Warm welcome to everyone on the call. I'm very excited to discuss our performance this quarter and highlight some of the key areas of our business. But before proceeding with our call, I would like to remind everyone that the information we are about to present contains forward looking information that is based on management's expectations, estimates and projections. These statements are not a guarantee of future performance it involves a number of risks, uncertainties and assumptions. Please consider the risk factors in the filings made by EnWave on SEDAR when reviewing this information.
Also all amounts discussed will be in Canadian dollars unless otherwise noted. Now with the mandatory disclaimer complete, let's proceed to discuss EnWave's best ever consolidated quarterly financial performance. The turn for both of our primary business units is well underway. As with all of our conference calls, we refer to our patented vacuum microwave technology business unit as nWave and our operating subsidiary that leverages Radiant Energy Vacuum or REV for short, for branded and bulk snack products as NutraDry. I'll begin today's call with an overview of EnWave's corporate progress year to date end performance in Q3 as well as our plans to accelerate business growth and profitability in Q4 and into fiscal 2022.
I'll also highlight several key improvements at NutraDryde, which is well on its way through a material turnaround. Following my update, Dan, EnWave's CFO and the NutraDryde will summarize our Q3 consolidated financial performance and discuss several key performance indicators that relate to the health of our enterprise. We proactively cut our expenses significantly at EnWave at the onset of the COVID-nineteen pandemic. This greased the skids for our team to drive efficiencies, Thrivan new leadership roles and ultimately innovate to allow our business to accelerate its growth. We're all proud of the success we've had this year, but by no means are we satisfied or complacent.
We've begun the process of executing a major turnaround at NutriDryde in Q3. The decision to restructure NutriDryde and to change management in February 2021 it has led to the creation of a sustainable cost structure, the hiring of a new capable leader of the business unit and a far more collaborative environment within our collective enterprise. Brad Larman, our new NutriDryde CEO, has been an excellent addition to our team and Dan continues to shine in his dual role, supporting both business units when needed. In Q3, we did what we set out to do, turn EnWave profitable and materially turn around NutraDry. On a consolidated basis in Q3, we had our best adjusted EBITDA in 2 years and our highest quarterly net profit in the history of the company at $670,000 segment highlights include NutraDrive producing positive adjusted EBITDA in Q3 and about $100,000 in net profit after losing 1,000,000 in Q1 and Q2, EnWave generated over $2,000,000 adjusted EBITDA year to date, over $3,000,000 improvement over the year prior at a bottom line net profit of $547,000 year to date, dollars 530,000 generated in Q3 alone.
Dan will expand upon our improving financial performance later, but it's clear that our prudent expense reductions, improved operational efficiencies and the accelerating commercialization of REV Technology promotes sustained profitability. In regards to our year to date commercialization progress, we secured 11 new commercial licenses, 4 telos, 3 R and D license agreements and sold 14 10 kilowatt machines, 1 60 kilowatt, 1 100 kilowatt and won 120 kilowatt for a total of 4 20 kilowatts of Rain Energy Vacuum Machinery Sold Fiscal Year TO Date. More specifically in Q3, we signed 2 new royalty bearing commercial licenses. 1 with Europe Snacks, a large snack food company from brands who will focus on healthy snack innovation and the other with Branch Out Food, a U. S.
Company who recently won the Small Business Innovation Award at the Sweet and Snack Expo for their chewy banana snack product, an innovation developed in house by our food science team. We also signed a solo with Bridgeford Foods, who is collaborating with the U. S. Army to scale up the production of close combat military field rations as one of their industry partners. We have been told by our contacts that funding to acquire a large scale rev machine is approved for 2022, but the purchase order can't we confirmed until the U.
S. Government officially releases those funds. Our machine sales also improved in Q3 as we sold 2 10 kilowatt machines, 1 to Dairy Concepts Sib Ireland, who recently launched their Cheez O's snack product into the UK market, and the second to NewWave, who is focused on shelf stable baked products. Lastly, we resold 1 of the 60 kilowatt machines purchased back from Tilray to branch out foods at a very healthy margin. In Q4 to the date of this call, we signed a material transfer agreement with AstraZeneca to trial the drying of several select monoclonal antibodies.
We signed 2 new royalty bearing licenses with 2 cannabis companies, Medical Kiwi from New Zealand and Canna Ponics in Australia. Both Medical Kiwi and Canna Ponex purchased 10 kilowatt GMP rev machinery and both of these deals were generated through our exclusive channel partner in that region, company named Citec Australia has been doing great work for us. This is a clear example that our strategy to leverage international sales reps is starting to pay off. And we signed a 4th agreement with Dole Sunshine Company, one of the largest international fruit and vegetable companies globally. On Thursday, we announced plans for this global strategic partnership with Dole to develop innovative nutrition solutions using fruits and vegetables.
Dole purchased a 10 kilowatt machine for accelerated product development part of this relationship. We have been collaborating with Dole since late 2020 and our relationship is with the most senior executives within their group. We expect to see Dole accelerate market trials through the end of this year and if successful acquire meaningful rev manufacturing capacity shortly thereafter. Before committing to a public relationship with us, Dole completed thorough due diligence and evaluated several incumbent technologies. EnWave's patented dehydration technology will assist Dole in bringing better for you snacking options to its global customer base as part of Dole's Sunshine For All commitment.
I'm very excited about this relationship and the potential positive impact it could have on our business, both near and long term. The highly anticipated start up of our RevWorks toll manufacturing facility is now scheduled for Q1 fiscal 2022. There have been several delays in the construction of our facility, all caused by delays in municipal permitting, but we're past those now. We expect RevWorks to be operational in early October and the construction of the facility has been well underway. We're currently waiting for the permit to complete the installation proper drainage in the flooring before we commission the rev machines and start conducting toll manufacturing services.
We submitted our permit application in City of Delta and we'll get that final approval any day now. In preparation for commercial production capabilities, we did hire a quality control person and are actively working on setting up the prerequisite programs for Safe Quality Food Systems or SQF and HACCP to meet the food safety requirements. Before the end of Q4, we hope to confirm the sale of a new large scale machines into the cannabis sector and several additional 10 kilowatt sales. If we can get that done, which obviously is within a month's time here, we'll continue to see growth headed into fiscal 20 '22 with a lot of momentum. Our pipeline is robust beyond these near term perspective deals and we hope to double the amount of large scale rev machines sold in fiscal 'twenty one in fiscal 2022, our outlook regarding the sales mix for our business hasn't changed.
We continue to anticipate approximately 60% of new business coming from food licensees and 40% coming from cannabis deals. Given the rapid build out of infrastructure and the evolving state legalization framework, we view the U. S. Cannabis industry as one of the more material near term opportunities for our company. To provide additional context regarding the size of our current U.
S. Cannabis Opportunities, the 6 largest prospects we are courting, collectively operate more than 70 facilities. From our calculations, it would take more than 20, 120 kilowatt rev machines to service this cultivation infrastructure. We're confident in the future of our cannabis industry penetration given the recent compelling data that we have generated in collaboration with one of our licensees, Gentle Dry Tech, and with a significant prospect in the U. S.
The data collected from drying more than 20 separate strains consistently showed a 30% to 50% improvement in terpene retention compared to the room or rack dried controlled flower. Further, the visual appeal is stellar and the ash burns pure white, which is a key indicator of a clean, smooth experience. As more companies discover the clear advantages of EnWave's scalable and reliable vacuum microwave drying option, we believe a domino effect could occur here in the cannabis industry. Given the substantial commercialization opportunity, we we continue to strengthen our intellectual property protection, the moat around our castle per se. Based on our current active apparatus patents, we are well protected until 2,030 with our Quantire platform and 2,032 with Nutiref, we have recently filed additional patents regarding integral mechanical component improvements to further layer protection and extend the terms of our existing licenses.
As for process patents, our recent patent application to protect our Terpene Max process for cannabis drying has been filed we hope for a favorable review soon. Our intellectual property, which also includes our process know how, trademarks, patents, confidential information and equipment it is integral to our business and we will protect it at all costs. On July 28, 2021, we filed a lawsuit in the Supreme Court British Columbia against EnWave's former CEO, Tim Durantz and 3 other former EnWave employees, Gary Sandberg, Bino Anand and Rihanna Norkbosh and 3 companies associated with Durant's, including Dehydration Research LLC and Durant's Technologies Inc. We are also pursuing claims against Primo Fabrication LLC, BC Hop Company Limited, Duane Stewart, who is BC Hop Company Limited's President, several companies doing business as Peregrine Precision Systems and Sean McClain, who is a Principal of Peregrine Precision Systems. In our notice of civil claim, we allege that Tim Durant's and other defendants associated with Durant's have used and disclosed EnWave's confidential information in breach of obligations owed to EnWave.
The notice of civil claims seeks damages in accounting of profits and injunctive relief. On July 30, 2021, we filed an injunction application seeking orders restraining Mr. Durant and his companies from selling or supplying vacuum microwave dryers pending trial. On August 20, 2021, the court granted an order prohibiting Mr. Durant's and his companies and anyone acting in conjunction with them from selling, attempting to sell, supplying, delivering or installing vacuum microwave dryers pending the hearing of EnWave's injunction application.
The date for that injunction application is not yet being determined and the order will remain in effect until then. We will show further updates as they become publicly available. NutriDry's turnaround will continue under the new leadership of Brad Larmen, our new CEO, and with the support and collaboration from the EnWave team. Plain and simple, NutriDry is focused on cash flow and managing working capital to ensure sustained financial stability in the near term, while pursuing plans to rapidly increase distribution, improved velocities and launch incremental new Moon Cheese products and build out its bulk and private label business to stimulate growth. We've seen growth in velocities across grocery year over year of approximately 30% over the past 24 weeks.
NutriDry's innovation pipeline has been activated and we plan to launch select, well tested new formats and products in fiscal 'twenty 2. We've also raised Moon Cheese pricing online and are exploring viable options for brick and mortar. We're also looking forward to working with our new grocery broker, Alliance Sales and Marketing to deliver growth in distribution in the coming months. The significant upside in cheese snacking will keep us focused in the space. Americans love cheese and the U.
S. Shelf stable cheese snacks category, which is now $1,200,000,000 in value, is growing mid single digit each year. Further, the all natural cheese snack section is growing at a clip of 35% to 40% per annum. NutrisDryde plans to be opportunistic with new snack mix introductions as well as new dairy based product formulations. We plan to dial up promotional efforts to drive trial and velocity in fiscal 'twenty two, win meaningful new checkout line placement and expand the distribution of our core Mucci's products in core channels.
We recently secured single serve placement of our 1 ounce items in a subset of Walmart stores in the U. S, signaling the progress is well underway. Club and convenience channels will also be targeted for growth and we hope to announce new wins in the coming months. Our entire team is bullish on the future of NutriDrive and prospective performance in fiscal 'twenty 2. With that, I'll now turn it over to Dan Enriquez, EnWave's CFO and NutraDryde's COO to summarize our Q3 financials.
Thanks, Brent.
Good morning, everyone, and thanks for joining us on today's call. I'd like to take some time to review the Q3 financial results. Please note the figures I'll be going over today can be found in our press release from this morning and in our financial statements and MD and A that are filed on SEDAR all amounts will be in Canadian dollars unless otherwise noted. I will also make reference to adjusted EBITDA, which is a non IFRS financial measure. So please refer to the non IFRS financial measure disclosures and reconciliation to GAAP net income in our MD and A.
We are very proud of the financial results achieved for Q3, with both EnWave and NutriDrive reporting strength in margins and positive adjusted EBITDA. Last quarter, we communicated our intention to significantly cut spending and turnaround NutraDryde and we followed through with that plan. Our results in Q3 reflect a nice combination of revenue growth at NutraDryde and a reduction in SG and A spending. In Q3, we reported consolidated net income after taxes of $670,000 marking our highest ever quarterly consolidated net income. For reference, our consolidated net loss for Q2 was 2,200,000 and $1,100,000 for Q3 2020.
There is still plenty of runway for us to continue to grow both business units into consistent profitability, But this makes us very confident in the merits of our business model. The financial performance in Q3 is attributable to 3 main trends. 1st, EnWave's rev machine sales continue to expand and our margins from selling machines improved with a lower manufacturing cost structure. Second, NutriDryde's revenues rebounded after securing new opportunities to sell bulk product, improved grocery distribution and co manufacturing opportunities. And third, we significantly reduced SG and A expenses at NutraDryde as part of the restructuring announced in February.
We got full benefit in Q3 after reducing staffing and purging non essential spending on consultants and agencies hired by former management. I will now take you through some of the highlights from our Q3 2021 financial results. Consolidated revenues in Q3 were 7,300,000 with $3,500,000 coming from EnWave's technology business and $3,800,000 from NutraDryde's product sales, overall revenues were $1,300,000 higher in Q3 2021 relative to Q3 2020 $2,700,000 higher than Q2 2021, a nice improvement. Amyloid's quarterly revenues of $3,500,000 for Q3, 2021 were higher when compared to Q3, 2020 by 1,900,000 this is a significant increase in our business. In Q3, our machinery sales grew with revenue from 3 new large scale machine orders, as well as 3 smaller scale machines.
We continue to see growth in the frequency of machine orders from both new licensees and repeat orders from existing licensees adding capacity, it's an encouraging trend. NutriDry's revenue was $3,800,000 for Q3 relative to $2,300,000 for Q2, an increase of $1,500,000 Our sales at NutraDry improved relative to Q2 due to the addition of several new bulk B2B product sales opportunities an incremental new channel NutriDry has begun to aggressively pursue. Over the coming quarters, we expect to continue to grow our bulk sales from our dried cheese products going to complement our branded business. We really like the bulk channel as it yields strong clean margins for us. We are also pursuing a number of co manufacturing opportunities at NutraDryde as part of the new growth strategy that's in place.
Our royalties for Q3 were $191,000 compared to $144,000 for Q3 of 2020, an increase of $47,000 With 2 large machines recently installed and 3 underway, we expect our royalties to continue to grow as our licensees build commercial momentum with our different products. In Q3, we reported a consolidated gross margin of 36%, up from 26% reported in Q3 2020 and just 10% in Q2 2021. Our consolidated gross margin lift in Q3 was driven by higher margins at Enlave and NutriDrive. We took significant steps in NutriDrive to get costs under control improperly aligned manufacturing resources with demand and the benefit of these cost controls improved our gross margin in Q3. The addition of bulk ingredient sales at NutraDry created incremental sales volume and that added to our margin as well.
Over the coming quarters, our objective is to grow NutriDry margins through the use of installed plant capacity, growing the bulk and co manufacturing revenue streams and expanding the distribution points and sales for our branded Moon Cheese. The new management team at Nutriyet is now laser focused on managing our production costs and inventories. Amway's margin profile in Q3 continued to benefit from our lower and variabilized cost structure to manufacture and deploy rev machines. We've reemployed 2 large scale machines originally purchased by cannabis customers into new royalty partners for higher margins. And in the near term, we expect our cost structure at EnWave to remain at current levels and are focused on driving margin growth through the sale of additional rev machinery and growing our royalties.
Now turning to SG and A expenses. We told you in February when we announced the restructuring of NutriDrive that we'd significantly lower SG and A spending in that business unit. Our combined SG and A expenses inclusive of R and D for Q3 was $2,200,000 compared to $2,900,000 in Q2, a total reduction of $700,000 in the quarter. We were serious when we said we'd drive unnecessary expenses in staffing out of NutriDryde and we gained the full 3 month benefit of these reductions in Q3. We reported G and A expense of $1,000,000 in Q3 2021 compared to $1,200,000 in Q3 2020, a reduction of $200,000 Relative to Q2, our G and A expenses were lower by 179,000 we do not anticipate significant increases to G and A expenses over the near term and now have a sustainable cost structure in place in both business segments.
We reported sales and marketing expenses of $831,000 in Q3 compared to $1,500,000 in Q3 2020, a reduction of $618,000 Relative to Q2, our sales and marketing expenses were lowered by $473,000 our biggest area of cost reductions at NutriDrive was reducing the use of expensive marketing agencies, consultants and reducing staffing, focusing our marketing spend on working dollars as opposed to agency fees and managerial costs. We've aligned our sales and marketing budget with the size of our business at NutriDry, providing us with the tools we need to grow the business in a profitable manner. As we launch new products and invest in driving velocities where we have distribution, we'll add in marketing dollars where we can generate strong returns. We also told you last May that we rightsized our SG and A expenses at NutriDryde, while still investing in areas that will allow us to scale. Now at both Enliv and NutraDryde, we have the appropriate infrastructure in place to allow us to scale the businesses we are appropriately managing expenses.
Our adjusted EBITDA, a non IFRS financial measure, so please refer to our MD and A for reconciliation from GAAP net income to adjusted EBITDA was a profit of $937,000 for Q3, a substantial improvement compared to a loss of $1,900,000 for Q2 and a loss of $1,100,000 for Q3 of 2020. We also reported a positive GAAP net income of $670,000 in Q3, our highest quarterly positive net income ever. Both EnWave and NutriDrive reported positive adjusted EBITDA in Q3, a stark improvement at NutriDrive from where we were just 3 months earlier. There's still a lot of work to do as we grow both businesses, but closely controlling spending will be part of each and every decision we make. Turning to the balance sheet.
Our balance sheet and treasury position at the end of Q3 continues to be very strong. We're cash strong and using it to invest in growth and buying back stock. Our cash position was $15,300,000 up from the $14,700,000 on September 30, 2020. Notably, we reduced our inventory balance at NutraDryde and now have much better control over our inventory relative to product sales, something the past management neglected. Through the 1st 3 quarters of 2021, we generated $3,700,000 in cash from operating activities $780,000 alone in Q3.
We're using the cash we generate for growth, including investing $1,800,000 into new plants and equipment, this is primarily for the new Revverx toll processing facility. Our net working capital position is $19,700,000 and our balance sheet remains, in practical terms, debt free except for our facility leases and a small low interest COVID-nineteen relief loan received by NutriDrive. In October 2020, we implemented a normal course issuer bid and obtain TSX Venture Exchange approval to repurchase up to 10,900,000 common shares. So far this year, we've repurchased 279,700 common shares at a weighted average price of $1.16 per share for a total use of 323,000 we continue to use the NCIB while not in blackout conditions to further return stock value to our shareholders. With that, I'd like to turn it back to Brent for his
closing remarks. Thanks, Dan. And I think you've made it abundantly clear that we have materially improved our performance in Q3 and have set the table for continued growth. Now given our strong consolidated financial performance in Q3 fiscal 'twenty one and anticipated solid consolidated Q4 numbers, we are planning to begin investing again modestly towards Investor Relations to amplify our business progress in the capital markets. We obviously pulled back on a lot of our expenses through COVID to ensure that we have the appropriate cost structure to run our business.
We will be conducting several virtual road shows in September and plan to maintain consistent activity onwards to obviously support the great progress that we hope to be making. If our marketing efforts in the capital markets combined with much improved financial and commercialization progress don't stimulate market capitalization improvement and a fair value from the perspective of EnWave's executive management and Board, we will consider using our NCIB to purchase back large amounts of stock. EnWave and NutriDryde are operating with appropriate cost structures and collaborating to best improve total Brise value. Our leadership group is collaborating more than ever before and our executive management incentives are well aligned. Further, we have full employees from both organizations that are working together on projects to either benefit EnWave's royalty partners or NutriDryde's product portfolio expansion and sales growth.
We have made smart opportunistic business decisions year to date fiscal 'twenty one, which has led to our vastly improved financial performance in Q3. It will take continued prudent management and measured risk to achieve our commercialization goals in fiscal 'twenty two and beyond. We're committed to remaining fluid I will react appropriately to evolving market opportunities. As we look forward to fiscal 'twenty two, both Nuke's Dryden and EnWave share strong optimism regarding continued growth and improved financial performance, our leadership group will continue to execute on our business plans to further expand and accelerate the commercialization of REVP technology through machine sales, royalty generation, toll manufacturing and branded consumer packaged goods product sales. With that, I'd now like to open the call for your questions.
Operator please provide the appropriate instructions.
Thank you. At this time, we will be conducting a question and answer session. Participants on the webcast can use the ask a question box located on the left side of the screen to submit written questions. The ask a question box located on the left side of the screen. Our first question is coming from Steve Hansen of Raymond James.
Please go ahead.
Hey, guys. Congratulations on the great results, quite the turnaround. Just a couple for me to start with. Brent, can you just reiterate, I think you said in your prepared remarks that you're expecting machine sales to double over the current year with one more it's a large one to come and was also wanting to ask you just to clarify some of your comments on the cannabis opportunity. I think you said the 6 largest prospects represent a potential
Yes, no problem at all, Steve. So in terms of performance through the end of Q4 here, we have not just one, but a handful of large scale sales opportunities which we're hoping to complete to hit the mark which we provided as guidance for fiscal 'twenty one of 5 large scale and 10 kilowatts, we've clearly surpassed the 10 kilowatt mark and hope to obviously meet and or exceed the large scale guidance we provided for fiscal 'twenty two based on the pipeline of anticipated upscaling from several of our current royalty bearing licensees as well as new licensed partners from both the cannabis and food space that we're working, a realistic target that our entire group is focused on hitting these 10 large machines. And on the small scale, we'll likely increase that internally to 15 based on the cadence of sales that we're seeing to date. In terms of the companies that we've signed NDAs with and are actively courting in the U. S.
Cannabis space, I mentioned that they had 70 or more than 70 facilities collectively that they're operating through and that it would take more than 20 large scale 120 kilowatt machines to satisfy that infrastructure, that's obviously assuming 100% saturation, but that's certainly part of what's played into our guidance for fiscal 'twenty 2.
Very helpful. That's great to clarify. And just if we want to take a step back then and think about the cannabis opportunity near term, is there you described that you could see some sort of step change in the acceleration of adoption, but I mean just thus far as you look at the benefits, is it a specific, like what has been the trigger point on the sales? Is it a new data that's come through? You described a 30% to 6% increase.
I think in trofinetention, for example, like what is it that's really catalyzing the sales in that space right now from your perspective?
I think seeing is believing and the ability to collaborate with several of our current licensed partners in that vertical and allowing prospects come and see large scale machinery in operation and run trials themselves on our 10 kilowatt units and collecting the data that proves out what we we're telling them when we're providing our sales pitch is key. I mean, because it's almost too good to be true when we're saying, okay, yes, 30% to 50% more terpenes typically and better THC and CBD and the smoke is still as good as it would be if it was roomoraccharide. That's all great to say, but you have to prove it. And we now have all the tools to prove that. And I think that's why we feel confident that once we can push over the next few dominoes, that it will become an effect in the U.
S, especially with the companies that we're in active dialogue with.
Okay, helpful. And then just quickly on the Doer relationship, because that is a new one that seems to be quite significant. Can you maybe just describe what the milestones are that you expect to see under this new arrangement that will allow them to accelerate that product opportunity for themselves and then ultimately translate into additional machine fields.
Sure, I have to keep it very high level given the confidentiality requirements between our two companies, but I will be forthright in saying that I think that this relationship could evolve into something significant the material for EnWave within the next 12 months, they purchased a 10 kilowatt replacement at one of their facilities to allow for production of smaller amounts of product to trial in several different countries globally. And the purpose of that obviously is to gain enough confidence to then acquire it could be multiple large scale lines to satisfy the manufacturing capacity that will be demanded for entering those markets. They have a huge internal push here to diversify into shelf stable, better for you snacks and beyond the snacking project, which hopefully some of their products in the market actually in in the North American geography soon, they are interested in ingredient processing too. So of course, part of our sales pitch to food sorry, fruit and vegetable market is the ability to dry B and C grade materials or off cuts and then convert that into functional ingredients. And so, I really do believe that this dual relationship has massive potential, not only on the snack side, but expanding into the ingredient space.
Okay, great. And then just one last one for me and I'll jump back in the queue. But just on the consolidated financial performance, Dan or Brent, obviously a strong performance on the EBITDA and the net income side. But is that a trend that can continue here? You're describing growth, but you're also describing some added investments.
So I'm just trying to get a sense for whether we can continue to see the EBITDA clip going forward.
Yes, I'll take that one, Steve. So we had a very strong Q3. We got the full benefit of the cost reductions we made at NutriTride, so we really pulled out the unnecessary expenses that weren't creating returns on investment and so we don't intend to add any of those back over the next coming quarters in NutriDryde. So that should continue to we support strong consolidated financial performance in the next quarters here. We added in the new channels for sales at New Jersey also.
So we started selling our product in bulk format to be used as ingredients and inclusions in other snack items, trail mixes and things like that. We're continuing to get new wins in that channel. So we expect the turnaround of NutriDryde to continue and we don't need to increase spending at NutraDryde to achieve growth. We have the tools that we need to go out and address the market opportunity. So Short answer, I think we're not entirely around the corner at NutriDrive, but we're 80% there.
There's still some more work to be done, but we can expect better performance in the next few quarters here.
Okay, great. Appreciate the time. Thanks.
Our next question is coming from Joseph Filla, a private investor. Please go ahead.
Yes, hi. I'd like to know about your finished goods inventory. It seems that sales are made and then it takes months to install a machine. Can you shed any light on your current finished goods inventory and what your prospects are for building, especially if you're expecting to double your machine sales next year? Thank you.
Sure. I'll answer that one for you. Our revenue recognition policies for machine sales are for large machine orders, we record revenue over time using percentage of completion. So as soon as we get an order and start making progress towards delivering machine, revenue start to appear in cost of goods in our P and L. On the 10 kilowatt machines, we get an order and then we recognize the revenue once we finish installing and training the machine for our So sometimes that can take a couple of months depending on delays in either installation of the machine, facility readiness and things like that.
Sometimes we'll announce machine orders that we don't book the revenue on for 1 quarter or maybe even 2 quarters for 10 kilowatt machines, so it can take some time. Those machines will stay in our finished goods until they're installed and the operators train on how to use them.
Okay. Thank you.
Thank you. Our next question is coming from Neil Linzell of AI Capital Markets. Please go ahead.
Yes, good morning guys and yes, great congratulations on a fantastic quarter. I'm trying to unpack how well you did on the NutriDry side. Obviously, with the loss of Costco, the year over year numbers are down, but it was kind of a surprising increase. Even if I back out the bulk cheese sales, it looks like on Moon Cheese, you probably had to want to share your percentage improvement?
We don't break it down by percentage, that I will tell you that our velocities in regular grocery distribution are improving. The conditions that we had in Q2 2 in the marketplace have improved heading to Q3. So we're seeing shoppers go back to normal, go to multiple stores to get the goods they want and that's helping improve our velocities in the grocery channel. So yes, we added the bulk channel to our sales, which helped in the quarter obviously, but if you back that out, we're still seeing velocity improvement. So like the units per store per week are going back up to where they were pre COVID.
So it's an encouraging trend, Neil.
Okay. That's great to hear. And then on the bulk, sorry, Frank, go ahead.
I I was going to say just about a margin improvement too. So obviously there's a dramatic improvement from Q2 to Q3 up to 20 gross margin, but when we see that business normalizing and hitting what we expect as being a modest manufacturing capacity the gross margin should be somewhere in the range of 30% to 35%. So there's still obviously great room for improvement both on the operational side and performance side. And we talk about performance, just a couple of details to add. We got our first purchase order from Lydall for 10 ounce cheddar, which is a good sign getting to that style of distribution sort of focused on club area.
And then one caveat to this growth prospects with NutraDry is hopefully that 4th wave of COVID doesn't stall a lot of these means that have already been set up and the momentum that we're currently generating. That would be the one caveat. Other than that, we're incredibly about Nutra Drive's future and continued turnaround.
Sounds good. Would you at some point we're thinking about breaking out the bulk cheese sales in your revenue breakdown. Or Can you give us an idea, is that really going to be a new stable business that's going to continue and grow? Or is it more lumpy, do you think?
It's absolutely going to be a new channel that we continue to sell into. In terms of the quantum, we may have ups and downs just like any other channel, but because of the volume going to specific customers and their ordering patterns. So in this quarter, we had 4 big customers that were doing most of the buying. And so if one of those changes that can affect quarter to quarter results in bulk, but over time if you would add it all up, we expect the channel to grow and we're just starting to scratch the surface, there's a lot of interest in the snack marketplace to have healthy inclusions and innovation in things like trail mix those types of products has been fairly stale over time. And so this brings something new that's starting to generate some interest.
So I think we can expect it to grow over time. We'll have we may have good quarters and bad quarters in terms of bulk like any other business, but as we add more customers, it will begin to stabilize and it will become more predictable.
Okay, great. And then with Walmart specifically, you talked about that. Could you just explain the number of the stores you're going into now or what happened in Q3 versus what's going to happen in Q4 and going forward with Walmart and does that include Sam's Club or
we got 2 items, our 1 ounce format into about 400 stores right now. It's going into the checkout lane, so it's at the front of the store. We have been told by the broker that if it's successful, it could expand into 1300 stores in the U. S. So we've already received the orders and we expect that stuff to be on shelf here in the next call it 6 to 8 weeks.
And if it does well, we hope it will expand into more parts of the store. And it's a good toehold into that retailer because ultimately we want to get to the center of the store at Walmart. So we want to be in the snack aisle. And so we're hoping this first entry point could lead to more growth with that retailer.
Okay. I understand. Thanks. And for the SG and A, you kind of surprised me in talking about you're not going to see increases in SG and A go from Q3 into Q4 into Q1, despite all this kind of ramp up in activity or the new product sales, is it because we're still not seeing those trade shows or travel that you might otherwise do or you just feel like you've got a great platform here and you can really leverage it up?
Yes, we're going to attend trade shows where we can. We've got Expo East coming up at the end of September that by what we're being told now, it's still going ahead in Philadelphia. We don't expect travel to increase over the near term just yet. We still have a lot of buyers in the U. S.
Doing things over the phone. They're taking meetings, which is a good step towards reopening, but they're not going places physically like they used to flying around and our sales team won't be flying around. So we've been doing this kind of stuff for the last year anyway, so I don't think that we need to add in much more expenses to fuel growth. The expenses we've pulled out aren't things we plan to add back.
Okay. Any thoughts about putting another unit into NutriDryde?
Well, there's some opportunities on the horizon that could lead to co manufacturing growth that could require a third machine. And obviously, if those opportunities materialize, we will install the capacity we need. But it's contingent on growth. So as we continue to grow and win more distribution and grow the co manufacturing in bulk channel will add in that machine when we need it.
Okay, great.
But then in short, maybe for 'twenty two given some large, large opportunities that we'll obviously confirm when they're signed, if they're signed.
Great, Cesar. Okay. Just going back to the Dole again, just want to make sure I understand it looks like it could be a potentially huge relationship there going forward, starting off pretty small with the 10 ks unit. Is it all dependent on new products or new channels that Dole is working on or would it be something that would be used in existing products? And I'm thinking about like the Dippers products.
You've got some freeze drying or some freezing there with the banana pieces, are you trying to integrate any of your technology or anything from EMEA into the Dole products? Can you just explain the development of the products and what we should be looking for going forward?
Yes, sorry. Just to clarify, I think you mentioned Alea as well in that question. So Alea is polysilicon field technology, which is a pretreatment to vegetables and fruits for certain applications, it's not being considered for the Dole applications that would be prospectively going to market in the very near term here. In terms of the area or the portfolio, it's an expansion. So they're going into, obviously, shelf stable, better for you snacks that are dried versus what we typically would see either canned or the small packs in juices and what have you.
So that would be relatively new to Dole, that is one part of the project. The other part, as I mentioned earlier, is early stage engagement with their ingredients division, which we'd be essentially employing REV as a consolidator of processes to get to the point where the offcuts and materials can be in dry form ready for powdering and then being used as functional ingredient. So it's a 2 fold project at the moment. In terms of the ongoing collaboration and there was a question submitted online to you about this, like what does it mean like this global strategic partnership, is it just you sell the 10 kilowatt license and that's it? No, no, no, we're heavily intertwined with their leadership in marketing, new product development and senior executives on leveraging our tech as much as they possibly can to carve out a competitive advantage in the marketplace.
And so we're talking about weekly calls and commitment from the highest levels in the organization to move quickly. This is not like a 2025 project. This is like a now project where they're going to commit necessary capital to get the infrastructure in place. They'll likely leverage some of our current royalty Barion licensees to get early stage product, but ultimately want to take manufacture in house, obviously to better control their cost of goods.
Thank you. Our next question is a follow-up coming from Steve Hansen of Raymond James. Please go ahead.
Yeah, hey guys, just to follow-up on the RevWorks start up and commissioning. Dan, I think you described pretty well the timeline to get things going. But I'm just curious if you could remind us where we're at from sort of a capacity commitment standpoint and where you're at in the pipeline there to fill that up?
For sure, Steve. So the project was delayed a little bit due to getting some permits from the city here in Delta, we got all the permits we need except for 1. So we're just waiting any day now to get the final permit for the modifications we did to the flooring to get the drain, the sloped floors installed, so we can have the best food grade facility. And so we expect the machine to go in sometime in mid to late September. So the flooring should be going in the next week or 2 here and then there's a curing of a week and then we're going to start putting the machine and everything else is pretty much ready.
So if things go according to our plan right now, we expect to have the commissioning and start up process completed at some point in October. And then from there, we can start to pursue those certifications. So by all accounts, we should be starting to receive revenue from RevWorks at some point in Q1, 2020, hopefully. It will start out modest as we start to bring customers into that new vertical, but we've we've had tangible interest from a number of companies. We haven't taken contracts or committed out anything beyond sort of non binding capacity offerings, just because we don't want to overpromise and have our partners make plans to launch products and then have delays in our start up of our plan we are getting the interest.
Our sales and business development teams are working on a number of leads to bring product into the pipeline there. So we think we have good prospects to have RevWorks up and running and producing revenue for us in 2022.
Okay, that's helpful. Thanks guys.
Thank you. I'd like to turn it over to Mr. Charlton for the web questions today.
Yes, thanks very much. So we have several web questions submitted and we'll go through the ones that haven't already been addressed with the voice questions here. So the first was in reference to licensee activity. One question submitted was asking how many of the 48 current active licenses are actually paying royalties and how many are what we consider as dormant or on pause. And so looking at that portfolio of licensees about 10 or so, I would classify as being slow in starting their commercialization with smaller scale machinery is still trying to find their niche.
We have about 10 to 11 larger payers that we're seeing rapidly accelerate their royalty quarterly payments and then the rest have been growing modestly. That all being said, we have 3 large scale machines set for commissioning within the coming, call it, 2 to 3 months here, we should hypothetically ratchet up the amount of royalty potential for our business immediately. And as I mentioned, we're looking to hopefully the Cure new large scale orders before the end of Q4 and there's the prospects of delivering those machines in a very consolidated timeframe to again ratchet up the royalty potential for fiscal 'twenty two. So as with all projects, some of them will be outstanding and we'll get great success from them. But like anything, some won't be as successful.
But that gives you an idea of where we stand today. The second web question submitted was pursuant to our Q3 numbers and asking if those numbers our likely indicator of our performance moving forward through Q4 and into fiscal 'twenty two. So as Dan alluded to earlier, our cost structure is we're stable here, been forthright with our bullishness on near term opportunities to finish off Q4 and into fiscal 'twenty two. So assuming that this pipeline converts into tangible commercial success, we do believe that our numbers going forward it should be positive and be moving in the right direction. Dan, do you have any further comment you'd like to
share on this question? That sums it up. We've pulled back on expenses at NutraDryde and we have the tools we need to scale the business now. We got to go execute, but everything's headed in that direction.
Great. Okay. Another question asked when will the AstraZeneca proof of concept work be completed? That's underway basically this week, and we anticipate that proof of concept work to be completed before the end of calendar year, we may decide to do a few different iterations of the trials which they're requesting. And then following that, of course, we're hopeful that they'll acquire their own testing machinery or continue testing via ourselves or Orgea, Lylefeld, our partner in the pharma space on a paid basis.
More to come on that later we hope. Next question was asking about the bulk sales manufacturing model at NutriDryde. And so I'll pass it over to Dan to just briefly explain the benefit upselling bulk versus some of the branded opportunities.
Yes, it's a pretty simple sales proposition. When we produce our Moon Cheese, the first thing thing we do after we take it off the drying line is it gets packed into bulk boxes and then it will sit there for a few weeks before it heads over to seasoning and packaging for our finished it's good. So we now have customers that want that dried cheese and they want to use it for inclusion in snacks, trail mixes, things like that. So it's a typical B2B sales model, we take POs. We don't have long term contracts in place, but we take POs we're very excited about our business.
But before proceeding with our call, I would like to remind everyone that, we're very excited about our business. So we don't incur freight. And it's a clean margin when compared to our branded product sales, so we don't incur commissions, we don't have trade spending, we don't have to promote that it's a clean margin with an invoice and a payment. So that's the general model. There there's a lot of interest, I think I mentioned earlier in this kind of inclusion for snacks and mixes and things like that.
So we're now out talking to other snack companies, trail mix companies, some of the big players in that space trying to get their interest in using our format of cheese is part of their innovation pipeline and we're getting some good results there. So we hope to see that continue.
Thanks, Dan. One of the questions that came through the web portal was do we plan to access or increase or improve the access to retail shareholders in the U. S. Trade EnWave, and I'll just in short respond that yes, due diligence is underway trying to determine the best option to improve the ability for retail shareholders in the U. S.
To trade our stock versus over the counter. So, yes, more to come on that hopefully in the coming months here. Next question is to do with expectations that range from the ongoing litigation. And obviously, I can't comment further than what we've already discussed on the conference call today in terms of an update, as promised, we'll provide pertinent public updates as they come forth. That what I also want to add is that this effort really sets a precedent that we're not huff and puff and threats that we're going to Sioux people, if we feel they're in breach of certain agreements, will actually follow through.
And the reason we'll follow through is because we absolutely need to protect the cornerstone of our business, which is our intellectual property portfolio, that's what allows us to charge royalties to these large companies the REP Technology for their commercial benefit. And then last question that has been submitted that I'll answer today is regarding the U. S. Army asking, okay, well, great prospectively they'll move forward with a large scale machine if the funding is released as they have communicated to us in fiscal 'twenty two, late fiscal 'twenty two, how big can this be? How many machines can the industry partners potentially buy for the production of military rations and so to be honest, we don't know how big this is going to get.
What we do know is that the 2 primary applications that have already been developed, tested and approved for inclusion would require at a minimum, 1 large scale machine, likely 2. And so we're talking about 2 components when there's many different ration packs with many different components and we know that the product application development continues at Natick, where the folks at the U. S. Army are developing other potential inclusions. And in all likelihood, it will be a number of industry partners producing these bespoke inclusions for future use.
So in short, we know that there's potentially one coming down the pipe for next year. How big can this be? We don't know. Okay, with that and answering all the questions submitted through the web portal, I'd like to thank everyone for their participation today and allowing Dan and I and John to provide you with a pertinent update on both business units and the direction that EnWave Corporation is going, reiterate our confidence in how the cost structure has evolved and our outlook with the robust pipeline we have in both businesses. Thanks very
much. Ladies and gentlemen, thank you for your