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Material Technologies
stands alone in an industry that they have created with a technology for testing for
cracks in metal bridges
Technology
Scientific & Technical Instruments Monitoring of Metal Fatigue
(MTNA-OTC: BB)
Material Technologies, Inc.
11661 San Vicente Boulevard – Suite 707
Los Angeles, CA 90049
Phone: 310-208-5589
Robert M. Bernstein
Chairman, President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
January 12, 2006
BIO:
Robert M. Bernstein
Chairman, President and CEO
Mr. Bernstein received a Bachelor of Science degree from the Wharton School of the University
of Pennsylvania in 1956. In 1985, he formed a research and development partnership for
Tensiodyne Corp., MATECH's predecessor, funding approximately $750,000 for research on the
Fatigue Fuse. In 1988 he became President and CEO of MATECH. Since that time Mr. Bernstein
has been responsible for obtaining in excess of $8,000,000 from the US Government for
research and development, congressional sponsorship for the technology, US Airforce
interest for using the technology in its aging aircraft project, and support from the
Federal Highway Administration for Bridge Monitoring Systems.
Company Profile:
MATECH is engaged in the research and development of metal fatigue detection, measurement,
and monitoring technologies. The Company has developed a suite of devices for the
non-destructive testing (NDT) of metal fatigue as well as the monitoring of structural
integrity.
CEOCFO: Mr. Bernstein, what was your vision when you joined
the company, and where you are today?
Mr. Bernstein: “The vision when I began with Material
Technologies had to do with a technology that we were given from the University of Pennsylvania
that monitors metal fatigue, which results in cracks in things like bridges and airplanes.
Part of the vision was to create a successful business that has a real value as opposed to
other businesses that are there just to satisfy the certain needs of various people.
We’ve spent twenty years developing these technologies and we are now at the point of
marketing them. They are quite valuable; we have received acknowledgement and support from
the federal government. So we are beginning to create a business as opposed to a research
and development company.”
CEOCFO: Can you explain what you do in layman’s terms?
Mr. Bernstein: “In layman’s terms it is very
simple. With regards to the bridge industry, there are 200 thousand bridges made of metal
in the United States and their average age is 50 years. They must be inspected every other
year; therefore, you have 100 thousand bridges that are being inspected. Do you know how
they are being inspected every year? The answer is visual inspection. A guy walks over
them with a hammer and if he thinks that there is a crack or a flaw, he will make some
kind of decision to make a repair or bring in in-depth inspections and, in accordance with
a statement made by the Federal Highway Administration, 56% of the time he is wrong. What
we have is very simple, it is an EKG for a bridge, an electro cardiogram that the medical
community would do on the heart, we are doing on the bridge. We put down two patches, wire
them to a computer, run a heavy truck over the bridge and get a computer read out. That
computer read out will say, ‘growing crack or not’. We believe very strongly
that the amount of funds that will be deferred from improper maintenance and repairs would
be tremendous.”
CEOCFO: How will you go about commercialization?
Mr. Bernstein: “In this particular case, our customers
are the cities, states and counties that are the owners of the bridges. Therefore, what we
will do is what we have already started doing, which is visiting the state DOTs. There are
also a number of bridge conventions all over the country, dealing with things like
inspections and we will be making presentations at those conventions. We have submitted
papers to several of them and all have been accepted so far. In addition, we will be
reaching out to political contacts, because a lot of these efforts are politically based.
We have been involved in this type of effort for a number of years and we have the
contacts and know how to do it.”
CEOCFO: You’ve done some preliminary tests in a number
of states; why were those states chosen and how did that work out for you?
Mr. Bernstein: “They were chosen basically because of
availability and the cooperation from people. We started out in Culver City, California,
which is near where I live and then we did Ohio, which is where our chief engineer resides
and has contacts. We did New York, because we had business associates in New York; we did
two in Pennsylvania, because I’m originally from Philadelphia and I know various
people in that state. We did a couple more in California, just because of contacts we had
developed there. Those tests are called Beta tests, and they have proven that the
technology works as we indicated.”
CEOCFO: You’ve had federal funding for what you’ve
done!
Mr. Bernstein: “Yes, we’ve had over $8 million in
federal funding. I was introduced to one of the main people at the pentagon; he took a
look at what we had and he set-up a conference with 30 United States Army, Navy and Air
Force engineers. We then presented our technology to them and they were convinced that we
had something of value, therefore it went before the defense appropriations committee and
it was approved. We were granted funding and every month we had a two-day meeting with the
engineers. It basically got to the point where we had proved the technology with
government funding.”
CEOCFO: Are there other applications for your technology
besides bridges?
Mr. Bernstein: “Absolutely! The other applications
besides bridges include nuclear power plants, wind turbines, oil tankers, rail road
tracks; any metal structure that is undergoing a stress or strain.”
CEOCFO: The process of getting a new technology developed and
commercialized, as well as the process of becoming a public company are time intensive as
well as costly. How have you weathered the process?
Mr. Bernstein: “Not too long ago I presented a paper to
an aerospace conclave titled, ‘The trials and tribulations of an entrepreneur on his
road to success’. That was basically telling the story from day one until the current
time. We are a public company and that has advantages and disadvantages. It is easer to
raise money in many cases, but you have tremendous expenses with the SEC and so on. We
have had our ups and downs in funding and development and research, so it’s really a
situation of intestinal fortitude. You have to have a tremendous amount of patience and
demand to get something like this done. I’m told that the average time that it takes
for a technology to go from the research and development phase to the real market is 17
years and I don’t think people realize that, but there are trials and tribulations.
I’m told that I have that kind of intestinal fortitude.”
CEOCFO: Are there any competing technologies that might
impact your progress?
Mr. Bernstein: “To our knowledge we do not have any
competition, and I feel comfortable in saying that, Our consultants are as good as it gets
in the industry with regard to infrastructure and they certainly would know; we have a
couple of very good engineers and they certainly would know. Therefore, I don’t think
that there is anything that competes with us.”
CEOCFO: Often when a company goes from R&D to
commercialization, the leadership would need to be augmented or changed; tell us about the
team that will lead Matech to the marketplace?
Mr. Bernstein: “We are, in a sense, up to our necks in
that stage. I have run this company for 20 years and it was really an entrepreneurship,
but now we are turning into a business. Therefore, we have onboard a chief
engineer/marketing person, who was formally a consultant with the Federal Highway
Administration and he is very experienced in this field. We have what will be a
consultant, a woman engineer from New York, who is now with the Sam Schwartz Company,
which is a major engineering company in New York City. Sam has been a consultant for us
for a number of years; he is still a consultant and he is a former head of New York City’s
DOT. He will help us with things like engineering and marketing. We have an engineer from
a small city near Los Angeles, who will be coming on as the field ops VP. We also have
coming onboard a foreign marketing representative with contacts in Europe and Asia. We
will probably have to hire a couple of new administrative assistants, because we are
making a business.”
CEOCFO: Address potential investors; why should they be
interested and what do people miss about Material Technologies when they first look?
Mr. Bernstein: “I think people see a business that has
been around for a long time doing research and as a public company, creating debt and if
you take a look at our public filings you may become a bit confused. They are very long
and have to follow the SEC rules very carefully. However, what will the business be worth
in a couple of years? My projection, and let me comment by saying, ‘Safe
Harbor’, and that means based upon unknown circumstances coming up in the future that
one never knows about; is based upon our goal to license the technology. You’ve got
100 thousand metal bridges being inspected each year and the average cost per bridge,
because we are primarily dealing with small bridges on and over the freeways and
turnpikes, will probably be about $10 thousand. So, if we were to receive a 10% royalty,
$1,000 per bridge is $100 million gross revenue. That could come out to be roughly $50
million after taxes. The market capitalization of a business of that nature, with other
areas of interest that we will be involved with in non-destructive inspection, could be a
15X multiple. Some people might think that is generous and some people might think that is
conservative, but that would be $750 million. If we were to have at that point-in-time,
100 million outstanding shares, which is a little bit less than we have now; that is a
stock price of $7.50. Our stock has gone up and down; it has been as high as $1.50, but
right now, it is at $0.18-$0.25. However, if we are potentially looking at a potential
stock price of $7.50, in a couple of years, that is not a bad bet in my mind.”
CEOCFO: Who is inspecting the bridges now and is there any
group of people that could potentially stand in the way of your progress?
Mr. Bernstein: “The answer is yes and no! There is the
no ‘group’. These are generally people that work for the state departments of
transportation and they are not typically highly trained engineers. They walk around with
a hammer and tap until they hear something. Certainly, they have friends that are above
them and when we come in with this new technology, they may fear that their jobs will
change. However, they are not necessarily going to be replaced.
My experiences include meeting with the then mayor of Philadelphia and after 5 minutes, he
had the top bridge people in the city in his office. We had a meeting recently in the
state of Massachusetts, and they have shown an interest in us immediately testing and
showing them how it works on 17 of their bridges. Therefore, you have the real interests
from the financial end of the DOTs. Pennsylvania, for example, spends over $300
million a year, on repair and maintenance. We believe very strongly that we can differ 20%
of those costs, and that would be $60 million that is being put off, which both cuts the
budget in the current year and puts it out into the following years. Hence, that is our
objective. Certainly there is going to be some resistance. Although, I will say, that the
Federal Highway Administration has reviewed it, they have interest in it, and they believe
that it has value. So, it is just a better product and we have to convince the world that
it is worth while.”
CEOCFO: In closing; what has kept you in this technology for
so long?
Mr. Bernstein: “What kept me in it for so long is that
this is a technology that has real value. It is not a cellular phone that is going to play
music and take pictures, which certainly has a huge market, but that isn’t going to
save lives. When a bridge goes down, people get killed and the infrastructure and the
commercial area around that bridge gets murdered because 70% of all merchandise is
transported by truck. When Fed Ex and UPS can’t go over a bridge, they then, on a
daily basis, have to increase their mileage by a very large amount; so it is a tremendous
wasted cost. This problem is not based on the inefficiency of the DOTs. Rather, the
average age of the nation’s bridges is over well over the the design life of 50 years
and when they were built, you had a Model T Ford running over them. Now you have 40-ton
trucks; so it is just a time sequence problem that has to be appropriately addressed, and
we think that we are the people to do it.”
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