Good morning. The next presentation we have with MicroCap is EnWave Brent Charleton.
Thank you. Thanks, everybody, for joining us this morning. I know it's presentation after presentation after presentation. It's hard to get yourself organized in these different rooms. Today we're going to talk about EnWave Corporation. This is a business that is commercializing a patented dehydration technology that marries vacuum and microwave to create a controllable, low-temperature, efficient way of drying primarily food materials. We do also have commercial partners in the cannabis space, in legal areas globally, and in the biopharmaceutical space. R&D projects ongoing with Merck Pharmaceutical, GEA Lyophil, one of the primary freeze dryer builders in Europe. More recently, we announced a master service agreement with a company called Biotechnique. Standard disclaimer: I'll likely be including some forward-looking statements on the future growth of the business. In terms of our capital structure, we have just over 110 million common shares outstanding.
Balance sheet per the last quarter was about $4 million in cash, a small amount of debt in the term of a $500,000 term loan tied to a credit facility which we secured in late 2024 through Desjardins, a tier-one bank. The purpose of that credit facility is to allow us flexibility in building some of our large-scale machines on spec prior to receiving purchase order to condense the time to deploy these machines, which are ultimately going to produce royalties for our business. That is what is unique about EnWave: it is our business model. We're not your standard OEM selling a manufacturing piece of equipment to a food company. We have an ongoing relationship with them, providing them with innovation in new product applications and processes.
In return, we get paid a percentage of their gross revenue based on those product sales into market, typically between 2% and 5%, or we're charging a weight-based royalty per pound or per kilogram ongoing. The purpose of, you know, our mission at EnWave is to build up the biggest diversified portfolio of royalties that we can and ultimately wake up in the morning in future years, fog the mirror, and get paid for doing just that. In regards to the companies that have adopted this patented vacuum microwave technology and are now using it to produce commercial food products into market, they're shown on our, I'll call it our trophy slide wall here. Many of those brands you'll know: Dole, Calbee, one of the largest snacking companies out of Japan. We have an ongoing project with the U.S.
Armed Forces for the improvement of certain military ration inclusions, as well as in the pet food area with Perdue Farms, a massive chicken purveyor, and several of the top global dairy companies in Arla Foods and Royal FrieslandCampina. One company which I've been asked about frequently over the past 48 hours is BranchOut Foods. And BranchOut Foods is publicly traded on the NASDAQ. They've been one of our fastest-growing royalty partners in that they've bought multiple large-scale production units to be used down in South America and Peru and have entered the U.S. market with a branded snack play, but also are doing massive production on a co-manufacturer base, selling ingredients to larger CPGs for inclusion in different applications. In regards to the investment highlights of our business, we have built a very large moat around this particular value proposition that is REV Technology.
We have 18 patent families, which we follow for those individual apparatus design patents as well as process patents in multiple international jurisdictions, basically every major jurisdiction that we're doing business in, to ensure that no other companies can develop similar styles of vacuum microwave equipment. Let me state this: vacuum microwave is a very difficult technology to perfect. If you don't optimize the power density under certain levels of vacuum, what you get is essentially, in layman's terms, lightning within the vacuum chamber, burning the product, burning certain components of the machinery, and making it not feasible, obviously, at commercial scale. That is the magic, I'll say, that EnWave's engineers and food scientists have created, is that we have figured it out. We have now operating history since 2013. That was our first large-scale line deployed.
We are starting to see a bit of a snowball effect with different brands buying repeat machine orders and also new brands coming to play because they see successful products in the market. In terms of the TAM, there is a slide forthcoming on this. Everyone needs to have a TAM slide. Where we compare ourselves competitively would be the incumbent technology of freeze drying. Freeze drying has been around for multiple decades, but it is a very cumbersome process. It is very expensive. It is batch in nature. There really is no flexibility in the use of freeze drying in terms of final moisture content of specific applications. You have to go down to 1% or 2% moisture without being able to stop at, say, 10% or 12% moisture because of the lack of homogeneity in the drying process.
That is another value piece to the REV Technology, which is our branded vacuum microwave technology, is that we can stop at any final moisture content that we please so long as it's below a water activity that creates shelf stability. We don't require any funding. We've got a healthy balance sheet. We have the credit facility to use to build machines on spec. We have no plans of raising capital at this time. The pipeline for new sales of these machines is quite robust. We had an announcement earlier this week with another repeat purchase order, and we're expecting additional purchase orders to be released in the coming weeks. Why would food manufacturers even consider vacuum microwave when you've got air drying and you've got freeze drying, spray drying, different methods to dry products that have been around for a long period of time?
Going back to the previous slide, we obviously have that flexibility in final moisture content, but more importantly, the speed of our drying at low temperatures. Typical processing times using vacuum microwave are 1-2 hours versus freeze drying, which can be anywhere between 12-24 hours, dependent on the product and the cut size of the product. Even air drying takes 8 hours to produce similar throughput in product. With air drying, you're blowing hot air over the product, degrading the nutrient retention, and ultimately not being able to produce a high-value end application. It's more commoditized. Here we have a couple of pictures of the actual machinery. The picture on the bottom, I guess, would be your right, is an installation in Vancouver.
We have a fully-fledged toll manufacturing facility that we use to allow certain companies to do line trials, to get product to market, and to de-risk the CapEx outflow to acquire their own internal manufacturer. It also is the penultimate showroom. When folks come to do product and process development at our Innovation Center in Vancouver, they can walk across the parking lot and see a large machine in action, again, further de-risking the potential adoption of this new innovative technology. Here are a few more of the key value propositions that potential adoptees of this technology consider before buying the machinery and signing a long-term license, paying us royalties based on their future commercial success. Depending on their interest, we'll focus more on different areas where technology, REV Technology, wins.
Of note, this technology continues to be used to turn trash to treasure, taking B and C-grade produce and turning it into value-added ingredients or snacks in market. It conserves water as there is no water usage other than cooling the magnetrons within the machinery, minimal CO2 emissions, and incredibly energy efficient. That is another key point. When comparing it to freeze dry, it consumes about 70% of the energy needed to produce the same amount of product. Driving down the OpEx for using this technology versus freeze drying, the economics are, simply put, better. I will not go through each particular quadrant of this chart, but again, summarizing some of the critical differences between freeze drying, air drying, the two primary incumbents that have been, again, being used for many years, and our vacuum microwave REV Dried product.
Where we've been most successful in commercializing this technology is indicated in the small blue circles on the left of the screen. As you see, for fruit and vegetables, we signed 18 commercial royalty-bearing licenses, subsequently 15 in dairy, 5 in the meat and seafood vertical, 3 for instant meals, ramen, and different baked products. Like I mentioned the U.S. Army previously, they're actually incorporating a dried chewy cheesecake into their ration program in the latter half of this calendar year, which we're hoping, obviously, snowballs into additional large-scale purchase orders and additional volume needed. Lastly, in the pet food, our sales team is actually going to be at the Pet Food Forum trade show coming up next week, really pushing hard to gain new projects in that area. Cannabis was a windfall for us in 2018, 2019 when it went legal in Canada.
We took advantage of that, sold a bunch of machines. As anyone who's followed the space, it's been an absolute cluster. We ended up buying, actually, the majority of those machines back from those cannabis companies because they weren't operating them for pennies on the dollar, and then flipped them and sold them to food manufacturers who are now actually using the machines and generating royalties for our business. What we do know is that the technology does offer a unique proposition for cannabis in that it dries, again, in less than an hour and keeps the terpenes at a level that's appropriate for premium smokable product. Currently, Organigram in Canada and an unnamed party in the U.S. are using large-scale equipment for cannabis drying, but we haven't been really active in that area business development-wise. We talked about the total addressable market.
I think two critical metrics to look at would be the value of new freeze-dried equipment that's sold per annum. That was tabbed at $4.3 billion in 2023 and expected to grow at a 7% CAGR. That is not including any of the air dryers that are sold. It is very difficult to aggregate that information globally. In terms of royalty generation, we only looked at freeze-dried products sold in market. As you see the bottom left of this particular chart here, it is $36 billion in value in 2022 and expected to grow at an 8% CAGR to 2030. We also included the cannabis sector, but really where we are focused right now, again, is in the food market because that is where we are seeing the most commercial success. Three ways to make money: selling the machines. We do not give them away for free. We do not lease them.
They have to put up capital to get in the game. Typically, we structure a purchase order with a 40% down payment, 20% three months into the build, an additional 20% before we deploy, and the final 20% after commissioning. That way, we do not require a huge sum of working capital to get these machines out into the field. The value of these machines, you can see that is in CAD up here. It is about CAD 300,000 for a small-scale batch unit, which is used for early-stage product development and market trialing. The continuous lines range between CAD 1.75 million-CAD 2.5 million. Per margin on those sales is typically around 30% gross margin. Right now, as you can see, our revenue mix, about 76% of that last year was machine sales as our royalty revenues continue to grow.
That is the second part of generating revenue for our business, and the most important in our mind, is the royalty streams. What we are seeing now versus what maybe we saw three years ago is an acceleration in royalty growth coming from successful products in market, which has led to repeat purchase orders on additional machinery, and it is starting to grow faster than it certainly was, again, three years ago. Also, the royalty partnerships that we have forged more recently are with blue-chip companies versus small to medium enterprises who had a higher penchant for risk. Now, because, again, those products are proven in market, you see very large blue chips engaged with us now in our sales pipeline. Lastly, incremental up to $2 million in revenue comes from our co-manufacturing facility.
Again, the primary purpose of establishing that was a showroom to show the technology and also allow for companies to take product to market before investing the capital in the machinery themselves. Why EnWave? I talked about the nuance of perfecting vacuum microwave technology. There is not another company that we know of globally that has successfully scaled up a reliable vacuum microwave technology. If PepsiCo could buy a vacuum microwave machine and not pay a royalty, you bet they're going to buy the one that's not paying the royalty. PepsiCo and others, Dole, actually have investigated certain companies that claimed that they had vacuum microwave technology and were aiming to scale it up. They went and kicked the tires and ultimately came back and decided to work with EnWave because of the truth in the matter.
We are the only purveyor of commercial-scale vacuum microwave technology globally. Because of the value proposition that we talked about earlier, it justifies the royalty being paid, given that there is heightened margin for them to reap. In regards to the sales process itself, it typically will start with a pitch or inbound inquiry where we will do product development samples and run through a high-level economic model to show them that this is a viable business opportunity for them. They will either rent machinery, one of our smaller 10 kW units, and pay us for that for a period of three to six months, sometimes a little longer, before making a decision to negotiate a royalty-bearing commercial license. Those royalty-bearing commercial licenses have a term of the life of our intellectual property portfolio.
Every license that we sign, the term is when the last patent in EnWave's portfolio expires, the royalties turn off. The last material patents that we filed for were in 2023, again, elongating that term for another 20 years, going out to 2043. We are continuing to innovate. There are plans for applications for additional patents this year. The idea here is that these royalties, as they grow, hopefully will be perpetual. That is the idea, continue to innovate and diversify the IP. After that, of course, support comes. It is not just we sell them the machine and say, "Good luck, slap them on the back." We are always monitoring the use of the machinery remotely. That is part of an audit process to make sure the royalties being paid are accurate.
Also, if a new process or a new product is developed, we want to enable these companies to exploit that and to drive, again, royalty growth for EnWave. This is what our machines actually look like. Again, our small batch unit on the left and then subsequent continuous machines in the middle and on the right. The footprint of these machines is less than what industrial-sized batch freeze dryers are. Typically, you can put two machines on a footprint that would take one large batch freeze dryer. It is obviously going to drive costs down and increase efficiencies in the operating plants. As we continue to grow, we feel that this business model is naturally scalable in that as the revenue mix starts to transition more to royalties versus a higher level of machine sales, we are going to increase margin.
Every machine that we deploy is basically a royalty check that we're going to collect quarterly. The royalties that set us far from our royalty partners have been stable and growing. If you look at, and we will in a minute, the growth of our royalties, they've been sticky along the way. They haven't sort of ebbed and flowed. It's been a consistent growth on a quarter-by-quarter basis and fiscal year to fiscal year. Of course, as that happens, we hope to be able to cover the expenses of our business, which is about CAD 4.5 million right now for all of our operating expenses. Our royalties last year, fiscal year, were CAD 2 million. We're forecasting closer to CAD 3 million for fiscal 2025. Our year-end is September 30th.
Thereafter into fiscal 2026, based on our pipeline, we hope to continue that level of growth, getting closer to that $4.5 million mark where all incremental margin from future machine sales plus incremental royalties will then fall to the bottom line, which then will allow us to buy back stock depending on the value of our stock in the market and/or establish a dividend-paying program. Where have we put our investments in recently? Sales and marketing. We went and headhunted a very talented new VP of Sales last summer. She subsequently hired a new business development manager, again, very experienced, that just started up in Europe to represent our technology.
We have also hired three other internal folks to help with the effort of attending pretty much every trade show imaginable globally to make sure that people know about this technology and what it can do for their respective businesses. From that, again, we have seen a growth in our pipeline and ultimately a level of confidence within our business that we are going to have more machine sales and more consistent machine sales versus those lumpy quarters because of the impact of each individual transaction to have more smooth earnings as we move forward. Snapshot of where we play. We are truly a global technology company in that we have deployed machinery into 24 countries. As I said, north of 50 licensed partners are currently working on the commercialization of different vacuum microwave applications.
Some of the recent wins we've had earlier this week, we sold the fourth large-scale machine to a company called MicroDried based out of Idaho. They have an established business selling fruit and vegetable ingredients, the biggest branded companies in the U.S. and beyond. You buy Blue Moon beer and it's got that orange flavor. That flavoring is coming from vacuum microwave dried orange powder that they sell and include in that particular ingredient deck. They're growing fast and there's anticipation that they will hopefully be buying another machine forthcoming by July and then a couple of other opportunities in South and Central America coming up. I mentioned the master service agreement with Biotechnique. That's again for vaccination drying.
They're going to have a client, which they're working with right now and potentially could acquire a GMP-certified vacuum microwave dryer, not through us, but if you go back into our filings, we signed a joint partnership agreement with a company called GEA Lyophil, which is the largest manufacturer of pharmaceutical-grade freeze dryers. They are representing our technology in this particular vertical. We have an arrangement where when they sell their machines and their royalties are applied that we share in that success or lack thereof. So far, there hasn't been a huge amount of success or traction in that particular area. A few other 10 kW small units that were recently sold: Peru, Japan, and Brazil. We're actively deploying this technology globally. I love this slide because it illustrates where we're going as a business.
You can see the growth that we've seen fiscal year after fiscal year in terms of our third-party royalty generation. Again, we expect further growth in fiscal 2025 and beyond. The leading indicator for royalty growth is the number, or we call it kilowatt capacity, of these machines that we've commissioned, deployed to different royalty partners. For fiscal 2025, we should see another material jump up in the kilowatt capacity installed, which then leads you to believe that there should be more royalties being generated in the latter half of this year and into next just based on that incremental growth. Right now, we have 22 large-scale machines deployed. That is going to generate somewhere in the range of $2.5 million-$3 million in royalties. I mentioned we needed to get to $4.5 million to cover our expenses.
Back of the napkin math, based on an average royalty generation per large-scale machine, if we can get to 40 large-scale machines, we should be able to surpass that amount. I'd say the past three years, on average, we sold four large-scale machines. This year is a bit more aggressive. We think we can surpass that and in 2026, again, get more towards the 6-10 machines per year and get into that 40 machines deployed as fast as we can. Quickly on our board of directors, as we have five minutes, I want to open up for Q&A. Capital markets experience with John Budreski. Finance experience with Louise Lalonde, ex-PwC partner. She's fantastic. Patrick Turpin, entrepreneurial and packaged food expertise.
He also was an executive at Costco for many years, so he really knows the retail space and perhaps what our royalty partners are thinking. Pablo Cussatti, who's a seasoned COO who's worked for multiple large food manufacturers, also gives out that perspective when we're talking to plant managers. What do we need to say? What information do we need to present to close more deals and sell more vacuum microwave equipment? I'm the token CEO board seat. Management, Dylan, my CFO, is here in the back of the room as well. Danna Dunnard is the new VP of sales that we hired, who was previously managing business worth over $1 billion for Gordon Food Service in Canada. Our two geniuses, Mehmet Sucu, our chief engineer, and Dr.
John Zenk, Chief Science Officer, they both have the golden handcuffs on them with big auction packages. So they're not going anywhere. They're staying with EnWave for their entire life, if I can have anything to do with it. I'll stop now and ask if anyone has any questions. As the client base continues to skew towards larger blue-chip companies,
I'm curious to get your thoughts on sort of capacity from a machine sales perspective to reset.
Great question. Our current manufacturing capacity for large-scale machines is 10 per year being built. If it surpassed 10, we already have relationships that are being developed in Mexico and Turkey. Depending on where those machines are purchased from, we can leverage some of the outsourced manufacturer. No worries about that. Also, if one of these large blue chips says, "Well, we don't want to manufacture. We just want the product," no problem. Let me introduce you to our royalty partner here who focuses purely on co-manufacture. Fantastic. That pushes a company like MicroDried or Milne to buy another machine to support a Kraft Heinz or some company like that. That's how we foresee the growth. Yes?
Market trends are going to stop. I mean, you guys have strong fundamentals, good growth story, but the price has been pretty stable. I guess it's a good word to put it for the last year. What do you think we're missing here?
It's a show me state right now, putting together more than two quarters of strong performance. Last year, which was not included in this particular slide deck, we had an ongoing legal dispute with a former executive in our business who we accused of stealing confidential information. We successfully sued that person. We settled.
We got everything we want, including IP transfer, and put that to bed. That is now done. Also, the lumpy nature of the large-scale machine transactions. One quarter, we could do two or three machines, and then the next quarter, no machines. It depends on the percentage of completion that took place during that time period for how much revenue we can recognize. There are still some ebbs and flows in terms of quarter-to-quarter revenue. As long as on a fiscal year basis, we see improvement, then I think that is where the market will recognize that we are not a threat to go bankrupt. We have consistent growing business, and we have managed our balance sheet appropriately. The term of the license is when the last patent in the portfolio expires. As of now, it goes up to 2043.
If we file successfully for a patent this year, then it will go out until 2045. Last 10 years, what's the lifespan of the machinery itself? What we know is the machine that was installed in 2013 is still working beautifully. We know it's got a 12-year life. It's mainly stainless steel, and the consumable products are the magnetrons, which create the microwave energy, which have a finite 5,000-hour life to them. You change them out when you're doing your cleaning very easily, and they're not dear in terms of the actual cost to the operator. We're talking like $60,000 to change all of them for the large-scale machines. Zero right now. Please don't change. Our machinery falls under the USMCA, so 0% tariff. That was our most recent large-scale sale was into the United States. There's no punishment to the buyer.
[Distorted Sound] Good question. This is going to be a muddled answer. It depends on the product they're producing. Some products have higher moisture or lower moisture, so you're going to get different levels of throughput, plus the value in market. A cheese stack is going to sell at $5 a package versus a dry piece of pineapple at $3 a package. If we're ascribing a 3% royalty on that, we're going to generate more royalties from that cheese stack because it's better throughput and better value in market than we would have. Yes. We remotely monitor all machines. We know how many hours they're used, how many baskets and trays go through the machinery, and then we audit the royalty payments that come through on a quarterly basis.
Is there room for growth in the current installed capacity? Yes, absolutely. Because some companies are running 100% capacity, and some are at like 50% or 70% capacity. There's still room for incremental royalty growth based on current installed capacity, based on individual royalty partner execution on their business case. Sorry. Yeah. Last question. Just under 2%. I grew up in this business. I joined 15 years ago as a marketing coordinator, busted my ass in the capital markets, and then started to sell these machines and was promoted to CEO in 2018. I am heavily compensated through adoption programming. Our chairman put his money where his mouth was during those developmental years. He has what, 2.5 million shares? Just under 2% of insider ownership.
Would love to be larger, but it's expensive to live in Vancouver and raise a young family and have to incrementally buy more and more stock along the way. Sorry, I'm getting—we talk after this, but I'm getting the wink and nod to get out of here because someone else is turning. Yeah.