Single Biggest Machine Purchase Order Received by EnWave Corporation
The cannabis sector is evolving into one of the fastest growth channels for new Radiant Energy Vacuum (REV) machine sales. The application to use REV technology as an efficient method to dry cannabis is an important advantage ensuring rapid and uniform processing, at much lower temperatures than possible through other methods.
REV processing also enables greater control over how much moisture is removed from the plants. Ideally, about 10% moisture content is preferred for the smokeable cannabis, while those plants that will be further processed for extractions and CBD oil are further dried down to 1% moisture content. This precise level of control is a material advantage inherent with the REV process that saves cannabis and hemp producers lots of time and money. Ever more parties involved in these industries realize that the REV technology is key to stay competitive in this evolving market place.
This week EnWave Corporation (CA:ENW – $1.84 & US:NWVCF – $1.37 & GER:E4U – €1.20) reported the most significant sales agreement in the history of the Company. The Green Organic Dutchmen Holdings Ltd. (TGOD), an international cannabis producer with operations in several Canadian provinces, has expanded its relationship with EnWave, ordering an additional three 120kW REV machines. Recall that TGOD completed its initial REV purchase in January of this year, with an order for a mid-size 60kW processing unit.
The order from TGOD also includes additional custom features including transport belts to assist with continual product feed to each unit. The machines will also be equipped with robotic arms to unload trays of dried cannabis after processing, empty them, and place them back on the belt.
Benefits Derived from REV Processing Create Greater Efficiency for Cannabis Producers
Among the many appealing aspects to this transaction, the total purchase price is estimated to be in the range of $6.5 million for the new REV machines. This one sale represents a higher total in REV unit sales than was reported by EnWave in all of 2018. Considering that the year is still in the early stages, the potential to achieve a breakthrough in net sales for 2019 that is a multiple of any prior year is a very real possibility.
Perhaps of even greater importance is that with this subsequent high magnitude sales order TGOD is making a strong statement in the confidence they have in their relationship with EnWave. As a major international player in the cannabis sector this is a tremendous validation for the technology and the transaction is likely to prompt other cannabis producers to initiate discussions with EnWave for sales and licensing opportunities.
The license and royalty agreement with TGOD is part of the collaboration with another significant international cannabis producer Tilray, Inc. EnWave and Tilray have agreed to share the royalty income related to this transaction as part of a prior commitment between the two companies. The relationship may yet be expanded with other cannabis producers under similar terms.
As the largest transaction so far for REV machine purchases, TGOD is demonstrating the effectiveness of this technology advantage as an essential part of its commitment to produce the highest quality cannabis products. This is establishing REV machines as the ‘gold standard’ of processing options to which other cannabis producers will seek to emulate.
In addition, TGOD is building a high capacity cultivation business in Canada, and will also be active in Jamaica and European markets. Many other jurisdictions and countries are expected to legalize cannabis consumption in the near future, opening additional potential markets where demand for new REV units may also arise.
The importance of this milestone achievement with the largest single sale transaction yet for EnWave is perhaps best illustrated by the fact that the combined order demand for the Company is now filling up the fabrication schedule. As more order flow is secured, the potential for the manufacturing to become fully booked is a possibility, and this is a good problem to have. Once operating in the field, each of these machines will be under royalty agreements and this presents the desired outcome for stable royalty revenues to continue increasing on the back end of the sales transactions. Smallcaps Recommendation: BUY.
|For important disclosures, please read our disclaimer.||Latest Company Report (pdf)|