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Structural Monitoring Systems shares surge 36%

Shares in Structural Monitoring Systems (ASX: SMN) have jumped 36% higher in morning trade to 30 cents after the micro-cap raised $375,000 through a private placement of 2,343,750 shares at 16 cents.

The placement was granted to prominent New York-based hedge fund Drake Private Investments, a long term strategic supporter of SMS and the Company’s largest shareholder, and professional investors.

The company noted that with the significant reduction achieved in its fixed monthly overhead in recent months, and given current cash on hand and anticipated order activity, it expects the funds raised will fully support the Company’s operations well into 2014.

Structural Monitoring Systems’ vision is to produce remote crack detection sensor and instrument products that will radically reduce the cost of maintenance and vehicle or plant down-time associated with performing safety critical structural integrity NDT inspections.

For the year ended June 2013, the company only generated revenue of $144,000, and as at the end of September its cash balances were down to $176,000.

At the end of October, SMS announced a partnership with one of the Company’s long-standing commercial partners, Delta Air Lines, Inc. (“Delta”), at the time the company saying…

“It is envisaged that this Programme, with installation of CVM (TM) technology onto a number of Delta’s 737-NG aircraft, will ‘pave the path’ to mainstream use of the technology in the global commercial aviation sector.”

Blue sky potential, but with risks to match

This was the start of a run in the shares that has seen them soar from 4.6 cents to as high as 30 cents, a 552% gain.

The company is now capitalised at a lofty $26 million. The stock may be hot now, and the company may have plenty of potential, but as with any blue sky stock, there is also the potential for star-struck investors to lose all their cash. Buyer beware.

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