Second Quarter Financials Confirm EnWave on Right Path to Success

EnWave Corporation (TSXV:ENW – $1.39 CAD & OTC:NWVCF – $1.06 USD & Frankfurt:E4U – €0.89), which offers industrial-scale dehydration technologies for food, pharmaceutical, and cannabis companies, reported consolidated revenues of $4.17 million for its second quarter of fiscal year 2018, ended March 31, 2018, compared with $4.18 million in the same period last year.

The Company’s most important achievement during the quarter was the acquisition of the 49% non-controlling interest in NutraDried LLP, bringing the Company’s ownership to 100%. NutraDried, which manufactures and distributes Moon Cheese, an crunchy cheese snack made using EnWave’s REV drying technology, reported $716,000 in net income for fiscal year 2017, and $1,086,000 for the first half of 2018.

These were the highest ever single quarter sales for Moon Cheese. The strong increase was partly due to several substantial orders from Costco’s Midwest, Northwest and Southeast divisions for club format Moon Cheese.

On the basis of annualized fiscal 2018 net income, the Company paid a purchase multiple of only 2.1x net income to acquire the 49% non-controlling interest. A very attractive deal indeed!

The acquisition of the non-controlling interest in NutraDried also allows the Company to pursue additional commercial opportunities using the installed 100kW nutraREV dryer, as well as enhance the ability for EnWave to use NutraDried’s processing capabilities as a showcase to prospective royalty partners.

Despite the strong Moon Cheese sales, EnWave reported a net loss of approximately $519,000 for the second quarter of 2018. This compares to a net loss of $779,000 in the second quarter of 2017. All in all, an improvement of about $260,000 compared with last year.

Moreover, the Company continued to be cash flow positive with cash flow from operations of $319,000 for the first two quarters of 2018, compared to a negative cash flow of $46,000 for the first two quarters of 2017.

Business wise, strong progress continues to be made. EnWave has been growing its prospective royalty partner pipeline as it commercializes REV across the food, legalized cannabis and pharmaceutical sectors.

In the second quarter, EnWave signed a new royalty-bearing commercial license agreement with Nomad Nutrition, and continued to expand its royalty partnership and machine sales pipeline through joint produce development projects under Technology Evaluation and License Option Agreements (TELOAs) with prospective partner companies in multiple verticals. Even during the past few days several more agreements were announced.

New and Expanding Agreements

Earlier this week, EnWave signed a second equipment purchase agreement with an unnamed existing licensed royalty partner.

Because the leading American food company is experiencing increasing market demand for its REV-dried snack products, it has purchased a second small commercial-scale Radiant Energy Vacuum (REV) machine to increase processing capacity.

In addition, EnWave has expanded its commercial relationships with Nanuva Ingredients of Chile. Nanuva has positioned itself as a leading provider of 100% natural (with no additives) dried fruits with colours, shapes, flavors and nutrients very similar to those of fresh fruit.

EnWave expanded Nanuva’s commercial royalty-bearing license to include beetroot, carrot, goldenberries, jerusalem artichoke, sweet potato, pumpkin, mandarin, orange, kiwi, mango, kale, tomato, banana, avocado powders and cranberries, to be produced in Chile on a non-exclusive basis. The additional products were added to Nanuva’s licensed product portfolio due to tangible commercial demand for these new and innovative products.

Nanuva currently operates three small commercial-scale REV machines and is working to build demand in 2018 to justify the acquisition of a 60kW continuous REV installation.

Moreover, EnWave signed a non-exclusive commercial royalty-bearing license with Dominant Slice, granting Dominant Slice the right to use its existing REV machinery to produce pineapple, mango, banana, coconut and papaya fruit pieces in Portugal. Dominant Slice already has a REV-dried cheese product, coined B!t Cheese, on the market in Europe.

For these new tropical fruit products, Dominant Slice is subject to minimum royalty payments to EnWave. Dominant Slice will retain the aforementioned non-exclusive right so long as the minimum royalty payments are made to the Company.

Also in Europe, EnWave has signed a TELOA with a food processing company based in a Nordic country to develop several dairy, vegetable, meat and seafood products using the REV dehydration technology.

The Partner and EnWave signed the TELOA after several successful product development sessions conducted at the Company’s pilot plant facility in Vancouver, Canada. The Partner will now focus on the refinement of selected product applications and evaluate their commercial viability in both the Nordic market and abroad. The TELOA grants the Partner a six-month exclusive term to evaluate REV technology and potentially license its use in the Nordic country.

Second 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. NutraDried, on the other hand, sells Moon Cheese into retail and wholesale distribution channels.

Three Months Ended
March 31
Six Months Ended
March 31
Amounts in $000’s
Net Sales
Direct Costs
Net Income (Loss)
Earnings (Loss) Per Share
Selected income statement data for the quarters and six months ended March 31, 2018 and March 31, 2017. Source: Company Filing

EnWave Canada had revenue of $1.77 million for the three months ended March 31, 2018 compared to $2.84 million for the three months ended March 31, 2017, a decrease of $1.07 million. Although during the second quarter of 2018, REV machines were sold to Tilray, Pitalia, Van Dyk, and Nomad Nutrition, EnWave didn’t reach the amount of sales that it did in the second quarter of last year. The revenue decline in the second quarter was also reflected in the six months sales numbers. Revenue for the six months ended March 31, 2018 reached $3.89 million, a decrease of $1.10 million compared to revenue of $4.99 million for the six months ended March 31, 2017.

EnWave Canada earned royalties of $118,000 during the three months ended March 31, 2018 as compared to $77,000 for the three months ended March 31, 2017 a growth of 53%. During the six months ended March 31, 2018, EnWave Canada earned royalties of $321,000 as compared to $199,000 for the six months ended March 31, 2017 a substantial increase of 61%.

The increase in royalties is very important. First of all, it indicates that a growing number of EnWave’s clients are selling larger quantities of REV dried products. Moreover, the rise is also important because these revenues go straight to the bottom line. Royalties are expected to continue to go up in 2018 and beyond as new license agreements are signed and additional REV machinery comes online.

Revenues from NutraDried were $2.40 million for the three months ended March 31, 2018 as compared to $1.34 million for the three months ended March 31, 2017. For the six months ended March 31, 2018, NutraDried generated revenues of $4.80 million, as compared to $2.66 million for the six months ended March 31, 2017. The increase in revenue was due to NutraDried filling orders for Costco, as well as increased sales volumes to other retailers.

NutraDried reported net income of $668,000 in the second quarter of 2018 as compared to net income of $92,000 in the second quarter of 2017, an impressive increase of $576,000 or 626% !

Also interesting to know is that EnWave achieved a gross profit of $1.29 million in the second quarter of 2018, compared with $1.03 million in the same quarter of 2017 an increase of $267,000. Gross margin as a percentage of revenue was 31% for Q2 2018 compared to 25% for Q2 2017.

Amounts in $000’s
March 31, 2018
March 31, 2017
Cash and Cash Equivalents
Restricted Cash
Trade 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
Selected balance sheet data for the periods ended March 31, 2018 and March 31, 2017. Source: Company Filing

A couple of items stand out on the balance sheet. First, on March 31, 2018 the cash and cash equivalents number was $7.48 million compared to $1.32 million on March 31, 2017 an increase of $6.16 million. The rise is primarily due to the equity financing of almost $9 million in November 2017. In February 2018, the Company spent $2.28 million to acquire the 49% non-controlling interest in NutraDried. The Company had net cash outflows from operating activities of $77,000 for the first two quarters of 2018.

Inventory as at March 31, 2018 included completed machines and machine components of EnWave Canada of $3.19 million. The increase compared to last year is also due to EnWave repurchasing a 100kW nutraREV machine from Hormel Foods.


EnWave is increasing its worldwide presence in the food, pharmaceutical, and rapidly growing legalized cannabis sectors. These continued efforts are starting to show more and more in the Company’s financials. EnWave is now cash flow positive and is working diligently to also become net profitable.

NutraDried has become a highly profitable subsidiary of the Company, and also royalty income is growing steadily.

We expect to see several more agreements and machine purchase orders in 2018, which will contribute to EnWave shareholder success. Recommendation: BUY.

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

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