Dear Subscriber,
The rapid expansion of commercial markets for Radiant Energy Vacuum (“REV™”) technology in 2013 has created momentum for EnWave, helping the company to begin building a foundation for long term revenue growth potential. Since late last year we have expanded commercial opportunities from a few specific berry products to five major categories. While all of these markets have not been firmly established, EnWave has confirmed significant commercial interest by signing three commercial licenses; the first with Hormel Foods Corporation, a multinational manufacturer and marketer of consumer-branded food and meat products; a second with NutraDried LLP, who will focus on the development, marketing and production of 100% natural, low-carbohydrate, gluten-free, high-protein dried cheese products for the snacking industry in the United States of America; and a third with a major North American enzyme producer, who will be receiving up to two commercial-scale powderREV™ machines for the dehydration of several food-related enzymes. EnWave also amended a fourth commercial license with Milne Fruit Products to expand their licensed product categories in the fruit and vegetable areas. Moreover, the genuine commercial interest from additional collaborators is very encouraging.
EnWave’s main focus throughout the remainder of 2013 will continue to be the increased commercialization of its REV™ technology and continued expansion of selective collaboration opportunities for current and new product categories. In order to increase EnWave’s global market position and commercial turn-key plant delivery capabilities, late last year the Company completed the acquisition of Hans Binder Maschinenbau GmbH (“Binder”), a qualified and experienced machine builder with operations in Marzling, Germany (30 kilometers north of Munich).
Building a Foundation for Potential Revenue Growth
EnWave’s business model has evolved over the past year. Revenues will now be generated through three distinct channels; royalty revenue relating to signed commercial licenses, machine building revenue from the consolidation of Binder’s financials and revenue from the sales generated by NutraDried LLP, a joint partnership with Lucid Capital Management. That being said, the Company’s efforts will continue to center on the growth of royalty revenue from Tier 1 and Tier 2 licensed partners. In order to grow royalty revenue, a consistent pipeline of new collaborations, commercial licenses, machine orders and installations needs to exist. This year alone, EnWave has signed three additional commercial licenses to bring the total to five, which address five distinct market opportunities:
1) Dehydrated & Low-Moisture Meat Products 2) Cheese Snack Products
3) Food Enzymes
4) Dehydrated & Low-Moisture Fruit Pieces & Powders 5) Dehydrated & Low Moisture Vegetable Pieces & Powders
EnWave’s goal is to continue addressing new commercial market opportunities to compliment these initial five and ultimately secure multiple machine orders from commercial licensees in each of these sectors from customers in diverse global regions over the next year and beyond.
Dehydrated & Low-Moisture Meat Products
The commercial license signed with Hormel Foods Corporation was a major milestone for EnWave as it validates the royalty revenue business model with a Tier 1 company and provides evidence of the value that REV™ technology creates including great flavor, high nutritional retention, attractive product appearance and affordable economics. Under the License, EnWave and Hormel Foods have agreed to long-term royalty rates, broader global market rights and the use of EnWave’s nutraDRIED™ trademark on the retail packaging of their products. Hormel has developed and tested a number of attractive dried meat products since entering the collaboration with EnWave in November 2011 and are currently producing products on a large pilot scale nutraREV™ production unit. Subject to successful testing results, Hormel intends to make an initial commercial plant purchase order decision in the first half of 2014.
Since the Hormel announcement, several notable meat processing companies have shown significant interest in the potential use of REV™ technology as well. Dialogue continues with these companies and EnWave believes that there could be an opportunity to collaborate with several of these entities in the near future.
Cheese Snack Products
Cheese is a product area that has attracted a very strong amount of interest over the past year. Due to the fragmented nature of this market, EnWave has a very good opportunity to pursue commercial relationships with several major companies. REV™-dried cheese products could provide very healthy margins for commercial licensees, which was one of the key factors for EnWave participating in NutraDried LLP.
The commercial license signed by NutraDried LLP created both a new potential royalty revenue stream for EnWave as well as a completely new source of potential revenue via the sales generated from Moon Cheese™. Thus far, the development of the commercial plant in Blaine, U.S.A. has gone extremely well. The smaller commercial unit has been producing saleable product consistently since the end of July and the management of NutraDried LLP is confident that the company will be prepared for a soft-launch of Moon Cheese™ in the Pacific Northwest by late September. A larger-scale 100kW nutraREV™ machine should be available by early 2014, increasing the production capacity for a broader launch.
Additionally, EnWave announced a new collaboration for dried cheese snacks with NDH Retail B.V., a European-based company focused on the Dutch, Belgium, Ukrainian and Russian markets. Commercial decisions are expected by NDH in Q4 2013 providing a great opportunity to expand commercial royalty revenue opportunities relating directly to dried cheese production in these new geographic areas. EnWave is also currently in collaboration with Gay Lea Foods, a major Canadian dairy co-operative, to develop a number of unique dairy applications.
Food Enzymes
During the past few years, EnWave conducted extensive research and development to illustrate that powderREV™ has the capability of dehydrating a number of food specific enzymes more efficiently and less costly than conventional freeze drying, the current industry standard. That work successfully lead to the signing of a commercial royalty-bearing license with a major North American enzyme producer in April of this year. The licensee produces dehydrated enzymes for a number of established Tier 1 customers and after extensive testing of the powderREV™ technology decided to enter a commercial arrangement whereby EnWave will supply the powderREV™ equipment to their operating site and receive a premium royalty expected to generate an attractive return on capital in excess of 30% when the plant is fully utilized.
The first plant is scheduled for installation in the Fall of 2013. Once successfully installed, the plant is expected to undergo a verification process by the licensee and their key Tier 1 customers before being approved as a commercial operation. If the first plant is successfully approved, EnWave is committed to deliver a second plant in 2014 to meet expected growth and capacity requirements. Furthermore, EnWave will be allowed to use the plant as a showcase for several other major enzyme, probiotic, protein or pharmaceutical companies that are interested in more efficient dehydration alternatives. EnWave believes that there is excellent potential for REV™ technology in this large growing market based on the significant potential cost savings alone.
Dehydrated & Low-Moisture Fruit and Vegetable Pieces & Powders
Since their commercial plant start-up, Milne Fruit Products Inc. has developed, marketed and sold a number of their Microdried™ product lines to several notable companies. Originally licensing only blueberry, blackberry and raspberry products, Milne has expanded their commercial offerings throughout 2013 adding pomegranate, cherries, strawberries, carrots, peas and corn to their product mix. They are also now working on pineapple, banana and apple products for potential commercialization.
Below are several examples of commercially available products that use Microdried™ ingredients as highlighted at the recent food Institute of Food Technologists (“IFT”) exposition in Chicago:
In addition to Milne, EnWave continues to collaborate with several companies regarding dehydrated fruit and vegetables. Some of the more notable opportunities are with Bonduelle, Ocean Spray Cranberries, Nuvi Fruits SA, Cherry Central Cooperative and Sun Maid Growers of California.
Corporate Summary
As the commercialization of REV™ technology has grown, so has EnWave’s infrastructure. The Company has successfully centralized its research and development facilities by building a biomaterials lab next to the existing pilot plant and engineering facility in Delta, British Columbia. EnWave is also expanding the research and development capabilities of Binder by installing lab REV™ units to be used by European and Asian prospective partners in Germany. EnWave is actively conducting testing or is in collaboration with approximately 25 companies currently.
Despite the progress that EnWave has made over the past three quarters, the Company’s management is vigorously motivated to increase the commercialization of REV™ technology as we end 2013 and enter 2014. Currently there are several commercial license opportunities ongoing with both Tier 1 and Tier 2 collaborators that could lead to license and purchase decisions over the next two quarters. Continued commercialization will hopefully coincide with momentum in the capital markets to provide an opportunity for increased market capitalization.
If you have any questions relating to EnWave’s guidance or the company in general, please contact Brent Charleton, VP Corporate Affairs via phone at 778-378-9616 or email at [email protected]. Best regards,
Dr. Tim Durance Mr. John McNicol Chairman & Co-CEO President & Co-CEO EnWave Corporation EnWave Corporation
Safe Harbour for Forward-Looking Information Statements: This newsletter may contain forward looking information based on management's expectations, estimates and projections. All statements that
address expectations or projections about the future, including statements about the Company's strategy for growth, product development, market position, expected expenditures and financial results are forward-looking statements. These statements are not a guarantee of future performance and involve a number of risks, uncertainties and assumptions. There is no guarantee that the Company's REV™ technology can or will improve processes in the target industry; even if the Company's REV™ technology can be used as described in this document, there is no guarantee that such use will result in orders for
the Company's REV™ technology. All figures comparing REV™ technologies to freeze drying or other dehydration technologies are provided as examples of data obtained through the Company's own scientific and testing programs; each product must be tested individually to determine the benefits of using REV™.
