Structural Monitoring Systems Plc (SMN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for all attending the Structural Monitoring Systems AGM this morning. My name is Sam Wright, and I'll be the Chair of today's meeting. It is now 11:00 a.m. Australian Daylight Savings Time and a quorum being present, I declare the AGM open. This meeting will be recorded and available on the company website in due course. Attending today's AGM are my fellow Board members, Ross Love and Brian Wall, who are both dialing in from Canada. Heinrich sends his apologies as it is 1:00 a.m. in Amsterdam. On behalf of my fellow directors, I extend a very warm welcome to all SMS CDI holders at this AGM today. We've also got representatives from Gerald Edelman, our company auditors, [ Sib ] and Hemen are on the call and also our CFO, Mr. Gary Elwell, who joins me in person. Before moving on to the formal business of the AGM, there are a number of procedural matters, which I'd like to bring to your attention. As explained in the Notice of Meeting, holders of CHESS Depository Interests, CDIs, are invited to attend and speak at the meeting but are not entitled to vote personally at the meeting. In order to have votes cast at the meeting on their behalf, CDI holders must have completed, signed and returned the CDI voting instruction form so that CHESS Depository Nominees Prox Limited, can vote the underlying shares on your behalf. Persons entitled to vote are all CDI holders, representatives and attorneys of CDI holders and proxy holders who have provided a completed proxy form, which has been received by Computershare prior to the cutoff date. CDI holders, you can tick box D in your CDI voting instruction form, a representative will collect your completed voting paper at the appropriate time during the meeting. I will assume you have read the Notice of Meeting, which has been circulated to all shareholders. So, with the permission of the meeting, I do not intend to read the notice in full. Before putting each of the resolutions formally, I will announce the details of proxies received and tabled by the company. Where entitled, the Chairman's proxy votes will be cast in favor of each of the resolutions. With this background, we'll now move to the formal business of the AGM. And the first order of business today is to receive and consider the annual financial report of the company for the financial year-ended 30 June 2024, together with the declaration of the directors, the directors' report, the remuneration report and the auditor's report. Does anyone wish to discuss any aspects of the accounts or have any questions relevant to the conduct of the audit by the auditors? Okay. So, moving to the resolutions to be put to shareholders today. Resolution 1 is the reappointment of auditors, which states that Gerald Edelman LLP having previously consented in writing to act in the capacity of auditor be reappointed as auditor of the company from the conclusion of this meeting until the conclusion of the next accounts meeting of the company pursuant to Sections 489(4) Part A of the U.K. Companies Act. The directors are hereby authorized to fix the remuneration of the company's auditors. And we've received valid proxies as follows; in favor of the resolution is 59.9 million, 21,000 against, and 723,000 abstentions. Resolution 2 is the reappointment of Brian Wall as a Director. Resolution states as follows that Brian Wall, who retires in accordance with Article 25.2 of the Articles of Association and ASX Listing Rule 14.4 and being eligible offers himself for reappointment, be reappointed as a Director of the company. And I can advise we have received valid proxy votes as follows; 59.9 million in favor, 163,000 against, 628,000 abstentions. Resolutions 3A and 3B relate to the ratification of securities issued under the recent placement. Resolution 3A states that for the purposes of ASX Listing Rule 7.4 and all other purposes, approval is given to ratify the previous issue of 9.6 million CDIs issued on 11 November 2024 under the placement on the terms and conditions set out in the explanatory statement. The proxies received on this resolution, 49.2 million for the resolution, 1.4 million against, 1.8 million abstentions and 8.3 million have been excluded. Resolution 3A states that for the purposes of ASX Listing Rule 7.4 and for all other purposes, approval is given to ratify the previous issue of 7.2 million placement options issued on the 10th of December 2024 under the placement on the terms and conditions set out in the explanatory statement. And we received valid proxy votes as follows; 49.3 million in favor, 1.9 million against, 1.3 million abstentions and 8.3 million excluded. So, moving to Resolutions 4A and 4B, which is the ratification of options issued under the SPP. And the resolution states as follows. Resolution 4A, that for the purposes of ASX Listing Rule 7.4 and for all other purposes, approval is given to ratify the previous issue of 2.9 million SPP options and shortfall options issued between 10 December 2024 and 15 December 2024 under the SPP or the shortfall offer on the terms and conditions set out under the explanatory statement. And the valid proxy votes received for Resolution 4A, 44.5 million in favor, 1.8 million against, 1.3 million abstentions and 13 million excluded. So, moving to Resolution 4B, which is the ratification of the CDIs. Resolution 4B states that for the purposes of ASX Listing Rule 7.4 and for all other purposes, approval is given to ratify the issue of up to 3.8 million CDIs issued on 15 December 2024 under the shortfall offer on the terms and conditions set out in the explanatory statement. And the valid proxies received are as follows; 56.5 million in favor, 2.5 million against, 1.6 million abstaining. So, moving to Resolution 5A. States that for the purposes of ASX Listing Rule 7.2, exception 14, ASX Listing Rule 10.11 and for all other purposes, approval is given for the issue of 320,000 CDIs in the company under the director placement to Heinrich Loechteken or his nominee on the terms and conditions set out in the explanatory statement. And we've received valid proxies as follows; 56.4 million in favor, 3.2 million against and 982,000 abstaining. Resolution 5B states that for the purposes of ASX Listing Rule 7.2, exception 14, ASX Listing Rule 10.11 and for all other purposes, is given for the directors to issue 240,000 attaching director options in the company under the director placement to Heinrich or his nominee on the terms and conditions set out in the explanatory statement. And the votes for 5B are as follows; 56.4 million in favor, 3.4 million against, 982,000 abstentions. So, moving to Resolution 6A, which states that for the purposes of ASX Listing Rule 7.2, exception 14, ASX Listing Rule 10.11 and for all other purposes, approval is given for the directors to issue 62,500 options in the company under the option offer to Heinrich on the terms and conditions set out in the explanatory statement. And we've received valid proxies as follows; 53.1 million for, 2.8 million against, 4.8 million abstain. Resolution 6B states as follows that for the purposes of ASX Listing Rule 7.2, exception 14, ASX Listing Rule 10.11 and for all other purposes, approval is given for directors to issue 1,472 options in the company to Brian or his nominee on the terms and conditions set out in the explanatory statement. And we've received valid proxies as follows; 54.2 million in favor, 1.7 million against, 4.8 million abstaining and 2,900 excluded. So, moving to Resolution 6C, which states that for the purpose of ASX Listing Rule 7.2, exception 14, ASX Listing Rule 10.11 and for all other purposes, approval is given for the directors to issue 73,992 options in the company under the option offered to Sam Wright or his nominee on the terms and conditions set out in the explanatory statement. And we received valid proxies as follows; 33.5 million in favor of the resolution, 23.1 million against, 4 million abstentions. Moving to Resolution 7, which is the issue of options to unrelated parties. It states as follows that for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the directors to issue 13.9 million options in the company to unrelated party subscribers under the option offer all the nominees on the terms and conditions set out in the explanatory statement. And Resolution 7, we received valid proxies as follows; in favor of the resolution, 39.4 million, against 2.3 million, abstentions 2.0 million and excluded 17 million. So, Resolution 8A, the next resolution which states as follows; that for the purposes of ASX Listing Rule 10.11 and for all other purposes, approval is given for the directors to issue 125,000 CDIs in the company to Brian Wall or his nominee on the terms and conditions set out in the explanatory statement. And the valid proxies for this Resolution 8A, 53.9 million in favor, 2.2 million against, 4.5 million abstentions and 2,900 excluded. Resolution 8B, that for the purposes of ASX Listing Rule 10.11 and for all other purposes, approval is given for the directors to issue 50,000 CDIs in the company to Heinrich Loechteken or his nominee on the terms and conditions set out in explanatory statement. And the proxies received for this resolution; 53.1 million in favor, 3.3 million against, 4.3 million abstentions. Resolution 8C states as follows, for the purposes of ASX Listing Rule 10.11 and for all other purposes, approval is given for the directors to issue 50,000 CDIs on the capital to Sam Wright or his nominee on the terms and conditions set out in the explanatory statement. Valid proxies as follows; 33 million in favor, 24 million against, 3.8 million abstentions. Resolution 9 is the final resolution, which states as follows. This is a special resolution that for the purposes of ASX Listing Rule 7.1a, the directors are authorized to issue new CDIs totaling up to 10% of the issued capital of the company at the time of issue calculated over the period prescribed under ASX Listing Rule 7.1A2 and otherwise on the terms and conditions set out in the explanatory statement. And we have received valid proxies as follows; 53.2 million in favor, 5.5 million against and 1.9 million abstentions. Ladies and gentlemen, that concludes our discussion on the items of business. We'll now adjourn the meeting while Computershare conduct a poll. The poll is being conducted on all the resolutions to be considered today. If you have voted by proxy prior to the meeting, you do not need to complete the voting card. Your vote has already been recorded. For those who tick box B in the CDI voting instruction form, a representative will now collect your completed voting papers. When you have finished filling in your voting card, please hold the card in the air for collection. I think that's all been taken care of. So, I declare the poll closed. And share registry will independently collect and verify the votes and the final results of the poll will be released to the stock exchange later today. So, thank you for attending the Structural Mining Systems AGM. On behalf of the Board, I'd like to thank all the CDI holders for their continued support of the company. This concludes the formal business of the meeting and I now declare the meeting closed. I'll pass over to our Chairman and CEO, Mr. Ross Love, to provide an update and following that, take questions that you may have in relation to general business.

Thank you, Sam. Can you hear me?

Yes. Loud and clear.

I can't see who's in the room. I can see those who like me have joined remotely. What I thought I might do is just give a brief summary and then open it up to questions and I'm happy to respond to any that I possibly can. So, I want to start with just 3 slides from the investor presentation. I presume many of you have seen these. And the first is the financial overview. I put a statement out last week to confirm that we are on track to at least meet the lower band of our revenue forecast for this year, which we are. Some people were concerned that wasn't as optimistic as they were hoping for. So, I just wanted to clarify that we're at 80% of that contracted revenue at the lower range of AUD 30 million. We have 6 months to go. And so we continue to be confident of that forecast. But I was only willing to go as far as confirming the lower band at this stage until we get those additional sales converted. The other point that I was making in the financial update last week, we disclosed in the investor presentations that we had a total cash burn in the first quarter of this financial year of minus $1.4 million. And a number of the steps that we've taken in the last few weeks has been to ensure that we turn that around. And as I said in the statement on Friday, we're now confidently forecasting a positive net cash flow for the next 2 quarters, that is the last 2 quarters of the current financial year. And we expect to record a positive net operating cash flow over the whole financial year. Once again, that depends on some more revenues that -- some more sales that need to be converted over the next 6 months. So, against this forecast, I'm pleased to report that a combination of the increased sales in recent weeks, the substantial cost restructuring that we've done and all of the other elements that we can see in the near future suggest we're going to meet or exceed these forecasts. So that was the first point I wanted to make. If I can go to the next slide, I know the $64 million question is how are we going with the CVM, the Aft Pressure Bulkhead certification. We are still at the point where we are awaiting the FAA to issue their final certification plan. We believe that is imminent, which is -- means we expect that, that is either days away or a small number of weeks away and the difference is Christmas vacation. And so that we continue to believe is on track. And then as we have described before, the 2 remaining steps are for Boeing to submit their final package and then the FAA to formally approve it. All of work has been done for that. And as I have explained in previous communications, we're highly confident from this point because we know that Boeing won't submit an application if they are not 100% sure will be certified. So that's the update on that. And then the last slide I wanted to draw your attention to in the investor presentation, we highlight a number of important short-term milestones to look out for. And so I thought I might just quickly draw your attention to those and make a few comments. The first one in our Avionics business is this large order for our new forest radio that we're seeking to convert from CAL FIRE, the largest aerial fire service operator, I think, in the world, certainly in North America. And as we say, we expect that to be confirmed in the next quarter. We have meetings scheduled with them in the first 2 weeks of January to sign that contract now that all the technical approvals have been given. So that's a substantial boost both to our revenues, but also the sort of penetration of this new radio product. The second milestone we've highlighted here is the U.S. -- the U.S. Forest Service final certification of our radio. And that's not required for Canadian operators or U.S. state-owned operators, but it is required for all the contract operators of whom there are about 800 aircraft. That is on track. It's not yet been completed, but we didn't expect it to be completed until early in the new year. However, I can tell you that we have sold something like 100 radios to the folks who are going to supply and equip those 800 aircraft in the last 3 weeks on the basis they are confident that the certification will come through and they are wanting to make sure they're first in line to have these radios. So that's really very good news on the radius, which is our lead growth product in avionics. As part of our -- as a result of the cap raise, we have reserved about AUD 5 million for investments, new investments in product development. The largest single investment is the development of this Gen 3 software platform. I won't go into all the details, happy to answer questions on it. We won't confirm that investment decision until the first quarter of next year because we want to make sure that we're delivering on our operating cash flow expectations before we do. And we are assessing 2 potential acquisition or commercial partnership opportunities in the Avionics business. And once again, the deadline we've set for that is to get to a go/no-go decision in the first quarter of next year with a view if we do proceed with the transaction to completing that early in the next financial year. On the CVM side, I've just given you an update on where we are with APB. And as we've mentioned before, that certification will trigger the contractual payment from Delta, where we continue to install the sensors across their relevant fleet. We have commenced but not concluded commercial negotiations with United, but have confirmed the arrangements for their trial of this technology on their fleet that will commence, we're told in January. And we are waiting for that final step in the ABB certification before we commence serious commercial negotiations with Southwestern American and then the balance of the larger fleets. So that proceeds as we have expected. We are continuing to work with Boeing and Delta on the next applications. We're likely to highlight applications in the military space where the regulatory environment is slightly different. And our objective with Boeing and Delta is to get to generic certification within the Boeing fleet for our technology. We are also in discussions with Airbus and Lufthansa about the first application that will go into a trial there. Those have not concluded, but they're progressing and with a suitable amount of interest from Airbus, I have to say. We continue to work through our commercial partnership arrangements in Asia. We have a very good relationship in Japan. We have other candidates in China and Singapore. Those discussions continue. And we are also evaluating a small start-up with a very interesting complementary structural health monitoring sensor to [indiscernible]. And they have come here for meetings and we'll be meeting with them shortly right for the new year. So that's the quick sort of summary of where we're at on those milestones, if you like. I'll stop there and invite questions, please.

[ Perry ], a shareholder from Melbourne. Chairman, I'm just wondering whether you can give us not any sensitive information about the CVM negotiations, but rather a very high-level sense of are you personally happy that the business model, the framework of the business model for CVM is clear now? Or is that of itself still something that's pending deliberations?

Well, I'm not quite sure about the business model. The business case is clear, and Delta have clearly done their own business case and concluded. The discussions with United are around helping them evaluate their own internal business case. They're clear on the technical side. And they've had engineers out here in the process of certifying us as a supplier. They've adapted their maintenance program to allow for the insulation and then the use of our technology, and they are talking to us about their fleet of 146 aircraft. So, all of that is on track. The discussions, they're not really negotiations. You don't negotiate, unfortunately, with the FAA. They're the largest and most influential airline safety regulator on the planet. So, that pretty much tell you what the rules are. And we now have a clear line of sight to certification. So, from our perspective, as a business proposition, that's what we need, but we do need these last 3 steps to be concluded. As I say, before we can -- well, before we trigger the commercial payment from Delta and before the customers who install our sensors can use them to replace existing technology. I'm not sure if that answers your question entirely, but it -- there are 2 things in terms of the application of our technology, which we're constantly testing. One is the commercial value to the customers, obviously. And the other is the ease or difficulty of gaining certification. And sometimes the most valuable applications are the hardest to get certified and easier applications to get certified are less commercially valuable. So, we're constantly working on a portfolio of applications to get to that point where it's a generally accepted solution.

If I may just a follow up. With business model, I meant the balance between -- say with Delta, the balance between upfront payments for kit and ongoing payments receipts usage and the savings they're making, that general commercial value.

Yes, yes. Look, that -- to me, that's just a way of how do you get paid. The first thing is sort of reasons [Technical Difficulty] inspection technology that gives you a binary answer, either you've got a crack or you haven't got a crack.

We had a bit of technical difficulty. Can you start again?

Sorry. I understand the attraction of subscription-based models, but most subscription-based models are driven by ongoing enhancements that you can make to the product or more particularly the software platform to which people are subscribing. At the moment, our product does not fit that description. You install it, you use it, gives you a result. In the future, where our technology is used to measure the growth or the propagation of cracks and you are collecting dynamic information, we have a proposition there, which will more readily lend itself to the subscription model. But at the moment, we're largely pricing this as an upfront acquisition. We will vary that and it really depends on how the airlines are used to buying this sort of equipment. In most cases, they are used to buying this equipment upfront and we're happy to follow that model provided the price is right. There will be some airlines with different budget constructions who will prefer to, if you like, make a down payment and effectively lease the [Technical Difficulty] as long as we achieve the same financial outcome. But yes, those are the 2 factors that determine how we price or arrange to be paid for this service at this stage.

Thank you. I've got a few questions. Is there any more from the floor? I've got a few...

Ross, [ Brian Cooper ], how do you think that Trump, 25%, what do I call, tariff?

Yes, the Tariff. Yes, I think there are a number of elements to answer that question. We don't know any more than you do or anyone who's reading the media does about what's going to happen. There's obviously a lot of work going in the background to try and understand what the implications for Canada are. They're obviously in his sites, certainly in some industries. Our expectation is that the -- any price or any increment -- that is required to meet the tariff is an issue for the customers, not for the suppliers. And given that our product is a product that you either decide you need or you don't and that applies to our avionics products as well. We don't expect that to have a major implication on our forward revenue, but we are obviously monitoring that. There's a lot of water to go under the bridge here in terms of which products are captured by any tariff if and when it arrives, what the tariff is on, bearing in mind that about 60% of our cost base is actually U.S. materials and supplies and components. So, there's a lot of work still to be done in terms of how that -- if it does apply, how it will apply and to whom. Yes, so there's not much more we can say other than that we're monitoring it closely. We're confident that all of our existing contracts are such that any tariff is at the expense of the customer, not the supplier. Yes, beyond that, there's not much more I can add, I think.

Ross, [ Rod Gibson ]. Final point of your presentation, you mentioned an initial complementary sensor target. Is that an aircraft target or something else?

It's a sensor technology that is -- goes to structural health monitoring. And it's one that is less advanced than ours. It has -- there are a few pilot studies where they are testing the sense on some Airbus equipment, another one on some Boeing equipment and it looks very prospective. It's completely non-competitive with ours. And in fact, there are many places in aircraft structure where you'd want our sensor and their sensor side by side. We just -- and we've already sort of signed an MOU where we've agreed to exchange information. We've agreed to disclose our partnership to the OEMs and any customers we're talking to. And the question just is whether we could take that further. And I can't say at the moment whether we will or we won't. But it's very interesting technology. It's probably the next cab off the rank after our technology as a potentially viable -- commercially viable structural health monitoring technology on airframes. And it makes sense -- it seems to make sense for us to be wherever we're dealing with technologies that are not competitive with ours, but are complementary to ours that we join forces because we're all very small companies trying to break into a very large industry and we're all dealing with the same challenges in terms of certification and convincing engineers and commercial people in the airlines of the effectiveness.

I've got a few that have come through on the webcast. A couple relating to United Airlines. I'll sort of combine why are United Airlines trialing the CVM tech in January? Do we expect to pass their trial? And when will they have to pay for the census?

Yes. Okay. Well, the reason that they're trialing the technology is not because they want to make sure that it works. They are, I would say, convinced that it does work. And once the certification comes through, I think that will be enough in terms of their conviction that it works. What they're actually trialing is the process by which they install them and the process by which they actually use them as monitors. And they want to make sure before they roll them out to a fleet of 146 aircraft, which are maintained in about 6 different maintenance bases across North America that they have the right procedures and processes. And so a lot of the conversation and a lot of the support we're providing, not just the sensors, but -- and the PM200s that read them, but also training and certification of people who install the sensors because it's really quite important, as you can imagine, they're installed properly the first time. And we happen to be the exclusive agency for certifying the training of the people who do this work. So, it's essentially from their perspective about how can they make sure they've incorporated into their maintenance program in a way that's going to be successful. I can't answer the second part of the question in terms of when will they pay because that's the discussion that we're currently having with them. But it's along the lines of, we'll discount the cost of the trial components against a fleet-wide order. But if they, for whatever reason, decide not to proceed, we'll get paid for the trial equipment.

Are you able to elaborate on the AEM restructure and how the savings are being achieved? Have staff adjustments been on the production floor or higher up the corporate structure?

Yes. Let me try to summarize that. I guess necessity is the mother of invention. And as we raised the extra funds recently, we were determined that we weren't running the risk that we would just absorb those funds in working capital. So, we said we allocate 20% of the fund raise to working capital, which we needed, but we needed to rightsize the cost structure of the business. The costs have all come out of what we would call fixed costs. So, none out of the direct production workforce, some out of the supervisory production workforce, but also some out of the R&D workforce, the sales workforce and the general admin workforce. It was a total of 17 AM positions and 2 contractors. So, it was basically, a genuine restructuring of the way we go about business, who's responsible for what and an identification of the positions that under that -- those circumstances, we couldn't justify. And I think what it does is give us a much stronger financial platform from which to grow. So, it was essentially -- not from a personnel point of view because a lot of the people who left were terrific people that we would have preferred to keep on. But from a structural point of view, it was sort of a cleaning house operation, I guess. And I should say just the other thing that we've done is we've established a clear distinction between our ongoing operating costs that are required to sustain the current business, the current suite of products, the current customers. And so we can be very clear about that, very small at the moment, but it will grow a component of our cost structure, which is genuine investment in new product development.

Ross, there's a question here. What type of military aircraft is our first application expected to be on?

Well, one with lots of cracks. There are 2 leading candidates, but I really don't want to go into those because there's still a bit more work to be done. One is a very common aircraft type across military fleets, which has been around for a long time. It's described as a bucket of bolt. So, it has lots of cracks and lots of potential to -- through our product. But it's not a Boeing aircraft. We are also looking for a Boeing aircraft that is used by military forces, and we're starting with the Canadian Air Force because we're in Canada. Boeing has a lot of offset credits that they need to dispose of in Canada and there are good opportunities for funding. And of course, Boeing is a critical partner of ours. So that's about as far as I should go, but it will be at least one of those and if not more. I've said this before, but just the reason that the military space is important. It's very hard to get into. But from our point of view, the thing about military aircraft is they are prepared to fly with cracks. And therefore, there's an even stronger case for them to know how big the crack is and how fast it's growing and at what point it becomes serious enough, they have to ground the aircraft and do a repair. In the commercial aircraft space, they don't allow aircraft to fly with cracks. So, as soon as you detect a crack, you've got to take out of service, replace the part. So, it's a very different regulatory standard. It's not to say our application is not valuable in both markets. It's just valuable in a different way. In the commercial market, it's valuable because it's a much lower cost way of meeting your regulatory requirements and demonstrating proving you have no cracks. In the military market, it's likely to be valuable because it enables you to know the level of risk you're taking and how much you can operate these aircraft before you have to ground them and replace the part.

Any more questions from the floor. Steve?

Ross, [ Steve Foreman ], shareholder, CDI holder. What's the current capacity assuming projections follow out for '25 on CVM production capacity internally at Kelowna? Like are you currently at now you could produce if you got an order for 300 sensors, you got capacity, what sort of CapEx?

Look, we don't -- we -- the short answer is we have plenty of capacity within any likely range for this Aft Pressure Bulkhead application. The kits are 26 or 27 sensors per aircraft. There are 700 aircraft that are appropriate targets for this technology. And because the process by which they're installed is staggered, that is they install these sensors when they bring the aircraft in for the next check. So, it's not a matter of someone buying, for example, United buying 146 sensors and installing them next week or next month, they get installed over a series of months. So, you have plenty of lead time to manage the production quantities and we have plenty of production capacity. We may invest in a second laser machine just for purposes of redundancy and risk management shortly once we see that flow arising. But yes, that's not a constraint.

That was actually pretty well the last question that I had came through online. So Steve, thanks for that.

Yes. Look, the other thing I'd say on that, Sam, is that will be a magnificent problem to have to deal with if we were running out of production capacity because these are extremely high-margin products from a manufacturing cost point of view. They're not high margin from recovering the full investment in the technology over the last 2 decades point of view. But yes, adjusting our production capacity to meet the demand is -- would be a welcome problem to solve and one we could do quite easily.

Ross, [ Stephen Mayne ], shareholder in Melbourne. With the question on the capital raise, so we've got 2,635 shareholders. Yet the Board proposed capping the SPP at only $2 million initially. So, if all shareholders had applied for the full 30,000, that's $79 million. So, we're only effectively planning to accept 2.5% of the potential capacity from retail with the SPP. I was just curious why you came up with that sort of seemingly low cap of $2 million. Obviously, well done for then accepting the extra $200,000 that came through making it $2.2 million. But if we do another capital raising, do you think you can be a bit more generous with the cap to start with? Because I know we've also got a history of doing an a placement last year, $1 million placement through Bell Potter with no share purchase plan at all. I thought we had an SPP, I thought it looked a bit skinny, well done for expanding it. But just could you just give us your thoughts on how you're treating retail shareholders overall when you look at raised capital.

Yes. Look, I guess the counterpoint to raising more money is that we also then create more dilution. And so we're always looking for the sweet spot, which is going to ultimately increase the value of the CDIs to the current shareholders. And so in this case, it was the current shareholders and the new shareholders, new shareholders in the first institutional part of the cap raise and then the second one. So, there's a trade-off, I think, between how much money you raise and the dilution that you might generate because bear in mind, each one of these shares in SPP comes with 3 free options for 4 shares purchased. And there are some shareholders who are concerned with any cap raise that it dilutes them. And so our responsibility is to make sure as we raise more capital, we're doing it for the right reasons and we're generating more value out of deploying that capital than we are diluting the starting position, if that makes sense. I would -- the other thing I'd say is that this capital raise was very different in character to the last 2. The last 2, I would characterize as emergency cap raises in order to maintain solvency while we went through some of these growth spurts we've been experiencing. So this one, we acknowledge that 20% was required for the purposes of additional working capital. And a big chunk of that, as I outlined in the announcement on Friday, $350,000 was to meet the cost of restructuring and redundancies and all that sort of stuff. But we're very clear this has given us a reasonable investment fund, which we intend to deploy very carefully and thoughtfully over the coming months and which we intend and confidently expect to add to with the positive cash flow that we can now see ourselves generating.

Just 2 more. First one is just curious why the AGM is so late. So, we're December -- we're June 30 balance day company. I mean NAB had their AGM this morning...

A domiciled company, we have until the end of December.

I'm just asking if we could have it a bit earlier in the future, sort of, a week before Christmas.

Yes. Look, fair enough. I'll take that on board. The reality is, Stephen, that the mechanics of this are we have to draft the resolutions, have them reviewed by the ASX and then publish them, which I think is a total lead time of -- Sam, correct me if I'm wrong, but it's 6 or 7 weeks.

We wanted to ratify the recent SPP. So, in order to [Technical Difficulty] and hold an additional meeting at the expense of shareholders, we just combine them and just held the AGM.

Yes. And we did canvass that possibility depending on the timing of the cap raise, we had -- we did canvass having 2 meetings, an AGM and an EGM and for various reasons, a lot of which are to do with just purely costs, we wanted to consolidate them. Yes. So it's the lead time, it's the sequence, do the cap raise first and then have the motions passed as they were today, either by an AGM or an AGM. But I do appreciate this is very late in the year from a practical point of view, and we're not sort of keen to repeat that if we can avoid it, but it was done for cost and expediency reasons this year.

Just final question. I guess it ties into that, Plcs have 6 months to have an AGM. Could you just explain the history of our structure? So, we're -- obviously, the Canadian operation is the most important. We're a Plc. Our headquarters is in Perth and our meeting here is in Melbourne and the auditor is out of London. Is it the most logical structure to have this very global [Technical Difficulty] what benefit do we get from being a Plc? A lot of companies are leaving Plc. Why don't we just -- a normal [Technical Difficulty] company.

That's a question that I've asked and we've looked at. So, I can't explain the entire history because I've only been here for 2.5 years. But you're quite right, we're a London -- a U.K. registered company, listed on the Australian Stock Exchange that owns an operating business in Canada and it gets even more complex because most of our customers and revenues are in the U.S. and in U.S. dollars. So, we have a number of options there, but the simple one, which is to reregister in Australia and eliminate the U.K. step, it comes at a cost. I think the last time we looked at it, there are lawyers and accountants and auditors and regulators and all stuff. And I think the cost was over $1 million and we decided that was not a cost that we, at the moment, wanted to bear. The practical implication of that is that we have to have a U.K. audit, which costs us, I think, around about $250,000 plus or minus. We also have to have an Australian audit and a Canadian audit, by the way. And we have to make sure the auditors all talk to each other. One surprising and unexpected benefit though of our rather complex structure is that we're quite unattractive to hostile acquirers. And we know this because we've had approaches from U.S. financial concerns who have sort of kicked the tires. And they have -- once they've understood the structure and the due diligence costs that would be involved for them for us pretty quickly run away. So that's not a reason for being a complex corporate structure, but it is a moderate benefit just at the moment. So look, I get your point, we have looked at it. As soon as it becomes -- if we judge that the cost of maintaining a U.K. registration exceed the costs of exiting that registration, transferring it, we will certainly do that, but that's not the case.

Ross, I've got one last question on the webcast here. Is the Airbus Lufthansa application moving forward independently of the FAA approval process?

The answer is it is and it isn't. Technically, it's quite separate. EASA, which is the European regulator is its own [ being and ] body. But I have to tell you that the folks at EASA are very closely watching the Boeing approval process. They have representatives on the working party that meets weekly to work through the issues. And I would say the folks at Airbus are very conscious as the people at Boeing are of wanting to make sure that they can rely on the certification of any applications that they invest time and effort into. And I think they fully expect the EASA people to be asking the same questions and having the same issues and being -- needing to be convinced of the same things as the Boeing people -- sorry, the FAA people. So, they're not unrelated in that sense. I think the positive news is that as the FAA sees its way clear to certifying the next application, the one after that and the one after that, it makes it easier for EASA to follow suit. And as it makes it easier for EASA to follow suit, it makes it easier for Airbus to proceed with more confidence. And in the meantime, we're working as hard as we can with some of the major European carriers, particularly Lufthansa and Lufthansa Technik, which is bigger than Lufthansa, to apply commercial pressure on Airbus to move forward with this. So they're related. The guy who does all of the structural health monitoring and CVM training for EASA is Dennis Roach, American guy who is one of our key advisers, which is terrific for us because he does a very good job. So, they're independent but related. The other thing to say is that they do have reciprocal arrangements so that for aircraft that the FAA have approved, EASA will recognize that. So, these Aft Pressure Bulkhead aircraft will be fine to fly and be approved in Europe and generally vice versa. The other thing that's really important about EASA, which I've only learned in the last 6 months is that EASA is the de facto regulator for Chinese-owned and operated aircraft. So, our relationship with them is very important.

If there are no questions -- [indiscernible].

Yes. Shareholder from Melbourne. Just overall, what is the total number of employees Structural Monitoring has in?

So, we have -- I can almost answer that question exactly because we've had to talk about it publicly here. We have -- I think it's 101 employees in on the AEM payroll here in Kelowna. We have 1, no, we have 2 independent contractors contracted to AEM here in Kelowna and we have 4 part-time staff in Australia supporting the SMS vehicle.

Okay. Thank you very much. I think we'll wrap things up. Thanks for your attendance.

Thanks, everybody.