Technology company Structural Monitoring Systems (ASX: SMN) has achieved a highly significant milestone as it progresses towards delivering its commercially-critical supplemental type certificate (STC) sometime in the third quarter of 2020.
However, the current COVID-19 pandemic could still prove a significant stumbling block, despite the company shifting its entire board and senior staff to an equity-only compensation structure and deploying “material compensation cuts”, possibly for the remainder of this year to reduce cash burn.
The company specialises in developing technology that can monitor and test the structural integrity of various materials and products such as aircraft, ships, power plants and rolling stocks.
In a statement to the market, Structural Monitoring said with all required signatures from the Federal Aviation Administration (FAA) technical standards branch managers obtained, the company has “clearly achieved” its previously communicated milestone within the time parameters indicated.
Moreover, Structural Monitoring said it intends to leverage its commercial partnerships with Delta Air Lines, Delta Engineering and Sandia Labs to acquire full commercial approval for CVM use as applicable to the inspections required for the radome installation related to Ku and 2Ku installed WiFi systems.
According to Structural Monitoring, CVM offers a novel method for in-situ, real-time monitoring of crack initiation and propagation.
CVM is a measure of the differential pressure between fine galleries containing a low vacuum alternating with galleries at atmosphere in a simple manifold.
The company’s management told the market that completion of its intellectual property would effectively pave the way for an “all-important” STC approval for on-aircraft use, whereby CVM would significantly mitigate or replace the requirement for ground-based hangar inspections.
With the FAA now releasing stage two of its issue paper, Structural Monitoring said its technical team has been given far greater clarity regarding the final process requirements to achieve final STC certification.
“It is therefore expected that the culminating stage three and four milestones will present minimal challenges, and move much quicker to completion, relative to the receipt of the stage two document,” the company said.
Having achieved its critical stage two milestone, Structural Monitoring published its near-term expectations, which includes moving into stage three with Delta Engineering with its engineering team now tasked with reviewing and providing feedback to the FAA.
Once the company’s feedback is processed, the FAA is expected to update the issue paper and establish a conclusion.
Upon receiving a decision from the FAA, Delta Engineering and Structural Monitoring will address the final certification requirements and will then proceed to final STC certification/approval of CVM for use on WiFi antenna structure inspections.
According to Structural Monitoring, both stages three and four could be completed by the end of the year, although the impact of the COVID-19 remains largely unknown.
“The company fully expects stages three and four to be completed by Q4 2020, but this forecast will be more optimistic if the global situation improves in the ensuing months,” it said.
Once the FAA has issued the issue paper, Structural Monitoring intends to deploy marketing efforts for commercial sales, remaining fully focused on striking deals with the likes of United Airlines, Republic Airways, Southwest Airlines, RyanAir, Air France and KLM.
Furthermore, the company said due to industry awareness and “excitement” related to the FAA issue paper, it has initiated “key discussions” with a major US airline to identify additional structural inspections for future CVM technology use beyond the scope related to WiFi inspections – a deal that would supplement the existing relationship with Delta Air Lines.
The aircraft types set to benefit from Structural Monitoring’s technology will initially be the B737, B757 and A320 aircraft families, as well as the Embraer E170 and E190 aircraft types.
This morning’s news had an immediate impact on Structural Monitoring shares, which more than doubled to $0.50 per share, up 140% by afternoon trade.