Material Technologies Inc. Chief Executive Officer Provides Positive Outlook in Special Letter to Shareholders
Posted: 2007-08-09 08:27:21
LOS ANGELES--(BUSINESS WIRE)----Material Technologies Inc., (OTCBB:MTTG), a developer of advanced technology to monitor and measure metal fatigue, today announced that it has issued a Special Letter to Shareholders in an effort to update existing Material Technologies investors on the current status of the Company, and more importantly, management's perspective on the Company's future growth outlook. The text from the letter follows:
I am writing today to bring you up to date on the progress being made by Material Technologies Inc. (MATECH) toward meeting its strategic goals. Bottom line: The news is good. MATECH has completed its long technology-development phase and is now taking its technology to market, with impressive results. Our list of current and potential customers is growing, and Wall Street is taking notice.
As I write this, MATECH stock is up more than 29% over just the past week. Granted, it has been an eventful week for our industry, with the tragic highway bridge collapse in Minneapolis raising fresh concerns about the safety of bridges all over the nation and generating significant media attention for us. But I believe that investors also see MATECH's signature technology, the Electrochemical Fatigue Sensor (EFS) system, as the best means available to address those safety concerns quickly and cost-effectively.
We recently received another vote of investor confidence from an important and influential group of money managers. European institutional investment firms exercised MATECH warrants they had received in a round of equity financing earlier this year. Included here were big names, such as Julius Baer Asset Management of Switzerland and Anima Funds of Italy. The fund managers cited the potential of MATECH's EFS technology to detect cracks in aging bridges and infrastructure in the U.S. and Europe. One of them, Julius Baer Executive Director Alexander Shalash, foresaw a "renewed spending cycle" to repair aging U.S. infrastructure and said MATECH is "favourably positioned to benefit" from it.
Of course, the warrant exercise also helps us by adding to our capital. With our low burn rate and our expectation of rapid revenue growth in the near term, we are now confident that we have sufficient funds to finance our operations for the foreseeable future. In short, we are poised for rapid growth, starting now.
Already, the EFS system has been used by highway departments in Pennsylvania, Utah, Massachusetts and New Jersey. The Pennsylvania deployment is the farthest along, with MATECH benefiting from an "on-call" inspection contract under which the state could use the EFS system as needed, anywhere in the state. Five such inspections have been completed, and several more were under way this summer. And this is just scratching the surface. According to 2006 figures from the Federal Highway Administration, 2,610 of Pennsylvania's 7,605 steel bridges are structurally deficient and another 1,651 are functionally obsolete. We also have been asked in recent months to demonstrate EFS in New York and to use it for verifying crack repairs in Alabama. Overseas, we have met with bridge owners in Australia, the U.K. and elsewhere and they have expressed serious interest in using EFS.
These officials recognize - and many others will come to recognize - that EFS is simply the best technology for testing bridges when judged by accuracy, cost and ease of use. In laboratory tests, it has detected metal-fatigue cracks as small as 0.0004 inch wide and 0.001 inch long. Cracks this size are far too small to be picked up with visual inspection alone or by other methods of inspection in use today, such as acoustic emission (the exciting of metal structures and analysis of resulting sound waves). Eddy current testing, which uses electromagnetic effects to inspect metal structures, is effective at detecting small cracks, but even it can miss cracks that EFS detects. Most importantly, it cannot determine if the crack is growing. EFS can, and this is a crucial advantage.
By measuring ongoing metal fatigue, EFS enables highway agencies to focus on active cracks, which need immediate attention. Knowing the difference is critical to both safety and cost-effectiveness. It helps direct repair money to where it is most needed. Additionally, the EFS is far more effective than these "health monitoring" systems by providing direct measurement of fatigue crack activity. It does this at a fraction of the cost of the extensive strain gauging and modeling that the health monitoring systems use.
Another MATECH technology, the "Fatigue Fuse" sensor, is available to fill the gaps between EFS inspections by monitoring accumulated fatigue in real time. Each Fatigue Fuse, consisting of several notched metal strips, is placed on a high-stress area of a metal structure. As the structure experiences stresses and strains, individual notches crack and separate at calibrated fractions, thereby indicating the amount of fatigue life.
MATECH thus can offer highway agencies and private-sector bridge owners (railroads, for instance) a full safety package based on periodic inspection (EFS) and continuous monitoring (Fatigue Fuse). With no other company providing comparable technology, we have a huge, largely untapped market open to us. To give you some idea of that market's size, in U.S. highway bridges alone, here are some facts:
-- Under federal law, nearly 190,000 steel highway bridges are subject to inspection every two years. In other words, the number of annual inspections for which EFS could be used is nearly 95,000.
-- According to federal data, 39% of the bridges in the U.S. are structurally deficient or functionally obsolete.
-- In 2006, the Federal Highway Administration (FHWA) classified 39,496 steel highway bridges as structurally deficient. Another 34,951 were labeled functionally obsolete.
-- Over the past 10 years, on average, a bridge failure (closure or collapse) occurs once a week on average in the U.S.
-- The average age of U.S. bridges is greater than 50 years, and most bridges in the U.S. were designed for a 50-year life.
-- According to the Road Information Program(R) (TRIP), 26% of U.S. bridges in 2005 were not designed to handle current traffic levels or need major repairs. In the 11 Northeastern states, 39% of bridges are structurally deficient or functionally obsolete.
And this is just for the use of EFS on U.S. highway bridges. It does not factor in the potential revenues from Fatigue Fuse, or the use of EFS and/or Fatigue Fuse on railroad bridges and other non-highway structures where metal fatigue is a critical safety issue (these include oil rigs, nuclear power plants and offshore docking stations). Surveying the current state of U.S. infrastructure, and looking at the clear advantages of MATECH technology, you can see why experienced investors are so positive on the company's prospects.
I would like to close by thanking you for your interest in MATECH, and saluting your foresight as an investor in promising but unheralded technology. Your judgment about the prospects of EFS and MATECH is now being rewarded, as you can see from the recent appreciation in share prices. Wall Street is beginning to see what you have seen all along: There is an urgent need for reliable and efficient technology to ensure that bridges and other crucial structures are safe, and MATECH has the technology that best meets this need. I expect to be giving you more good news in the coming months, as the company's growth story progresses and reaches an ever-widening audience of investors.
Robert M. Bernstein
Chief Executive Officer
Materials Technology, Inc. (MATECH)