EnWave Corp: Outlook Turns Bullish on Agreements With Cannabis Giants

Enwave Corp Cannabis Stock Up 81% in 2019, Outlook Remains Bullish
iStock.com/babyrhino

EnWave Corp Increases Presence in Cannabis Sector

EnWave Corp (OTCMKTS:NWVCF, CVE:ENW) is an under-the-radar marijuana stock that has been bucking the broader industry’s downward trajectory, with EnWave stock advancing 81% in 2019 thanks to a number of significant accomplishments.

EnWave Corp may be best known for its subsidiary NutraDried Food Company LLC, responsible for the popular “Moon Cheese” snacks.

Nevertheless, EnWave’s influence in the cannabis industry has been expanding rapidly, highlighting the company’s massive long-term growth potential.

NWVCF Stock Overview

EnWave Corp has developed an innovative process to dehydrate organic materials faster than anyone else on the planet. This has been a boon for the snack industry and it will be revolutionary for the cannabis industry.

Advertisement

EnWave’s disruptive technology, called “Radiant Energy Vacuum” (REV), allows producers to quickly and uniformly dry organic materials, shortening the time from harvest to shelf. (Source: “Investor Presentation August 2019,” EnWave Corp., last accessed September 11, 2019.)

The company’s low-cost REV technology is far superior to the most popular methods used today, air drying and freeze-drying. Thanks to control and consistency, using EnWave’s technology can cut the drying process from days to hours.

As a result, the company has a big presence in the food and pharmaceutical sectors and has been making major inroads in the cannabis industry.

EnWave generates revenue by securing royalty streams through the licensing of its technology, which is based on a percentage of sales or units produced. The company also makes money when it sells and installs its machines.

As mentioned earlier, EnWave also owns NutraDried Food Company, which sells all-natural cheese snacks under the Moon Cheese brand. They can be found in over 25,000 points of sale, including major chains.

NWVCF Stock Information
Market Cap $185.8 Million
52-Week Change 81.5%
52-Week High $2.10
52-Week Low $0.92
Shares Outstanding 110.5 Million
Float 108.6 Million
50-Day Moving Average $1.75
200-Day Moving Average $1.65

(Source: “EnWave Corp (NWVCF),” Yahoo! Finance, last accessed September 12, 2019.)

Recent Contracts

EnWave recently installed the first commercial-scale REV machine for cannabis processing in Canada. It installed a 60kW REV machine at Tilray Inc’s (NASDAQ:TLRY) facility in Ontario. (Source: “EnWave Announces 2019 Third Quarter Consolidated Interim Financial Results,”EnWave Corp, August 29, 2019.)

On April 10, EnWave confirmed a commercial license agreement with Fresh Business Consulting for a machine to produce dried fruit and vegetables in Peru. (Source: “Enwave Signs Commercial License Agreement With Fresh Business Consulting and Receives Purchase Order For REV Machinery,” EnWave Corp, April 10, 2019.)

On April 26, EnWave announced that it had signed two royalty-bearing agreements with Aurora Cannabis Inc (NYSE:ACB). (Source: “Aurora Cannabis and EnWave Corporation Enter Global Licensing Arrangements” Cision, April 26, 2019.)

Aurora will use EnWave’s REV technology for processing cannabis in Canada, the European Union, and South America. EnWave and Aurora also signed an intellectual property agreement for joint development projects.

On May 13, EnWave announced that it had signed a royalty-bearing agreement with Calbee Inc. (OTCMKTS:CBCFF, TYO:2229), one of the largest snack companies in Japan. Calbee will purchase a 10kW REV machine. (Source: “Enwave Signs Commercial License And Equipment Purchase Agreement With Calbee Inc.” EnWave Corp, May 13, 2019.)

On July 25, EnWave announced it had signed a royalty-bearing commercial license with Electric Farms. Electric Farms cultivates hemp flower at indoor and outdoor facilities in Tennessee. (Source: “EnWave Signs First Royalty-Bearing License For Drying Industrial Hemp In The United States With Electric Farms LLC,” EnWave Corp, July 25, 2019.)

This agreement marks the first use of EnWave’s REV technology for drying industrial hemp in the U.S., and it establishes a foothold for future expansion for drying smokable hemp and other hemp-derived products.

On August 30, EnWave announced that it had signed a royalty-bearing commercial license with Glasshouse Botanics Inc. The privately owned Glasshouse cultivates medical marijuana at its facility in Ontario. (Source: “EnWave Signs Royalty-Bearing License For Drying Cannabis In Canada With Glasshouse Botanics,” EnWave Corp, August 30, 2019.)

Under the terms of the agreement, Glasshouse will pay EnWave royalties tied to the weight of finished dried marijuana using EnWave’s REV machine. Glasshouse recently received its cultivation license from Health Canada, with the first 43,000 square feet of its planned 520,000-square-foot greenhouse constructed.

Record Q3 Revenue

On August 29, EnWave announced its financial results for the third quarter ended June 30, 2019. Third-quarter revenue increased 49% year-over-year to CA$10.0 million. Year-to-date revenue advanced 72% to almost CA$26.7 million. (Source: EnWave Corp, August 29, 2019, op cit.)

The revenue growth was fueled by increased orders for REV equipment by cannabis companies, and ongoing growth in Moon Cheese.

The company continued to be cash-flow-positive, with adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of CA$139,000. In the third quarter of last year, adjusted EBITDA came in at CA$1.3 million. On a year-to-date basis, adjusted EBITDA increased 41% to CA$2.3 million.

The consolidated net loss for the third quarter after taxes was CA$1.3 million, compared to a net loss of $104,000 in the third quarter of 2018. The consolidated net loss for the first three quarters of 2019 was CA$1.5 million, versus a net loss of CA$1.0 million in the same period last year.

Almost half of the loss in the quarter as a result of restructuring charges (CA$612,000) related to reorganizing the sales and marketing functions at NutraDried.

Analyst Take

EnWave Corp is a small company making major headway in the U.S. and Canadian marijuana industry. Most of its revenue continues to come from its NutraDried snack business though.

The company’s small profile means it has taken a back seat to larger cannabis players, but that is changing. Back in June, EnWave stock was added to the Horizons Marijuana Life Science Index ETF (OTCMKTS:HMLSF, TSE:HMMJ), and in August it was added to The Cannabis ETF (NYSEARCA:THCX). That will increase the company’s exposure in the U.S. stock market.

All this suggests that NWVCF stock’s short- and long-term outlook remains exceptionally bullish.