[Nick Hargrave]

I just had a call with Geoff Baker, a director of BSF, who was kind enough to take some time to provide some more colour on the business. He made a strong first impression – very thoughtful and with a clear understanding and awareness of shareholder value. Some key takeaways:

There is some frustration at the share price which has continued to struggle despite only good news coming from the company. They have identified a single trader who is focused on pushing the price down each time it rises, selling in 10k, 20k, 50k blocks. Unfortunately this is a factor of the market we are currently in where there is limited liquidity with a supportive, long-term shareholder base and nervous investors where such traders are able to make a living from this activity. The difference is, this is the first time in a long time I have spoken to a director of an AIM listed company who has done the work to look into the trading activity and identify the driver of the share price.

In layman’s terms, cultivated meat requires animal cells to be added to media and grown in a bio reactor. Media is a ‘soup’ which is 80% water/salt and then a variety of growth agents. Historically, media was a blood product and so cultivated meat couldn’t be described as animal free. Th cost of media has been the constraint in the cultivated meat industry as it used to cost £200 per litre so it was difficult to achieve price parity with traditionally produced meat. BSF’s product, City-Mix, is a serum free additive to the media which adds structure to the cells and allows the media to be much cheaper. The company is able to produce 1,000s of litres at its lab in Newcastle to supply demand for cultivated meat as it is added at a 25-40x concentration ratio to media. Should there be a significant increase in demand from bio-pharma companies, for example, the company would look to license out production. The recent EU grant foe EUR612,000 is for the development of a complete media, not just the CityMix additive.

Given cultivated meat companies are currently struggling, the company has been pivoting more to bio-pharma where there is potentially significant demand as highlighted in the company’s September strategic update. There are also ongoing trials of the company’s skin for leather product. They have previously announced they are working with a large, European fashion house on producing cultivated leather. BSF produces the skin which goes to the tanners to produce leather. The company has been suppling test samples of about the size of a mobile phone and 1mm thick which the fashion house have apparently described as remarkable. These sound like small samples but apparently there is no technical barrier to producing the larger skins required for handbags etc, but right now the product is being tested for tensile strength and the result of hole punching etc. The company is in discussion with a small number of other fashion brands. It is likely that these brands would want to form a JV with BSF so that they can manufacturer skins themselves as BSF clearly doesn’t want to provide an exclusive licence to any one customer.

Current funding provides a 2 year runway for the business as is. BSF’s remit is to acquire additional companies beyond 3DBT which would need ad hoc financing, but the company is does not currently need to go the market and is cognisant of not diluting shareholders at low prices, so would look to creatively structure financing for additional deals.

In summary, a very useful call providing comfort on the prospects and governance of the business. AS the company develops we will look to ‘graduate’ the idea to the Early Bird Radar with a full memo

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