Some digging into the 10k-a filed on 3-25-98 on MTEY, the 50% joint venture owner of Antaeus; This is not the entire filing. The SIMS-MATECH partnership that resulted in Antaeus is part of this filing.
<TT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission file number - 33-23617
EXCERPTED
The Company is seeking to raise funds from numerous sources, including various
state and federal governmental agencies and/or private or public offerings of
securities. At this time, however, the Company has no firm agreements other than
a teaming agreement with Southwest Research Institute ("SWRI") related tothe Air
Force contract signed on February 25,1997. In August 1996, Matech entered into a
teaming agreement with SWRI, San Antonio, Texas (a non-profit research facility)
and the University of Pennsylvania. On February 25, 1997 the team was awarded a
$2.5 million Phase I contract to "determine the feasibility of the EFS to
improve the United States Air Force capability to perform durability
assessments of military aircraft, including both air frames and engines through
the application of the EFS to specific military aircraft alloys." Matech's share
of this award is approximately $550,000. Sufficient interest has been generated
by the military and the Pentagon and Congress has appropriated an additional
$5,000,000 for further development related to the EFS technology. The
contracting process for the additional funding has begun. The Company
anticipates that process will take two to three months from the date of this
filing.
Management anticipates marketing the Fatigue Fuse separately at first. If the
Electrochemical Fatigue Sensor is successfully developed, the two products will
complement each other. Matech is aware of several manufacturers capable of
producing the Fatigue Fuse at a reasonable cost. No assurance can be given,
however, that these devices will be successfully completed, that they can be
commercially produced, that they will perform to Management's expectations, or
that commercial markets will be successfully developed. Moreover, there may be
significant competition for the fatigue Fuse if and when it is marketed.
The Fatigue Fuse is in its final stages of testing and development. To
beginmarketing the Fatigue Fuse, will take from 6 to 12 months and cost
approximately $600,000, including technical and beta testing and final
development. Iftesting, development, and marketing are successful, management
estimates Matechshould begin receiving revenue from the sale of the Fatigue Fuse
within a yearof receiving the $600,000. Management cannot estimate the amount
of revenuethat may be realized.
To date, certain organizations have included Matech's Fatigue Fuse in test
programs. Already completed are tests for welded steel civil bridge members. In
1996, Westland Helicopter, a British firm, tested the Fatigue Fuse on
Helicopters. That test was successful in that the legs of the fuses failed in
sequence as predicted. British Aerospace is conducting a full scale, 3 year test
of the Fatigue Fuse on Grumman T-38 training aircraft. Matech has also received
commercial inquires on the availability of fatigue Fuses for windmills, marine
cranes, and refinery pressure vessels.
DESCRIPTION OF TECHNOLOGIES
The Fatigue Fuse
The Fatigue Fuse was designed to be affixed to a structure to give warnings as
preselected portions of the fatigue life have been used up (i.e., how far to
failure the object has progressed).It will give warnings against a condition of
widespread generalized cracking due to fatigue.
The Fatigue Fuse is a thin piece of metal similar to the material being
monitored. It consists of a series of parallel metal strips connected to a
common base, much as fingers are attached to a hand. Each of the "fingers" has a
different geometric pattern called "notches" defining its boundaries. By
application of the laws of physics in determining the geometric contour of each
of the notches, the fatigue life of each of the fingers should be finite and
predictable. When the fatigue life of a given finger (or Fuse) is reached, the
fuse breaks. By implementing different geometry of each finger in the array,
different increments of fatigue life become observable. Typically, notches will
be designed to facilitate the observation of increments of fatigue life of 10%
to 20%. By mechanically attaching or bonding these devices to different areas of
the structural member of concern, the Fuse undergoes the same fatigue history as
the structural member. Therefore, breakage of a Fuse will indicate that an
increment of fatigue life has been reached for the structural member.
Fatigue results from a metal object being subjected to repeated cyclic strain.
In a commercial context this strain and concomitant stress comes about as a
result of a large number of cycles of loading and unloading. Sudden fracture can
result. Fatigue damage and the resultant compromise of the stability and
integrity on the member experiencing fatigue can present the potential for
structural failure and extreme danger. Such objects as bridges and the wings of
airplanes are subject to fatigue and it is obvious that the sudden fracture of
such an object would have disastrous results. It is presently impossible, under
any generally acceptable theory of fatigue phenomena, to predict by analysis
alone when the limit is reached and when a fracture may take place. Further, in
normal usage, the damage occurs cumulatively, at microscopic levels and can only
be detected in the early stages at a time when dire results can be avoided by
examination of the microscopic structure.
This difficulty has caused designers of objects and structures subject to
fatigue to be extremely conservative by designing structures in a manner which
maintains the stresses presented in critical areas of a structure at a level
well below the know endurance limits of the material employed. In many instances
this has resulted in extreme expense. In spite of this "overdesigning",
catastrophic fatigue failures still occur. Although tests of the Fatigue Fuse
have been performed in independent laboratories and the Fuse has been shown to
perform as designed and as expected, Management has determined that substantial
additional testing is necessary to ensure that it will be possible to calibrate
various types of loading spectra, i.e., the range and types of stresses which a
metal object experiences during usage. Management estimates that it will
require an outlay of approximately $350,000 to accomplish this additional
testing. If this money were available, Management estimates that such additional
testing could be accomplished in 6 to 12 months.
Management believes that the Fatigue Fuse will be of value in monitoring
aircraft, ships, bridges, conveyor systems, mining equipment, cranes, etc. No
special training will be needed to qualify individuals to report any broken
segments of the Fatigue Fuse to the appropriate engineering authority for
necessary action. The success of the device is contingent upon Matech's
successful development and marketing of the Fatigue Fuse, and no assurance can
be given that Matech will be able to overcome the obstacles relating to
introducing a new product to the market. To determine its ability to produce and
market the Fatigue Fuse, Matech needs substantial additional capital and no
assurance can be given that needed capital will be available.
Electrochemical Fatigue Sensor ("EFS")
In August, 1993, Tensiodyne, a predecessor of Matech 1, entered into two
agreements, a license and a development agreement, with the University of
Pennsylvania regarding a new invention designed to measure electrochemically the
status of fatigue of a structure without knowing the structure's past loading
history. Pursuant to the license agreement, 12,500 shares of Tensiodyne's common
stock were issued, a 5% royalty on sales of this product was granted, and under
the development agreement Tensiodyne undertook to pay $11,112 per month for a
total of 18 months, for a total payment of $200,000. As of this date, no
payments have been made on this obligation. On December 17, 1997, the company
and the University modified the terms of the licensing agreement and related
obligation. The terms of the modified agreements include an increase in the
University's royalty to 7% of the sale of related products, the issuance of
additional shares of the Company's Class A Common Stock to equal 5% of the
outstanding stock of the Company as of December 17, 1997, and to pay to the
University 30% of any amounts raised by the Company in excess of $150,000
(excluding amounts received on government grants or contracts) up to $200,000
plus interest at 1 (r) % per month from June 30, 1997.
The EFS is a high precision instrument consisting of (a) a cell which can be
attached to a structure to measure electrical current and (b) software to
interpret the current measurements. The cell is an enclosure which contains a
fluid or gel which conducts electricity and two metal electrodes connected to
external wires leading to a battery and the current measuring instrument. The
sensor is temporarily attached to a structural member, then the member is
subjected to multiple loads while the instrument records the current. A computer
analyzes the current record to determine the degree of fatigue damage present at
the location of the sensor in the structure. Then the sensor is removed.
Preliminary tests at the University of Pennsylvania on different metals
indicates that various stages of fatigue in each metal produce a current
specifically associated with each stage. For example, if the specific metal has
experienced 20% of its fatigue life, the current produced with the EFS
technology has certain characteristics, i.e. a signature. If the metal has
experienced 40% of its fatigue life, the current has a different but distinct
signature associated with that amount of fatigue.
The EFS is in the initial stage of research. No assurance can be given that it
can be successfully developed or that, if successfully developed, it can be
produced at a commercially acceptable price, and that even if these two
conditions are met, that there will be a market for the EFS.
PATENTS
Matech is the assignee of four patents originally issued to Tensiodyne
Corporation, a predecessor of Matech. The first was issued on May 27, 1986, and
expires on May 27, 2003. It is entitled "Device for Monitoring Fatigue Life" and
bears United States Patent Office Numbers 4,590,804. The second patent, entitled
"Method of Making a Device for Monitoring Fatigue Life" was issued on February
3, 1987 and expires February 3, 2004, United States Patent Office Number
4,639,997. The third patent, entitled "Metal Fatigue Detector" was issued on
August 24, 1993 and expires on August 24, 2010, United States Patent Number
5,237,875. The fourth patent, entitled "Device for Monitoring the Fatigue Life
of a Structural Member and a Method of Making Same," was issued on June 14, 1994
and expires on June 14, 2011, United States Patent Number 5,319,982.
STRATEGIC ALLIANCE WITH STRUCTURAL INTEGRITY MONITORING SYSTEMS
The Company has entered into a strategic alliance with Structural Integrity
Monitoring Systems ('SIMS') of Willimantic, Connecticut. The company and SIMS
are in the final stages of planning to obtain government funding to develop and
demonstrate a bridge monitoring systems. The Company and SIMS have formed a
Delaware corporation, Millennium Bridge Monitoring, Inc. The Company and SIMS
will each own 50% of Milllennium Bridge and will each license its technology to
that Company. Millennium Bridge will then apply for federal government funds
for development and a demonstration project. As this plan is in its early
stages, the Company can
DISTRIBUTION METHODS OF PRODUCT
Provided there are funds to support such activities, as to which no assurance
can be given, Matech intends to exhibit the Fatigue Fuse and the Electrochemical
Fatigue Sensor at various aerospace trade shows and will also market its
products directly to end users, including aircraft manufacturing and aircraft
maintenance companies, manufactures and operators of cranes, certain state
regulatory agencies charged with overseeing maintenance of bridges, and
companies engaged in manufacturing and maintaining large ships and tankers, and
to the military. Although management intends to undertake marketing, dependent
on the availability of funds, within and with out the United States, no
assurance can be given that any such marketing activities will be implemented.
Competition
Matech's Products
1. The Electrochemical Fatigue Sensor is intended to provide a fatigue
measurement which cannot now be obtained from any other instrument, namely, an
assessment of the extent of fatigue damage before cracks have grown to a size
detectable by nondestructive inspection, in a structure which has not previously
been instrumented or monitored to record the loads or strains experienced in
service.
2. The Fatigue Fuse provides a simple low-tech way to assess and predict fatigue
damage, which otherwise requires complex instrumentation, precision data
recording, and sophisticated analytical programs.
Competitor's Products
Other technologies exist which indicate fatigue damage. Single cracks larger
than a minimum size can be found by nondestructive inspection methods such as
dye penetrant, radiography, eddy current, acoustic emission, and ultrasonics.
Track of load and strain history, for subsequent estimation of fatigue damage by
computer processing, is possible with recording instruments such as stain gauges
and counting accelerometers. These methods have been used for up to 40 years and
also offer the advantage that they have been accepted in the market, whereas
Matech's products will remain largely unproven for some currently indeterminable
period. Companies marketing these alternate technologies include Magnaflux
Corporation, Kraut-Kermer-Branson, Dunegan-Endevco, and MicroMeasurements. These
companies have more substantial assets, greater experience, and more resources
than Matech, including but not limited to, established distribution channels and
an established computer base. The familiarity and loyalty to these technologies
may be difficult to dislodge. Because Matech is still in its development stage,
it is unable to predict whether its technologies will be successfully developed
and commercially attractive in potential markets. |
