Verutek Technologies cleans soil. StreamScape Minerals was supposed to dig valuable minerals out of it. But the two didn't come together over their connection to the land.
No, when Glastonbury-based Verutek last month acquired StreamScape, it was digging for something far more valuable than rights to eight unproven Canadian mineral mines: access to the publicly traded market.
StreamScape, a Nevada corporation formed to explore mine holding in British Columbia, had been traded on the Over The Counter Bulletin Board, the so-called "penny stock" market owned by Nasdaq, since 2004. It never turned a profit, but it was publicly traded.
Of course, Verutek has never made a profit either. Filings show the 14-person firm has lost $4.2 million since February 2006. But its co-founders, John Collins and George Hoag, believe they have revolutionary technologies that have a major impact on the ground remediation industry.
But they need money to bring it to market, Collins said.
Like many upstart tech firms, Verutek could have gone several routes. Venture capitalists and angel investors were one option, but they inevitably want seats on the company's board, control over its direction and big cuts of profits if and when they come. An IPO was an alternative, but the cost and difficulty of finding an underwriter remained major downsides, Collins said
Instead, in a process known as a reverse merger, they simply bought StreamScape, changed its name, business and ticker symbol, and issued $1.65 million in debt, which they will use to further their technology. Collins said it seemed to them the smartest, quickest way to do it.
Reverse mergers became popular in biotechnology circles when the IPO market seemed slowed down following the boom and bust years of the late 1990s.
Now, increasing numbers of nanotechnology companies like Verutek see reverse mergers as relatively easy and inexpensive way to raise money, without having to meet listing requirements of an exchange and pay an underwriter for an IPO.
What Verutek makes is a form of nanotechnology that blends "green" chemicals and techniques to purge polluted soil of things like petroleum. Common chemicals like castor oil and peroxide can be put together and dumped into soil to break down many pollutants into oxygen and carbon dioxide, explains Collins, who holds a Ph.D. in soil chemistry. The trick is in how you put them together, and Verutek has developed a type of nanotechnology that delivers them through the soil to depths of 100 feet, far below where most polluted sites require clean up.
"This is a 21st century technology for an industry that is still using 19th century technology," Collins said.
Most remediation involves digging out the soil, trucking it off to be burned, and then replacing what is missing with earth from elsewhere.
Verutek is still perfecting some of its techniques, but were emboldened several months ago when they demonstrated to the State of New York how their product worked when it completed a remediation of land polluted by a century-old factory in Long Island.
Now, with an infusion of cash from investors, Collins said he and Hoag, who founded the Environmental Research Institute at the University of Connecticut, will be able to expand and develop Verutek into a more marketable technology.
Collins said the company will use that money to move from Glastonbury into a larger lab and office space in Bloomfield, and to continue developing new nanotech treatments for soil remediation.
"I really feel like this technology is going to change the entire industry, and be quite profitable," Collins said.
Maybe. If it does, it means the path to profitability clearly ran through a Canadian mine shaft.