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VIDEO: Front Range Biosciences $10 Million Capital Raise

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Front Range Biosciences is a biotech company that transfers existing agricultural technology, such as tissue cultures, to the cannabis and coffee industries to create clean stock programs. CFO Nick Hofmeister discusses the company’s recently completed financing round. Front Range raised $10 million and that money will be used to fund the company’s expansion plans at its Boulder, Colorado facilities. While going public is on the company’s radar, Front Range currently has no plans to announce a public offering. The company started generating revenue in 2017 and strategic partnerships with Faith and Family Farms and Fringe Coffee provide access to the California cannabis and coffee markets.

Transcript

Ed Milewski:  Hello, everyone. Welcome to Midas Letter Live. I’m Ed Milewski. We’ve got a very interesting company with us today, and gentleman here, Nick Hofmeister, who’s the CFO. He’s coming to us from Colorado, working, and Front Range Bioscience, which is a private company. And I see you just raised $10 million?

Nick Hofmeister:   We’re very happy about that result. We were on your show a little over a month ago –

Ed Milewski:  Yeah, that’s right, yeah.

Nick Hofmeister:   And we were talking about that round then. We have since closed the round and made the announcement just about last week, and $10 million in the bank, ready to go, funded and closed, which gives us all the capital that we need to do the expansion plans over the next two years.

Ed Milewski:  Yeah, I was going to ask you if you have any of that money left, but that would be a joke. Okay, so you’ve got – you know what, it’s a nice feeling, because I know in a small company, you struggle, you’ve got to – you know, you got to be a real steward, and treat the money very, very seriously. So you got a little breathing room, but you shouldn’t get flippant with it, right? You’ve got to –

Nick Hofmeister:   We take this very seriously. I’ve raised, now, more than about 260 million from various public and private sources for early-stage startups, and this is really important money for us. We take it very seriously.

Ed Milewski:  Good, good.

Nick Hofmeister:   Our investors from previous rounds, many of them joined this round, seeing what we did with the money that we raised previously, the milestones that we hit, the accomplishments we had as a company, they were confident in what we were doing, and put more money in.

Ed Milewski:  Tell us about, just, tell us again about your main function, what do you propose to do, what’s the value added? Why do we want to invest in Front Range when it – I assume you’re going public at some point?

Nick Hofmeister:   No plans to announce about that yet, but it is definitely on the radar. I have something –

Ed Milewski:  Well, just tell us about your company.

Nick Hofmeister:   It’s a biotechnology company. So we translate existing agricultural technologies to cannabis, and now also the coffee space. So those technologies include things like tissue culture – what we call our Clean Stock program, which produces disease-free, pesticide-free and certified true-to-type baby plants, and those plants go into grows. Currently we’re in Colorado and California, and we’re working on expansions across the US and into Canada.

Ed Milewski:  Right. It’s – you know, I don’t know anything about this area, but it just sounds to me that, it sounds very high-end. You know, it sounds to me this would consume a lot of money in the laboratory area. Am I correct in that?

Nick Hofmeister:   Not necessarily.

Ed Milewski:  Not necessarily, okay. That’s the right answer, because, you know, 10 million, you might go through it quickly, and then you got to raise another 10 or 20 million. But anyway, so you’re saying not necessarily.

Nick Hofmeister:   It’s – I’ve worked on biotechnology companies for most of the last decade, and in those startups, you can burn through biotech money very quickly in a startup. You know, a piece of equipment can cost $1 million.

For Front Range Biosciences, part of the reason that we wanted to form this company is that it’s relying on agricultural biotechnology technologies. They’ve been developed and perfected over the last 30 years, and needed to be translated into cannabis. So there was some R&D work to do that; we spent a couple of years and some of our early-raised capital to create the process. But it doesn’t involved a million-dollar DNA sequencing machine, for example.

Ed Milewski:  Great. Right. Now, I see you’re the CFO, so I take it you have a degree in accounting. That’s your training, correct?

Nick Hofmeister:   I have an MBA, I went to MIT-Sloane, yes.

Ed Milewski:  Okay, good. But you’ve also been in the bioscience space for 10 years or more?

Nick Hofmeister:   Yeah, about 10 years, now. I worked on algae biofuels, nutraceutical and pharmaceutical manufacturing from algae, all sorts of products.

Ed Milewski:  Okay, okay. So how long – now, you said earlier, and I want to repeat this because this is important, and I’ve been in the investment business for, hard to believe, but more than 20 years – closer to 40 – the bottom line is, you know, like if you have to keep raising money, that’s dilutive to existing shareholders. And you’re saying this 10 million is going to keep you going for quite a while?

Nick Hofmeister:   It will. So we budgeted for that 10 million to last for two years; we’re already earning revenue as a company, and we have a lot more revenue in store for us over the next year or two.

Ed Milewski:  That was my next question, like, no revenues, raise more money. And I don’t like to see more and more – so you got some revenues, and you’re going to continue to build on that.

Nick Hofmeister:   We got our first revenues in 2017, actually, just a year after starting our operations, and then we’ve had significant revenues this year in 2018, and this expansion capital, the $10 million raise, is to expand our operations in Colorado, California, and therefore, expand our revenue.

Ed Milewski:  Yeah. And so – and maybe you can answer this and maybe you can’t – because you’re a private company, I understand that there’s things you can say, so I’m just going to throw this out, but do you see a point in the near future, I’m assuming, you know, being a startup company, that you’re – are you burning money now, or are you breaking even, or can you talk about that?

Nick Hofmeister:   Yeah, I can talk about it in really general terms, which is, we use the traditional capital to allow for the expansion, so we are taking investor capital and putting it into larger facilities, and particularly more personnel. So we’re a people-driven business at the end of the day, and we raised that additional money so that we could grow faster than our organic growth would allow us to do.

Ed Milewski:  How many employees do you have now?

Nick Hofmeister:   We are at 30 employees in Colorado and California.

Ed Milewski:  Really? Really, wow, so that’s interesting.

Nick Hofmeister:   A little after, a little more than two years of operations in total. We started August 2016.

Ed Milewski:  And how many people did you have in August 2016, 3 or 4?

Nick Hofmeister:   Three.

Ed Milewski:  Wow. Well, that’s impressive. So you’re generating – you know what? A lot of companies in the cannabis space aren’t generating revenue right now. Maybe you can’t sell product until it becomes legal, and it’s not becoming legal till next week, but, yeah, interesting. So now I see you got a couple of relationships, here. Faith and Family Farms, maybe talk about that for a bit.

Nick Hofmeister:   Sure. Faith and Family Farms is a decades-long family farm in Salinas, California, so part of the central coast agricultural region, there, and we made a partnership with them, I guess about six months ago is when we announced it. And that partnership is to grow marijuana under their license in California. So it was a way for us to get started early in the California marijuana market and begin our expansion into what will be the most important marijuana market in the US.

Ed Milewski:  Right, right. Now tell me: I just want to be clear, because I’m not sure. Are you a Calgary company, or are you an American company?

Nick Hofmeister:   We’re an American company, so we’re actually based in Boulder, Colorado, or Lafayette, which is in between Boulder and Denver.

Ed Milewski:  Okay. Maybe I got confused, here. So you’re not tied to Calgary at all?

Nick Hofmeister:   No, not right now.

Ed Milewski:  I’m sorry, viewers, for making that mistake, and we’ve got that straightened out. So the other question was, and now it just escapes my pea-brain….now you’ve also partnered with Frinj Coffee in California?

Nick Hofmeister:   Yes, that was a really interesting partnership for us. So, Frinj Coffee is associated with a 30-year-old organic farm and breeding facility in Santa Barbara, California. And Frinj has spent the last 15 years developing new varietals of coffee that grow in non-traditional coffee-growing regions, so this would be areas like Southern California.

So they’ve opened up California to be a coffee-producing market, and that is an interesting thing in its own right, but it was also interesting that, through our connection with the University of California at Davis, we got introduced to them. We developed a tissue culture protocol and program, our Clean Stock program, for coffee, and so we’re now producing our first plants to be delivered to Frinj, under a contract that we signed with them earlier this year.

Ed Milewski:  And this is coffee, right? This has got nothing to do with cannabis, correct?

Nick Hofmeister:   Nothing to do with cannabis. It is coffee, as in, the thing you drink in the morning.

Ed Milewski:  Yeah. So you’re really – this is good, that you’re taking your technology and your expertise and you’re expanding it into markets that may be connected, may not be connected, but certainly –

Nick Hofmeister:   Yeah, it was very interesting for us because…

Ed Milewski:  Sorry, I keep losing this thing.

Nick Hofmeister:   Yeah, no worries. It was one of the first examples of translations that we saw from the cannabis industry to another part of agriculture. Normally you think of technology moving from the more developed pieces back to a new market, like cannabis, but we had a great article in Wired and partnered with Frinj to get that done, and it talked a lot about how this technology we’ve created for cannabis was now applicable to an existing market, a $100 billion commodity, like coffee.

Ed Milewski:  Yeah, wow. Well, like I like what I’m hearing, Nick. We’re going to leave it at that, but hopefully we can come back to you as you develop here. And maybe just one final thing: was the money raised in the US basically? Was this a – obviously it was a US thing, okay.

Nick Hofmeister:   Yep. It was a US capital raise, you bet.

Ed Milewski:  Okay, that’s it, ladies and gentlemen. Thank you so much for tuning in, and we’ll be broadcasting this very shortly.

Nick Hofmeister:   Thanks, thanks for having me on the show again. I appreciate it.

Ed Milewski:  Thanks a lot, Nick.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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