Two years ago, the outlook was promising for Matech Corp., a Los Angeles company whose technology detects cracks in metal structures.
Following the August 2007 Minneapolis bridge collapse that killed seven people, executives from the company, formerly named Material Technologies Inc., were featured on national TV talking about their revolutionary Electrochemical Fatigue Sensor. And there was even talk states would finally get serious about repairing the nation’s aging infrastructure.
Then, the company ran hard up against reality.
First, there was the miles of red tape that comes with government contracting. Then the recession hit, strangling budgets and delaying infrastructure spending.
“The two biggest challenges we have are dealing with the fragmented bureaucracy of each state’s transportation department, and now the shortage of funds for infrastructure improvements,” said Matech Chief Executive Robert Bernstein.
The troubles for the company are obvious enough in its stock price, which peaked within the last 12 months at $3.94 in December 2008 only to crater to as low as 17 cents last week in over-the-counter trading.
But Bernstein, 74, who founded Matech more than a quarter century ago as a research and development company, is nothing if not persistent, optimistic – and persuasive.
Despite generating less than $500,000 in annual revenue, the company continues to draw interest from private investors, partly because the federal government targeted $29 billion of its stimulus funding into highways and bridges.
Moreover, Bernstein said the company is in partnership talks with Northrop Grumman Corp., the Los Angeles defense contractor, which also has a unit that pursues infrastructure projects – the kind of partnership that could help it break through contracting logjams.
“Matech has a great product that I’ve seen in demonstrations,” said Timothy Galarnyk, chief executive of Construction Risk Management Inc., a construction inspection firm in St. Paul, Minn. “But it is just dealing with a tough market that doesn’t seem to be taking bridge inspection seriously.”
Looking up
Matech has developed two products: the Fatigue Fuse, a relatively simple thin metal device that breaks when it detects wear-and-tear in a structure, and the state-of-the-art Electrochemical Fatigue Sensor, or EFS.
The EFS detects cracks using a technology that is similar to an electrocardiogram. Inspectors send an electric current through a gel patch into the bridge, which is sent back to the device, giving an easily readable analysis of metal fatigue.
Under federal law, all of the country’s 200,000 metal bridges must be inspected at least once every two years. However, many of those inspections are conducted visually, which can miss tiny cracks that can be dangerous. By contrast, the company claims the EFS can detect cracks as thin as 0.0004 of an inch.
The Federal Highway Administration recently wrote in a report that EFS that successfully detected 14 spots of active cracking on the Route 72/Manahawkin Bay Bridge in Ocean County, N.J.
Because of the success, the New Jersey Department of Transportation, has told the company it would use the technology again, Bernstein said. However, it is slow going to get a state contract. First, transportation officials and lawmakers have to be convinced of the need for the product. And then final sign-offs are a challenge, given that some transportation departments have 30 plus divisions.
“You are not dealing with one group of executives as in the private sector, you’re dealing with bureaucracy and politics that you have no control over trying to get on the same wavelength,” Bernstein said.
Then there is the recession. Elizabeth McNichol, a senior fellow who analyzes state budgets at the Center on Budget and Policy Priorities in Washington, D.C., said that transportation projects are usually no larger than 8 percent of a state’s annual budget. That may shrink this fiscal year, as 48 states are facing shortfalls totaling $168 billion.
“Most states would want to spend preemptively to avoid bigger costs down the line when it comes to public safety,” McNichol said. “But state lawmakers are looking to cut right now and transportation takes a back seat to the biggest costs – education and health care.”
Taking another route
Bernstein said the problems have caused him to look beyond contracts with the state, and he is now pursuing bridge inspection for private entities. Last year, Matech landed a contract with Union Pacific to inspect a Nebraska bridge.
Matech also is hoping to build up foreign business. The company is already selling its services in Australia, and is building alliances with construction firms and manufacturers.
Bernstein is most optimistic about working with Northrop Grumman after nine months of talks and a joint presentation at a bridge conference. Bernstein said that Northrop is considering incorporating Matech’s technology in its Sensor Information Systems program for bridges. Northrop’s SIS systems gather security, environmental and other data for bridge owners.
No deal has been inked, and Northrop did not respond to requests for comment. But Bernstein remains optimistic.
Although Matech generated only $205,724 in revenue in the first half of this year, that is far better than the $92,622 for all of last year. But with eight employees and a staff of outside contractors who conduct the actual inspections that’s not enough to fund the payroll.
Instead, the company has relied on private investments, which has totaled about $9 million in the last nine years and $500,000 alone in the last 40 days, Bernstein said. Also, contractors are often paid with common stock in lieu of cash.
“I started this company over 25 years ago and have kept it afloat since then, so I know what I’m doing,” Bernstein said. “We know the Federal Highway Administration is familiar with our technology and interested in using it. I think with all that money coming down the pipeline, there will be some serious interest from both potential government clients and also from (more) people looking to become investors.”
