Material Technologies Inc. has many of the hallmarks of a startup.

The Los Angeles-based company has technology that it claims will revolutionize its industry in this case the critical process of measuring metal fatigue in bridges and other structures.

It also has few revenues, high research and development costs and, thus, not surprisingly, is awash in red ink. But that’s where the similarities end.

Founder and Chief Executive Robert Bernstein is 72 not 20-something and the company has been around for 20 years, including a decade or so as a public company.

But now, finally, Material Technologies is beginning to gain traction with transportation departments across the country as it markets what some consider the only true fatigue testing technology in the world.

For Bernstein, after so many years invested in keeping the company alive, this transition is presenting an even more daunting challenge: growth.

“My toughest task as CEO is to get the technology out of the laboratory,” he said. “We’ve proven the technology. It’s just a matter of growing the customers and making the business an operating business as opposed to an R & D; business.”

Last September, the company secured its first contract when the Pennsylvania Department of Transportation hired the company to test the fatigue in three of the state’s bridges. The company in April signed a second contract with the state, a $110,000 deal for seven bridges.

Company executives also have brought their devices to more than five other states and recently gave presentations to potential customers in China, England and Australia.

Still, until more contracts are signed, the company is struggling financially as it transitions from research and development outfit to a commercial enterprise. In the first quarter of 2007, the company reported a net loss of more than $4 million for the three months ended March 31, saying its biggest challenge is maintaining funding until its products generate sufficient revenue to support its operations.

The company has raised cash primarily through loans and the sale of its common stock. And Bernstein, who is the largest single shareholder with 28 percent of outstanding shares, helped secure more than $8 million from the federal government.

But as it revs up its marketing engine, company executives and analysts both expect growth.

Lisa Springer, an analyst with Beacon Equity Research, recently rated the company’s stock a “speculative buy,” with a target price of $3. Shares, which trade on the Over the Counter Bulletin Board and the Pink Sheets, closed at $1.09 on July 2.

“These products have wide-scale applications in evaluating America’s aging bridge infrastructure,” she wrote in her report.

Bernstein said he expects the company to secure several major contracts soon and move out of the red by next year.

“We’re marketing all over the place,” he said. “I think that we will get profitable in ’08.”

Finding cracks

The company’s future rests in its marquee product: the electrochemical fatigue sensor.

Under federal law, all of the country’s roughly 200,000 metal bridges must be inspected at least once every two years. But the requirements for inspections are loose, and the vast majority of them are done visually, without any technology to aid inspectors. Generally, inspectors look for cracks and if they find one, they will drill a hole in the end of it to stop it from growing.

Though the law allows visual inspections, data from the Federal Highway Administration shows that more than half of visual inspections produce incorrect condition ratings.

Engineers with the California Department of Transportation do quick visual inspections of bridges each week and more comprehensive inspections every two years, said David Anderson, a spokesman for the department. But those inspections are decidedly low-tech: one of the more common non-visual inspection techniques is the use of colored dye to detect minute cracks.

Though state bridge inspectors have not incorporated the electrochemical fatigue sensor into their inspection repertoire, Anderson said they are open to using it in the future. “We are interested in anything that will protect the public and improve safety,” he said.

The company has spent well over a decade fine-tuning its technology first unveiling the fatigue fuse and later the electrochemical fatigue sensor before seeking outside validation that the technology did, in fact, work.

In 2002, Thousand Oaks-based Rockwell Scientific Co., now a subsidiary of Los Angeles-based Teledyne Technologies Inc., completed a four-month study showing that the electrochemical fatigue sensor can detect cracks as small as 0.0004 inches 10 microns.

The method the device uses to detect cracks is similar to an electrocardiogram for the heart 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 fatigue damage in the metal.

There are some devices currently available to bridge inspectors that help them determine possible fatigue with names such as strain gage and tilt meter but “they don’t find growing cracks as we do,” Bernstein said.

Since the Rockwell report, Bernstein and his colleagues have been meeting with transportation departments across the country, including California, Pennsylvania, Massachusetts and Montana.

Company executives are marketing the devices primarily among bridge inspectors, but applications include most large metal objects, including rail structures, ships and cranes.

A simpler method

The Pennsylvania transportation department was the first state to sign a contract with Material Technologies.

“We were looking for inspection tools and techniques that give engineers actual data on the behavior of bridges,” said Tom Macioce, chief bridge engineer for Pennsylvania. “We were looking for those tools to be quick and cost effective with results that are understandable.”

The state has been one of the company’s best clients so far, signing two contracts with the possibility of more in the future.

Macioce said the majority of the state’s inspections are done visually, and when inspectors use instrumentation, it is with a highly technical device known as a strain gage. The gage is reliable, he said, but inspectors must be highly skilled often with Ph.D.s and use mathematical modeling to read the results. Material Technologies’ device, on the other hand, is much simpler.

“The (electrochemical fatigue sensors) give you more of a focused reading,” he said. “It’s a good technology.”

Material Technologies Inc.



Founded:

1983


Core Business:

Metal fatigue sensors


Employees in 2007:

4


Employees in 2006:

4


Goal:

To license their technology to states and bridge inspection companies

Driving Force: To maintain a safe transportation infrastructure across the country and reduce unnecessary bridge maintenance costs