EnWave’s 30% Revenue Growth in First Quarter Sets Stage for Outstanding 2018

EnWave Corporation (TSXV:ENW – $1.05 & OTC:NWVCF – $0.85 & Frankfurt:E4U – €0.70), reported consolidated revenues of $4.52 million for its first quarter of fiscal year 2018, ended December 31, 2017, compared to $3.47 million in the same period last year, an impressive 30% increase.

This solid result can mainly be attributed to increased Moon Cheese sales by EnWave’s subsidiary NutraDried, which secured a substantial order from Costco in Q1.

The Company also continues to be cash flow positive with cash flow from operations of $315,000 for the first quarter of 2018 compared to a negative cash flow of $112,000 in the same quarter last year.

In addition, since the start of fiscal year 2018, the Company has signed three royalty-bearing agreements, entered into three Technology Evaluation And License Option Agreements (TELOAs), received very promising feedback from ongoing research at the US Army Natick R&D Center, and secured additional Moon Cheese orders from Costco where the cheese snack is doing very well.

Since October 1st, 2017, EnWave achieved the following milestones:

Signed a royalty-bearing license agreement with Tilray, a major Canadian medical cannabis licensed producer. The license grants Tilray the exclusive right to use and sub-license the Company’s dehydration technology to dry and decontaminate cannabis in Canada.
Signed a royalty-bearing license with Howe Foods, the second largest producer of bananas in Australia. Howe Foods purchased a small-scale 10kW REV machine to initiate commercial production.
Signed a royalty-bearing license with AvoLov LLC (formerly AvoChips LLC) a U.S. based snack company to produce a new, and innovative avocado snack product. AvoLov purchased a 10kW small-scale machine to initiate commercial production.
• Achieved a series of positive product development results in partnership with the US Army Natick Soldier R&D Center as part of an ongoing project to create superior, phytonutrient-rich field rations for soldiers in the field.
Signed a TELOA with Hampton Farms, a major American peanut and tree nut processor and manufacturer.
Signed a TELOA with Seven Seas Fish Company Limited, a leading Canadian seafood manufacturer and international distributor.
Signed a TELOA with Calbee Incorporated, the largest snack food manufacturer in Japan. Calbee will evaluate the use of EnWave’s technology at its facilities in Japan using labscale REV machinery.

Currently, EnWave has 13 active TELOAs and two active R&D projects with prospective licensees evaluating the use of REV for applications in the dairy, seafood, spice & herb, fruit products, vegetable products, and meat products verticals. Several of the active agreements are with major international processing companies.

The strategy under these arrangements is to co-develop product applications using the technology for specific partner opportunities and to ultimately convert them into commercial licenses. EnWave earns revenue under TELOAs from short-term REV machine rentals as well as fees for access to its R&D facilities and product development expertise. EnWave’s food scientists and engineers work with the prospective license company during the TELOA phase of the sales cycle to formulate and optimize innovative products using REV, and develop a path towards commercialization.

First Quarter Financials and Balance Sheet

EnWave generates revenue from two business segments: EnWave Canada and NutraDried. EnWave Canada sells REV machinery to royalty partners, rents REV units to prospective royalty partners, and earns royalties from customers that sell REV dried products. (Royalties are payable to EnWave as a percentage of the value of products sold or based on the number of units produced by its royalty partners). NutraDried, on the other hand, sells Moon Cheese snacks into retail and wholesale distribution channels.

Three Months Ended
December 31
Amounts in $000’s
Net Sales
Direct Costs
Net Income (Loss)
Earnings (Loss) Per Share
Most important income statement data for the quarters ended December 31, 2017 and December 31, 2016. Source: Company Filing

EnWave Canada achieved revenue of $2.12 million for the three months ended December 31, 2017 which is about even to revenue of $2.15 million for the three months ended December 31, 2016. The small decrease in revenue is due to timing and volume of commercial machinery sales. During the first quarter of 2018, revenue was generated from commercial equipment sale contracts with Tilray with the purchase of a 10kW and 60kW units, Pitalia from the purchase of a 100kW unit, Van Dyk with the purchase of a 60kW unit, and Howe Farming, AvoLov and Bare Foods purchasing 10kW units.

In addition, EnWave Canada earned royalties of $203,000 during the three months ended December 31, 2017 compared to $122,000 for the three months ended December 31, 2016, a strong rise of 66%. The Company expects royalties to continue to grow as new license agreements are signed and additional REV machines are deployed.

EnWave Canada reported a net loss of $813,000 for the first quarter of fiscal year 2018, while it had a net loss of $744,000 in the comparable period last year.

NutraDried, on the other hand, reported revenue of $2.40 million in the first quarter of 2018 compared to $1.32 million in the first quarter of 2017, an increase of $1.08 million, or 81%. The increase was due to NutraDried securing an initial order from Costco’s Midwest division.

In addition, NutraDried reported a net income of $416,000 in the first quarter of 2018 compared to $126,000 in the same period of fiscal 2017, an increase of 230%. NutraDried’s success solidifies the business case for using REV to create profitable consumer products.

Amounts in $000’s
December 31, 2017
December 31, 2016
Cash and Cash Equivalents
Restricted Cash
Accounts Receivable
Due from Customers on Contract
Total Current Assets
Property and Equipment
Intangible Assets
Total Assets
Accounts Payable
Total Current Liabilities
Long Term Debt
Total Liabilities
Total Stockholder Equity
Most important balance sheet data for the periods ending December 31, 2017 and December 31, 2016. Source: Company Filing

Most notable on the balance sheet, is the major difference in cash and cash equivalents. On November 15, 2017, the Company completed a prospectus offering prospectus offering and concurrent private placement of 9,530,000 Units of the Company at $1.05 each for combined gross proceeds of $10 million. As of December 31, 2017 the Company had not used the proceeds from the equity financing.

EnWave Acquires Remaining 49% Interest in NutraDried

Earlier this week, EnWave acquired the 49% non-controlling interest in NutraDried LLP, bringing the Company’s ownership to 100%. The 49% was sold by NutraDried Creations for US $1,800,000 (CAD $2,266,000), which was paid out of treasury.

NutraDried has been the most profitable business unit for the Company. Fiscal 2017 net income was $716,000 and revenues were $6,556,000. Based on the $2,266,000 purchase price for the 49%, the purchase price multiples were 6.5 times income and 0.7 times revenues.

The acquisition of the non-controlling interest in NutraDried will enhance the ability for EnWave to use NutraDried’s processing capabilities as a showcase to prospective royalty partner companies. To date, EnWave has leveraged the success of NutraDried’s Moon Cheese product to attract eight other companies to sign royalty-bearing commercial license agreements for cheese snack production internationally. We will provide an updated overview of these eight partners in our upcoming Q1 Research Report.

Moreover, now that EnWave has full control over NutraDried, additional commercial opportunities using NutraDried’s installed 100kW nutraREV processing line will rapidly be pursued. In a few of months NutraDried will launch a couple of Moon Cheese extension products coined “Moon Cheese Mixems”. For example, different types of cheese will be dried and mixed with a dehydrated tomato. In addition a Moon Cheese salad topper will be launched as an alternative o croutons. These will be distributed through the existing Moon Cheese channels.

NutraDried produces Moon Cheese in cheddar, gouda, mozzarella and pepper jack flavours at its manufacturing facility in Ferndale, Washington, and distributes it in over 20,000 retail locations across Canada and the United States. During the past quarter NutraDried again added several new retailers for distribution of Moon Cheese in the United States and Canada. Notable retail points of distribution include Starbucks, Target, Rite Aid, CVS, Safeway, Loblaws, Save-On-Foods, and most recently, Costco’s Midwest division.

Sales at Costco are going well. NutraDried received additional orders from the Costco Midwest division, and there’s interest from other divisions as well to take the product on. Note that because this is still a rotational item at Costco, there’s no guarantee for longer term distribution yet.

EnWave expects NutraDried to continue contributing positive earnings, revenue growth and cash flow for the Company. NutraDried’s revenues have been increasing each year, reporting $6,556,000 for fiscal year 2017, up 30 times in three years from $221,000 in 2014, its first year of operations.

EnWave Featured in BTV Cannabis Special

Finally, EnWave’s disruptive dehydration technology was featured in a cannabis special on BTV-Business Television (see video starting at 6:45). The half hour episode will also be aired on BNN this weekend.


With strong sales growth and a positive cash flow, EnWave has clearly set the stage for an outstanding 2018.

NutraDried’s business performance strengthened significantly in fiscal year 2017, and through the first quarter of 2018. We believe that by obtaining 100% equity ownership the Company will be able to further drive growth in the revenue and profitability from Moon Cheese sales. The Company is targeting to reach sales of over $10 million in Moon Cheese alone during 2018.

In addition, NutraDried continues to serve the Company as a showcase of the capability of large-scale commercial REV machinery to current and potential royalty partners.

We also expect to see several agreements and orders from the cannabis space in 2018, along with continued positive developments from ongoing research at the US Army Natick R&D Center. Recommendation BUY.

For important disclosures, please read our disclaimer.Latest Company Report (pdf)

Leave a Reply

Your email address will not be published.