Fishers startup prepares to go public

Everything about Novusterra Inc. seems small, from its bare-bones workforce (two full-time and three part-time employees) to its modest revenue ($27,000 last year) to its graphene technology (a lightweight material that is thousands of times thinner than a human hair).

But despite its size, the 4-year-old Fishers startup is preparing for its initial public offering. The private company filed a securities registration last month and said it plans to go public within 90 days. It hopes to be approved to trade on the OTCQB Venture Market, often used by companies that are still developing.

It’s an ambitious move for Novusterra, a company that is still in the testing-and-evaluation phase of its products.

“We are somewhat at the startup phase,” acknowledged CEO Gregory Jensen. “We are in a phase right now where we’re really focused on developing the technology.”

If all goes according to plan, Novusterra could become the newest public company in Indiana, following a spate of IPOs in 2023, including medical-device company Neuraxis, health care services company Syra Health, and the spinoff of Atmus—Cummins’ filtration business.

What Novusterra does is specialize in the development of carbon nanostructures, carbon nanotubes and graphene, which are super-thin materials that are stronger than steel and harder than diamonds. Graphene is extracted from graphite and is made up of pure carbon.

It’s so thin that scientists consider the material’s single layer of atoms arranged in a honeycomb nanostructure a two-dimensional—rather than three-dimensional—structure.

In 2010, two researchers at the University of Manchester in England won the Nobel Prize in Physics for their “groundbreaking experiments regarding the two-dimensional material graphene.” The Nobel Prize website called the material “not only the thinnest ever but also the strongest.”

Using coal waste

Today in the United States, dozens of companies are racing to develop graphene products and technologies for a wide range of sectors, from aerospace and automotive to energy and defense.

It’s a young industry projected to grow 35% globally from 2024 to 2030, reaching $3.75 billion, according to San Francisco-based marketing research and consulting firm Grand View Research.

“Graphene is often heralded as the ‘wonder material’ of the 21st century, and investing in graphene companies offers investors exposure to a growing number of graphene applications across a diverse set of industries,” according to Investing News Network.

Novusterra is hoping to capture that excitement and land customers for its products. The company’s name is Latin for “the new land,” suggesting a new approach to an old challenge.

“We believe our revolutionary technology will create an entirely new framework within the markets we operate, hence the name,” Jensen told IBJ.

It’s perhaps an audacious claim for a young company that still operates out of a small suite at the coworking space Launch Fishers. The startup was founded in 2020 by Andrew Weeraratne, who served as CEO until he left the company in 2022.

Yet Novusterra has laid out its big vision in a 240-page government filing, including a plan to specialize in the development and production of graphene. The company said it plans to find that graphene in “carbon-based waste streams” using patented technology.

“There is an abundance of carbon-based waste streams throughout the world today that could be utilized as a low-cost feedstock to our graphene manufacturing process,” the company said in its filing. “As we grow the business and explore additional international relationships, we plan to license our technology and manufacturing process to partners that can further expand the value to our shareholders.”

The company’s website describes how it can use patented technology to convert coal to graphene.

“These byproducts may be electrolyzed coal particles, gelatinous film formed on the electrolyzed coal particles, or the electrolyzed coal particles together with the gelatinous film,” the website said. “The electrolyzed coal byproduct is deposited as a thin layer onto a surface, or carrier substrate, which is heated to a temperature effective to form graphite while a reductant gas, such as hydrogen, flows over the heated coal product. The reductant gas flow carries the carbon particles and deposits them onto a surface, forming a layer of graphene.”

‘A super product’

Jensen sounds upbeat as he describes how graphene can be used in dozens of applications.

“We call it a super product,” he said. “It’s substantially stronger than concrete or any other material that you’d have. It’s a very thin, layered material, and it creates greater adhesion and allows for greater durability.”

The company says its products could be used in water filtration, electronic devices, energy storage, agriculture fertilizer recycling, defense applications and sustainable infrastructure, such as concrete and asphalt.

Yet, Novusterra is not yet ready for production, and it’s facing growing financial challenges. The company had a tiny revenue stream of $27,000 last year, all coming from consulting services to an outside contractor. The previous year, it posted no revenue.

At the same time, the company burned through hundreds of thousands of dollars in administrative and general expenses, resulting in a loss of $740,012 last year, more than double the previous year. The company acknowledged in government filings that it needs additional funds to attain profitability.

“However, there is no assurance that the company will attain profitability,” the company filing said under risk factors. “These matters raise substantial doubt about the company’s ability to continue as a going concern.”

Since its inception in 2020 through March 31, Novusterra accumulated losses of $1.57 million.

Other language sprinkled throughout the filing shows how the company is strongly intertwined with another Fishers company called American Resources Corp., which specializes in extracting, processing and selling metallurgical coal to steel and industrial customers.

Jensen, for example, serves as general counsel for American Resources as well as CEO for Novusterra. Mark LaVerghetta, chair of the Novusterra board, is vice president of corporate finance and communications for American Resources.

Jensen is also the brother of Mark Jensen, who is CEO of American Resources and served briefly as CEO of Novusterra.

In addition, the patents on Novusterra’s graphene technology are held by a subsidiary of American Resources under an exclusive license agreement with Ohio University, which owns the patents.

The suite of patents was developed by Gerardine Botte, chair of chemical engineering at Texas Tech University, who developed and patented the technologies when she was a researcher at Ohio University. She is now a board member of American Resources.

Additionally, Novusterra signed a nonexclusive sublicense in 2021 on certain patents from American Resources. That allowed Novusterra to focus on the development and production of carbon nanostructures, carbon nanotubes and graphene.

“The company began researching the ability to produce graphene due to the relationship the company’s management team had with American Resources Corporation as a result of prior business activities,” Novusterra said in its government filing.

Jensen, when asked about the close relationship between the two companies, said there are no related-party conflicts and that the two companies are distinct, with different missions and business plans.

“We’re a completely separate outfit going in a completely separate direction” from American Resources, he said.

Novusterra has many potential products and customers it could chase. But for now, it is chiefly working with a Utah defense contractor called Kenai Defense. Jensen said the contractor reached out to him to see if Novusterra’s graphene technology could make air-base runways stronger to handle heavy military aircraft.

“Sometimes these aircraft land on areas that aren’t looking like the Indianapolis [International] Airport,” said Jensen, who is also a lieutenant colonel in the U.S. Marine Corps Reserve.

“A lot of times, they’re going to be landing aircraft that are heavy and have short runways that need to be durable,” he said. “So they’re trying to see if our graphene nanostructure can help. If it’s incorporated within the concrete, will it allow it to have longer durability, longer sustainability?”

He said the two companies have been engaged in advanced discussions and are now in a testing-and-evaluation phase for the use of Novusterra’s technology.

Not yet priced

Novusterra’s stock has not been priced, a process that often involves long discussions with investment bankers and research analysts. Jensen declined to speculate what the IPO price will be and how much the company will be valued at after the public offering.

But some outside experts who reviewed the company’s registration for IBJ said it is likely to be a small stock with little trading volume.

“The benefit to the shareholders is, they’ll have an avenue to sell a block of stock so they can actually … get money out of it,” said Roger Lee, director of research at Columbus, Indiana-based Kirr Marbach & Co. “So it’s basically liquidity for everyone—liquidity for the shareholders and more liquidity for outside investors to come in.”

Jensen said the company will get working capital out of the stock sale, though that is not spelled out in the registration filing.

Under the section “risks related to our business,” Novusterra acknowledges it has no history of making or marketing graphene and “will be conducting the process based on experiments made in a lab.

“Because we have a limited operating history, our operating prospects should be considered in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets,” it said.

Yet Jensen sounded optimistic about the company’s IPO and its ability to develop the technology for an assortment of customers. And it could mean the company will become public within a few months, with the potential to raise more money from investors.

“That’s what our hope and desire is,” he said.•