Existing Royalty Partner of EnWave Corp Takes on New Dimension
One of the very strong aspects of EnWave Corp’s (CA:ENW – $1.44 & US:NWVCF – $1.09 & GER:E4U – €0.92) business model is that its Radiant Energy Vacuum (REV) technology has a very diverse range of applications. As such, EnWave has partnerships with companies that are active in the cheese, meat, fish, fruit, yoghurt, vegetable, cannabis, and pharmaceutical industries.
One partner that has been processing and distributing products using EnWave’s REV technology is Your Wasabi Farms Ltd (YWF). Located in British Columbia, this firm is a case study demonstrating the untapped potential for REV development. YWF originally started using the REV technology to produce dried wasabi, which it could include in health supplements. Wasabi Farms purchased of a 20kW REV machine in June 2016.
Thereafter YWF established two distribution agreements, one for natural health products and the other one for topical creams. Through its license agreement, Wasabi Farms has been paying royalties to EnWave from the recurring sales of these products.
Demand Growth for Cannabis Processing Using REV Technology
Fast forward then to the initiative with Tilray that gained momentum in 2018, as REV processing was determined to be a superior method for processing cannabis plants. Tilray was eventually granted exclusivity within Canada for the use of the technology related to cannabis processing, and this included the rights to enter into sub-license agreements with other companies on a shared revenue basis with EnWave.
This week, EnWave reported that a sub-license agreement has been signed with YWF, to enable the partner to begin processing hemp with its REV equipment on a toll-processing basis on behalf of third-party suppliers.
It should be noted that the license currently granted to YWF is for the processing of hemp only, which is a species of the Cannabis plant. Hemp has many industrial uses derived from fibers of the plant and is also increasingly becoming important for medicinal applications. While hemp itself is legal to cultivate and process, marijuana plants are still regulated and production of these plants in Canada requires a license.
As the legal consumption of marijuana grows in Canada, increasing demand will likely encourage more cultivation operations and larger crop yields. This in turn may lead to greater utilization of REV processing to cure and dry cannabis plants. There is the possibility that YWF may apply for regulatory approval to begin processing marijuana plants, and thereafter reach an amended deal to expand the license agreement with Tilray to include this option under a royalty structure.
Versatility of REV Machines Demonstrated by Multiple Commercial Applications
The strength of this latest agreement with YWF is that it enables a royalty partner to earn further revenue operating the REV machine to process hemp during periods when the wasabi processing is not active. This option to diversify the output from one REV machine serves to build more efficient operations and increased production for YWF. The combined production output will also contribute to higher royalty revenues payable to EnWave. YWF may opt to purchase an additional REV machine if its toll processing business grows to warrant investing in additional capacity and this too would contribute even further growth in royalty payments.
The expansion for REV processing in the cannabis sector is still at an early stage. It is expected however that Tilray will endeavor to establish more sub-license agreements in Canada, and EnWave is working to create new partnerships overseas. Management is very bullish that additional cannabis processing agreements will be achieved during the remainder of 2019 and beyond.
Nearly every month there is another significant event reported by EnWave that builds the prospect for increased revenue generation. New uses for REV technology are being developed, and new partners are stepping up to utilize the technology in the production of an astonishing array of products. This expansion is ongoing to reach international markets, and in a diverse range of sectors.
With so many active partnerships in place generating royalty income for the Company, and many more in testing and development, the rollout of REV technology is capable of delivering exponentially revenue growth.
With the proven effectiveness of its business model, and the potential for much further growth to be realized as the rollout continues for REV processing technology, the market value for this Company can only head much higher. Smallcaps recommendation: BUY.
|Smallcaps.us Advice: Buy||Price Target: $3.88||Latest Company Report (pdf)|
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