates related to all these activities as and when required. The programmes and negotiations involve major aerospace OEMs, defence forces and civil aerospace concerns – involving both fixed-wing and rotor aircraft.
* National Aerospace Laboratory, Netherlands (“NLR”), one of the Company’s key industry partners overseeing the Netherlands Air Force Apache attack helicopter CVM™ programme, held a major demonstration workshop on November 3rd 2016. Approximately 180 military and global civil aerospace participants were in attendance, where senior NLR personnel demonstrated CVM™ technology.
* SMN is preparing for a near-term re-focusing of the Company’s core activities to encapsulate a greater level of new business development, with the aim of realising recurring revenue contracts directly related to the provision and licensing of CVM™ to end-users including, but not limited to, commercial airlines, aerospace OEMs and global defence forces, operating both fixed-wing and rotor aircraft. Additional personnel are expected to be hired in 2017, either as strategic partners or direct SMN staff, to build out and mature the Company’s personnel platform. To this end, on 19th January 2017 the Company announced a multi-year contract with Sandia to engage Dr. Dennis Roach and his staff to focus on multiple aerospace industry opportunities (commercial and military) and the subsequent commercialization and regulatory approval of CVM™.
* SMS held its Annual General Meeting of Shareholders at RSM Australia, 8 St Georges Terrace, Perth WA 6000 on 28 November 2016 at 9:00am WST. All resolutions that were put were unanimously passed on a show of hands. A recording of the Q&A session is available on the Company’s website.
* During the quarter an arbitration award was made in relation to the Company. SMS has issued proceedings in the Supreme Court of Western Australia seeking to overturn the arbitration award. The award is not enforceable without further order of the Supreme Court of Western Australia, and as a result, the dispute is not finalised, and is ongoing.
The arbitration relates to a dispute between the Company and Tulip Bay Pty Ltd concerning royalty payments in respect of an agreement (executed in 1999) by which technology rights were fully assigned to SMN. SMN claims it is entitled to repayment of previously paid royalties of approximately $435,000 after Tulip Bay and a related party breached the agreement. The Company claims this breach gave rise to a right to terminate the agreement, and the recoupment of certain related royalty payments previously paid by the Company.
Tulip Bay counter-claimed for royalty payments owed and not paid by SMN and the arbitrators have ruled in favour of Tulip Bay and a related party in the sum of approximately $280,000 including costs and interest.
The dispute is in no way related to any technology asset of the Company and is not material to the operations of the Company. Further, as the dispute is the subject of legal proceedings which are not completed, the Company does not intend to make any further disclosure related to the dispute until its finalisation.
* As often stated in previous communications, the Company does not expect any foreseeable need to issue any further shares at any time in the future.
* The Company continues to meet all necessary expenditure needs and is, per usual, operating with demonstrable financial constraint and responsibility. The Company’s key operational and strategic liquidity/working capital objectives remain well-defined and visible.
*The Company’s cash balance as at 31st December, 2016 was approximately $3.6m, and sees SMN fully funded relative to its foreseeable total cash flow requirements for the 2016/17 fiscal year, and well beyond. As per usual, CVM™ equipment/peripheral sales are being frequently secured, and expected, and these sales will further bolster the Company’s cash balance, as will expected CVM™-related licencing etc. agreements with major counterparties.
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