Emailed chairman’s letter to shareholders, page-42

The following letter from Faillace to Love was received today by another poster. I have not yet received mine as will be the case with many of you.

8 August 2022
Mr. Ross Love,
As you know, I am Structural Monitoring System’s largest shareholder and the 100% owner of Drake Private
Investments LLC, Drake Special Situations LLC and Drake Management (together “Drake”), so I read your
“Letter from the Executive Chairman” from 04 August 2022 with great interest.
You open the Letter by questioning whether Drake owns greater than 5% of the shares and is even able to call
an EGM. While you may be new to the company, it has long been known to the Board and public that I am the
largest shareholder, as evidenced by disclosures in Structural Monitoring System’s own annual reports dating
back years. For example, the 2021 Annual Report shows Drake as the only group listed in the “Substantial
Shareholders” section on page 67. Given the fiscal year ended on June 30th, you were appointed on July 12th
,
the company filed its Appendix 4C & Quarterly Update on July 29th and you are required to sign the upcoming
annual report for the period ending 30 June 2022, you should have received advanced copies of the upcoming
report to review.
If, however, you have not, it is hardly a stretch to imagine that during your due diligence on the company you
reviewed recent annual reports, all of which disclosed the Drake shareholding. Is due diligence on the
Company’s largest shareholders not a high priority for any potential incoming executive chairperson? It also
begs belief that, in the midst of a dispute over Board representation by way of a Notice of Requisition that
preceded your appointment, Bryant Mclarty did not mention the Drake shareholding. Whether through Drake
Special Situations (DSS) or Drake Private Investments (DPI), ultimate ownership of the CDIs resides with me
and that has never changed. We fixed our filings to reflect the transfer from DSS to DPI as soon as we became
aware this had not been updated properly. In fact, our initial Notice of Requisition dated 8 October 2021 was
filed by “Drake Private Investments LLC (the Shareholder),” and the negotiations that led to the ouster of Toby
Chandler and the appointment of Mr. Mclarty, regrettably, to the Board of Directors were consummated on the
basis of Drake, by way of DPI, holding the shares. At no point in my conversations with you or anyone else at
the Company has Drake’s status as SMS’s largest shareholder ever been questioned, and inferences
otherwise in your Letter are misleading at best.
You continue in your Letter by taking the position that Drake’s Notice of Requisition dated 8 July 2022 does
“not meet the basic and fundamental requirement of the Articles or the relevant United Kingdom statutory
requirements” to call an EGM. Your argument that the Company is only obligated to recognize requisitions
from registered shareholders and not ultimate owners of CDIs is, at the very least, an affront to the spirit of
democracy enshrined in the company’s Articles as well as relevant UK and Australian regulatory requirements.
Know that Drake is undertaking steps to address and mitigate this technical point, and it is now a question of
“when” and not “if.”
The larger issue here is that you are willfully employing technical gimmicks to avoid letting shareholders have a
say in the Board that governs the Company. With all that has come to light in public regarding the conduct and
trustworthiness of your two principal supporters on the Board, plus other yet unverified information that has
been volunteered to us over the last week from a range of people with whom we have spoken, the
shareholders have a right to decide how they would like to be represented, and to do so as soon as possible.

You say that calling a general meeting to decide the Board composition is an “unnecessary wastage of
Company resources” without giving any consideration to tradeoffs. The cost of calling a meeting is trivial
relative to the destruction of economic value we believe will occur over the coming months should Mr. Mclarty
and Mr. Wright be allowed to remain on the Board and vote on matters of strategy, management and
fundraising. Board credibility is worth far more than the cost of administering a meeting. There is good reason
why ASIC and ASX mandate the availability of the requisition process for shareholders controlling greater than
5%, and it is not your place to dismiss it, even if you believe that an EGM is not in the “company’s best
interest.”
The exercise of calling an EGM would also give you the opportunity to speak with your investors and better
understand their true concerns. Given your comments to us regarding the “desires of the Australian
shareholders,” it is clear you are relying on anecdotal information supplied by Mr. Mclarty and Mr. Wright. If you
took the time to speak to your shareholders, you would quickly find that a majority support the changes
proposed on 8 July 2022.
Having held productive discussions with shareholders representing nearly 50% of the total shares outstanding
of the Company, it has become clear that Mr. Mclarty and Mr. Wright have effectively no path to victory under
almost any voting scenario, even 100% shareholder participation. This remains true of an AGM where, when
Drake has participated, our votes have historically represented a near majority of votes cast. There is
widespread discontent with members of the current Board and the way the Company is governed, which you
would learn if you engaged in substantive conversations with as many shareholders as we have. When this
vote is finally held, it will not be close as all four resolutions will be adopted, and the Board will change. We
realize you may not like the idea of losing your two biggest champions, but we urge you to come to terms with
it quickly and stop wasting time as well as legal resources on these fruitless efforts to obstruct the normal
governance process.
Your request that shareholders give the Board the time to “review the current Board composition and publish
its preferred Board matrix to establish where it needs additional expertise” is nothing more than an attempt to
play for time. From our conversations, this Board has nowhere close to the support of a majority of
shareholders and as a result is unfit to make these judgements. Most importantly, you make no mention in your
Letter that, since 28 June 2022, Drake has repeatedly requested the Board honor the October 2021
Agreement and Board Resolution to make our nominee a director. This is a failure in governance, contract law
and integrity that undermines any ongoing and future claims this Board feebly makes regarding its intention to
do the right thing over coming months. If you had ever intended to do the right thing, you would have at the
very least, put our resolution dated 5 July 2022 naming Andrew Roberto, my nominee, as the sixth director to a
vote on 28 July 2022 as we formally asked. The failure to do so is inexcusable.
Your Letter also claims that the Company needs “a period of stability and informed and unbiased deliberation
as to board composition, strategy and management.” Until your Update of August 1, Drake was prepared to
drop its Notice of Requisition in return for the board seat we are entitled to under the October 2021
Agreement. As an ~18% shareholder, how can it not be fair and reasonable that Drake is one of six seats
participating in this “unbiased deliberation”? If there is now a lack of stability, it is due to the actions of Mr.

Mclarty, Mr. Wright and now, unfortunately, you as well. How could you not believe this blatant disregard for
previous agreements and normal corporate governance would not create an attempt to enforce our rights?
Your silence on the fitness of Mr. Mclarty and Mr. Wright to serve on the Board is deafening. Any objective
assessment of their recent behavior and performance of duties would disqualify them. In our view, there is no
longer a place for either in providing input to, or voting on, decisions regarding the future of the Company. Both
should do the honorable thing and immediately resign. Drake has stated publicly that “we do not consider that
either Mr. Mclarty or Mr. Wright have the required degree of industry expertise or professional experience
necessary to add value to SMS and its Board or governance processes.” Stock broking (Mclarty) and corporate
secretarial services (Wright) are very far from what is required to help an aerospace technology company with
its many challenges right now. Additionally, their wholesale disregard for our October 2021 Agreement, which
they affirmed at the time, is utterly unacceptable. It shows that they cannot be trusted to abide by basic
contractual agreements. Drake does not want them making any further decisions for the Company, a view
widely held by virtually all of the shareholders with whom we have communicated.
Finally, I strongly disagree with your suggestion that we wait until the AGM to make changes to the Board. The
Company is at a crossroad right now. We do not have time for this Board to deliberate and stall, with the
outcome almost assuredly being more of the same. Decisions need to be made now. Key staff need to be
retained. Those with real aerospace experience need to be consulted with and listened to immediately. How
can this Board be trusted with the key functions you mention when it will not even honor its own agreements?
How can we trust that there will be no more delaying and technical gimmickry related to calling the AGM in a
normal, timely manner? You began your Letter by saying that “SMS is a great company.” Look at the
performance of the share price. Cheerleading does not make something a reality. Structural Monitoring
Systems can be great in the future but not without real, immediate, and lasting change. Enough is enough.
SMS Shareholders deserve better than this. Call the meeting.
Anthony Faillace
Drake Management & affiliates
For inquiries, please reach out to us at [email protected] or visit us at www.smsrequisition.co