EnWave Corp (CVE:ENW)Secures Royalty Sublicense with The Green Organic Dutchman Holdings Ltd (TSE:TGOD)

EnWave Corp (CVE:ENW) (OTCMKTS:NWVCF) (FRA:E4U) CEO Brent Charleton is thrilled the company has secured a sublicense with the Green Organic Dutchman Holdings Ltd (TSE:TGOD) (OTCMKTS:TGODF) (FRA:01GA). This deal is EnWave’s second such license in the cannabis space, having previously licensed technology to industry giant Tilray Inc (NASDAQ:TLRY) (FRA:2HQ). EnWave licenses its vacuum microwave drying technology to clients in the food and cannabis industries and in return receives a 1-to-2 percent royalty per gram. EnWave’s radiant energy vacuum offers cannabis companies a 40 minute drying process, a dramatic decrease from tradition methods that required 4-to-6 day drying periods. The radiant energy vacuum does cause a slight reduction in terpenes but EnWave has addressed this problem by creating a terpene capture system, which is still subject to approval. EnWave’s technology is perfect for companies focusing on extraction and Charleton predicts 75-80% percent of its machines sales will be to cannabis and industrial hemp companies in 2019.

Transcript:

James West: I’ve got Brent Charleton joining me again. He’s the CEO of EnWave Corporation trading on the TSX Venture under the symbol ENW. Brent, welcome back.

Brent Charleton: Thanks so much.

James West: Yeah Brent. So give us an update what has changed for EnWave Corporation since we last chatted.

Brent Charleton: Since we last chatted we were successful in securing an additional sublicense to access our technology for drying cannabis what the green organic Dutchman. So they purchase a 60 kilowatt continuous line, which should be an operation by midpoint calendar year. This is our second license for technology. And I really look at it as being sort of the second domino pushed over hopefully for more dominoes to fall this fiscal year for us.

James West: Okay. So now you’re going to have industry data performance data and that should trigger some more sales.

Brent Charleton: Correct. Yeah. So, our collaboration with Tilray which was the first license that we had signed, they’ve collected apt quantitative data to share with the likes of TGOD and other prospects hoping to convert them into users of our technology.

The upside for Tilray is they hold the master license and there’s a non-disclosed share of royalties generated through the production and use of our radiant energy vacuum technology.

James West: Radiant energy vacuum technology. So take a layperson.

Brent Charleton: Yeah. Sorry. If you would the acronym there.

James West: No, I love it.

Brent Charleton: It’s a vacuum microwave. So essentially you apply vacuum lower the atmospheric pressure. Therefore you lower the boiling point of water and then you excite the water molecules through the introduction of microwave energy, which is very efficient at evenly or volumetrically removing moisture.

This is important because for combustible product obviously you want a higher moisture content than dried cannabis material that’s going to be used for extraction purposes. So that allows the user of our tech to be precise in their drawing and do it in less than 40 minutes.

James West: Hmm does the process of drawing what using this vacuum microwave technology. Does it have any negative effect on the flavor of the cannabis when you smoke it?

Brent Charleton: The terpene levels?

James West: Yeah.

Brent Charleton: Well, there’s loss in terpenes for any drying method. And when compared to the longer time period air drying rooms. There is a slight reduction in terpene being removed through the vapor that goes through a condensation systems. But we’ve created a solution for that. A terpene capture mechanism, which is going to take that fluid combination of the water and terpenes which then can be separated and prospectively as long as Health Canada approves this, added back into the original material.

James West: Oh okay, interesting. So does Tilray dry all of their cannabis using your system?

Brent Charleton: They do not currently as they have the machines on order the first we’ll go into their Enniskillen facility would be sometime in March April this year, and the second line that Tilray has purchased will go to their Portuguese facility this summer. The TGOD machine will be installed by June July of this year. So we have yet to have a commercial operating plant producing finished product. And obviously we’re looking forward to that happening.

James West: Sure. How does the ability to dry cannabis more quickly affect the economics for a licensed producer.

Brent Charleton: So there’s a couple value proposition points through using our technology. First is reduced footprint, so they can allocate more footprint for growing which is advantageous. Second is because of the quickness of the drying process being you know 40 minutes or less. They avoid the opportunity for blight and mold to take hold in certain crops that after being harvested which again will avoid those large costly write-offs potentially.

So those two value propositions plus what I mentioned to you in terms of controlling that end moisture in the final product are all important factors in creating significant value for the users Tilray and TGOD and hopefully more to come and justify paying the royalty back to EnWave on a program basis of call it one or two cents.

James West: Mmm. Well, that’s interesting. So then you said that the drying time using machine is 40 minutes?

Brent Charleton: Correct.

James West: What is a drawing time if they were just to hang it and let it dry naturally?

Brent Charleton: The data that we’ve been given by our partners is between four and six days typically it will take them.

James West: Right right that’s… so that’s ahh really speeding things up dramatically.

Brent Charleton: It is. So our technology is a slam-dunk for extracts a hundred like definitely. For as you mentioned the combustible product that is still I would say in the evolutionary process ensuring that we can still retain a level of terpene, which is attractive to to the user right?

James West: I see so the primary use of the machine until you introduce this terpene recapture technology is going to be for extract.

Brent Charleton: I believe so. I mean we’ve gotten feedback on for a few smoking panels and has been positive but from a scientist perspective if they see terpene reduction occurring than…

James West: Ahh smoking panels who are testing the marijuana.

Brent Charleton: Yeah. Well that’s what happens. Not me.

James West: Well, we’re about to start a smoking panel here every week.

Brent Charleton:  Oh interesting.

James West: Well, in fact, I ordered seven different packages of premium dried cannabis from the Ontario Canada store for our initial inaugural segments on…We’re going to sample seven brands of cannabis in a small panel and decide which one we like the best, which one has the best flavors, but we also have a machine that measures the CBD and terpene content and THC content.

So what dish what is the cost to I mean you say there’s one or two cents per gram royalty. What is the additional CapEx cost to any company that wants to adopt the technology.

Brent Charleton: Sure. There’s there’s two primary scales of machinery a 60 kilowatt machine which means nothing to laymen, it will do about 20 metric tons of finished product per year running eight hour shift five days a week do 20 days a year, obviously run double shift simple math times two.

The next scale up is a hundred 20 kilowatt unit which simplistic we 40 metric tons. And if you run two shifts 80 metric tons, so we’re looking at production facilities currently such as Tilray Enniskillen, you know, one 60 kilowatt will satisfy their current projected production.

James West: Right.

Brent Charleton: And the cost is 1 million for USD for the 60 kilowatt and about 1.6 million for the 120 kilowatt.

James West: Oh okay, and of that cost how much is margin for EnWave?

Brent Charleton: Uh…

James West: Is that something you don’t want to disclose?

Brent Charleton: Well, I won’t disclose it here. I certainly look at our financial statements but it’s modest, being that the primary goal of EnWave is to build out a diversified royalty portfolio. And build that to the point where the royalties cover all the overheads for our company and the excess fall to the bottom line. It can be dispersed as dividends into the future. For our shareholders.

James West: Okay, is this not a way of sole business?

Brent Charleton: It’s not. This is a market opportunity that we’ve seized.

James West: Right.

Brent Charleton: We were primarily focused in the food space, consumer packaged goods, food ingredients. At the beginning of the commercialization of this technology about four years ago and have had good success. We have caught 22 commercial royalty bearing licenses with food manufacturers, one deal with Merck Pharmaceuticals to dry vaccinations and two now in the Cannabis space. Having said that, understanding the need and interest in our technology 2019 I believe that up to 75 to 80% of our machine sales are likely to be in either the marijuana or in the industrial hemp vertical.

James West: Yeah. Sure. So what what competing technologies are there out there and how do they stack up in terms of CapEx, OpEx, energy consumption, etc.

Brent Charleton:Okay. So standard incumbents would be freeze dry and air dry. In the cannabis space specifically, I understand there’s a technology out of Germany harder air dryers, which we incorporate some of the vapor that’s taken out to try and maximize terpene retention. I understand they’re also limited by scale to a certain extent and have trouble going down to very low moisture content for extract purposes. So I would consider them to be a competitor in the space. Also the standard method of cutting and hanging and let it cure is certainly competition to to our alternative. So I do Envision that those who do adopt or technology will have a focus on growing your extract business into the future. So we provide them with that solution.

James West: Interesting. I just took delivery of a four pod hydroponic system because I’m determined to grow my own cannabis at home just because I can.

Brent Charleton: Yeah, why not?

James West: And so is there a, is there like a home scale model of your technology that we can use?

Brent Charleton: Unfortunately, unfortunately not. It is simple enough to use as an operator where you don’t need a rocket scientist degree, but it’s certainly not a toaster. You can’t just press the button and get your dried cannabis at the end of it. There needs to be a certain level of know how.

James West: Well interesting. So at this point the, I mean if we look at the global expansion of the cannabis industry, it sounds like there’s a huge market opportunity for you. Have you been able to put some numbers around what the global market opportunity looks like going out say two years from now?

Brent Charleton: Right, well I’m probably reading the same reports as you know, a BMO put out one in terms of global market size for the US prospectively into Australasia, Europe and South America. I mean, it’s a large market to address. I don’t believe that our technology is going to meet the needs of every single manufacturer of cannabis as they may prefer to focus mainly on the smokable product and certain level of terpene retention.

But again, like I said, we offer a tangible processing technology for those that are going to focus on extracts and we hope to address it internationally so long as the legal environment is conducive for deployment of our machines. In the US as you know, the Farm Bill passed late last year taking industrial hemp off that list of prohibited substances. So we’ve now opened up conversations with certain producers of industrial hemp in California, Nevada what not and then maybe the first entry point for us being that we need to transfer the royalties from wherever they’re being generated back to our Canadian entity at some point in time.

James West: Well sounds great, Brent. Sounds like the progress is really impressive. We’re going to leave it there for now. We’ll come back to you again soon and hear how more of these machines are making their way into the space. Thank you very much for joining me today.

Brent Charleton: Thanks, James.

Original article: EnWave Corp (CVE:ENW)Secures Royalty Sublicense with The Green Organic Dutchman Holdings Ltd (TSE:TGOD)

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