EnWave Corporation (ENW) Earnings Call Transcript & Summary

Just a few comments, everyone. Thanks for joining us today before we get this going. Brent will be presenting, and we will be discussing the business and opportunities and after that, we are taking questions from the audience. So please type your questions into the Zoom Q&A feature. Don't use the raise your hand feature, I don't know how that works or I ignore it. So type your questions into the Zoom Q&A, and we will try to get through them all. If your question or a similar question has been asked, I may hop over it or if the point has been addressed. And -- but I highly encourage lots of questions from the audience. You guys have great questions, and it really adds a good new dimension to the interview here. So I appreciate everyone for joining us. Brent, are you good to get going here?

Yes. Let's go. Let's do it.

All right. Good day. I'm very happy to have EnWave join us today. I've known the company for many years, and the past year was highly transformative for the company. I've got CEO, Brent Charleton, on the call today to discuss what all happened last year and how this sets the table for growth this year and beyond. The company has great technology and an exceptional business model with both hardware sales and recurring high margin revenues. EnWave is the global leader in application of microwave dehydration for agri food, cannabis and other industry with its unique royalty-based business model. I'm Martin Gagel with Market Radius Research. It's Wednesday, January 24. Please remember this is neither a recommendation or investment advice, we're here to learn about the company. Brent, great seeing you again. Thanks for joining us. You've been quiet recently, but also quiet and very busy over the past years. So how are things going? And please let us know what's going on.

Things are going extremely well behind the curtain and you mentioned the word transformative in the introduction, maybe perhaps I can expand upon that. In the last 12 months or so, we went through the process of winding down a subsidiary that wasn't performing well and getting our foundation of the pipeline to sell REV technology or proprietary dehydration platform, to a number of blue chip companies and putting the business in a situation where we felt comfortable actually investing time, money and energy telling the story back again in the capital markets. And we only started doing that about 1.5 months ago given that we have rightsized our expense structure, our pipeline looks strong. And we feel that moving forward here, we can hopefully provide better financial results in the coming quarters and years. So I'm going to provide the corporate summary through our presentation today. I'm assuming that much of the audience are current investors, shareholders or stakeholders in the business, but some may not be. So I'll give you a brief overview of the technology and the model of the business. And then like you said, interactive dialogue with yourself and answer any questions that we have from the attending audience. So your standard disclaimer, likely we'll be providing some forward-looking statements in this presentation. Please refer to our AIF as filed on SEDAR for all the risks associated. Our business is founded on a proprietary technology, vacuum, microwave, dehydration and more importantly, the intellectual property that protects our specific apparatus designs and processing protocols that we make available primarily to large food manufacturers, several cannabis manufacturers and on a sort of blue sky perspective evaluation in the pharmaceutical space. Now when you look at the incumbent drying technologies in the food industry, freeze drying and air drying being the 2 dominant ones. They have several deficiencies in that they don't provide platforms, specifically for innovative product development. In the case of freeze drying, the process itself takes far too long and even air drying, which is considered one of the more fast options when compared to vacuum microwave it still takes 7 to 8x longer. The machinery is larger with the incumbents than it is for vacuum microwave dehydration, producing the same amount of product. And for air drying, definitely the end qualitative results are underwhelming. Freeze drying products tend to have higher nutritive value, but the textures, the formats still aren't comparable with the quality and the variety that our patented REV vacuum microwave technology can provide to the users. So when we look at the technologies' principles, the vacuum application allows us to control the boiling point of water at specific temperatures. And this is incredibly important in the retention of the nutritive values of set products. In the cannabis industry, it's very important for keeping the drying temperatures low to maintain the optimal levels of terpenes and cannabinoids. Certainly, that's the case in the pharmaceutical industry, whether testing the drying of vaccinations and other pharmaceutical products. You want to make sure the bioavailability of the ingredients are high. And then the usage of microwave energy as a method to excite the water molecules before removal is unique in that it penetrates the entire product load, which allows for precise moisture control in the final product, which is something that cannot be achieved with those 2 incumbent technologies that I mentioned. With freeze drying, you're supplementing the product, so gradually drawing the moisture from the outside to the center of the product and if you stop at any given time before you get to a very low final moisture, you're going to have uneven moisture content. And with air drying, you're blowing hot air over it, degrading the quality and similar concept, you're going to have a wetter center than you have in terms of the moisture content on the other parts of the product load. So we have companies producing, as an example, dried fruit that's at 12% final moisture content, 7, 5, 3, depending on what application that final product will be used for providing our users with flexibility. Further on the value proposition of our specific vacuum microwave drying, and I'll take a moment to say that the competitive landscape for vacuum microwave has been consistent for the past few years. A number of companies have made themselves known that they wish to compete in the space. But from our due diligence and the due diligence of our current license partners, we found that they have been unable and successfully scaling up vacuum microwave equipment that can provide reliable and scalable drying. One thing about vacuum microwave, if you don't get it perfectly correct, you have uneven distribution of microwave energy under vacuum, which can cause extreme hotspots and extreme cold spots and in many cases, burning the product load, making it not feasible. And that's the genius of the intellectual property and the implementation of that intellectual property in that. Our operating lines that are now, I think, the longest term has been since 2012 have consistently provided top quality, consistent results.

Brent, first, on the IP, how -- you've been working on this technology for a while. So you've got original patents and you've layered on new patents since then. What does your patent portfolio look like and how long dated is it?

So the portfolio consists of 18, we call them patent families. And these families are filed for in a variety of different international jurisdictions. In an effort to obviously protect the rights that we're granting through these licenses. The majority of them are process patents, but the most integral are the apparatus patents. And the apparatus patents tied to our nutraREV and quantaREV aligns extend out to 2036, 2037, which aligns with the term of the license agreements that we have with all of our royalty paying partners, and that's uniform across every single license in that every partner who adopts our technology has agreed to pay a royalty in whatever form that may be in the individual license for the life of our IP, meaning that if we file for an additional layered on patent whether it be process or apparatus in the future and is successfully granted, that will then further extend the time line of royalties being paid by all of these partners for another 20 years. So we've still got a lot of runway for royalty collection. And of course, we're continuing to invest and look at different ways to innovate and make our machines more efficient and useful to the commercial partners that we have.

And beyond the patented IP, you've got a lot of operating knowledge. Like you said, like if you do it a little wrong, you blow up the -- like we've all blown something up in our own microwave oven, I'm sure it's similar, but bigger magnitude of what could go wrong. One of your production lines. There's a lot of sort of soft knowledge that on actually how to run bananas or strawberries or whatever you're working on. You've built up a lot of internal expertise on how to work with new products and how to achieve certain results.

That's correct. Yes. And we've cataloged all of that incredibly valuable know-how and then use it to our advantage to shorten the lead time when we're doing product and process development for different parties. That's critical. I mean you used the cannabis industry as an example, only been working there for a few years. And when we first started doing processing, we had no idea what the optimal processing parameters would be. And so thankfully, given the opportunity to collect the quantitative data, for different protocols and obviously implement that at scale with our larger machinery. We now feel incredibly confident that we know the ins and outs of optimizing the use of REV technology in that space. And likewise, for different food applications, it's very much similar.

All right.

So this slide shows the different verticals in the food industry that we're currently active in. Historically, the majority of our license partners have come in the fruit and vegetable area, both for direct-to-consumer products and also selling on a business-to-business basis, both ingredients and snacks primarily. In the meat and seafood space, we've had companies collaborate with us, but Frankly, we haven't had historically that much traction. We expect that to change in the very near term here. We'll wait to consummate certain arrangements and then share more details, but we've had breakthroughs on the processing protocol side, which lends itself well to validate certain business cases, which should lead to capital investment in future REV machines. In the dairy industry, cheese has been a very successful snack product launch with several companies internationally. We have yogurt products now in the market. We're working to gain more partners in that area. And we're also looking at different formats of both high-value milk protein formulations and also some alternatives to dairy like plant-based dairy alternatives to mimic the products that we've already produced in full dairy farm. And lastly, one area, which is newer. And again, we feel there's opportunity for growth in this year is in the baked good and noodle area, where, again, the flexibility to produce end products with different variations of moisture content and that will affect the textures, of course, have been deemed of value to certain players, and hopefully, we'll be announcing some new deals in that area later this year.

I never thought of that. Pasta obviously has to be dried and that, I guess, you mentioned pasta, that could be -- I don't know, they air dried or something now, and they could run it through one of your machines?

Primarily. And the folks that are interested are tech in that space are looking at premium ramen noodles. So ramen noodles that when you rehydrate them by cooking them with whatever toppings are included, will feel and taste more like a fresh ramen noodle than I remember the Ichiban that I used eat as a college student. That was -- you put it in the pot, and you just eat it because you need the [ sauce ] and not necessarily the culinary experience. And so that's a product application that we're hoping to see more broadly sold later this year.

Well, on a personal note, I am looking forward to that product.

I'll send you some samples when it comes to commercialization. We did some work updating the TAM. And so from the reports that we've been able to source, the new freeze drying spend, so the CapEx spend on new freeze driers as of 2023 was about $4.3 billion. We haven't included air drying equipment in this equation, showing us that we have a small, small, small sliver thus far in terms of machine sales per annum. I mean last year, we were about a $12 million business, $10.5 million of that, let's call it, on machine sales. $1.5 million in third-party royalty revenue. And that means that we need to do a better job of accelerating growth in sales of our technology and competing against the existing freeze driers. And so as we get through this presentation answering questions, I'll definitely touch upon the strategy moving forward to do that. I mean historically, we've sold 4 to 6 large-scale machines in the past few years. And it's like, how do we get it from 4 to 6 to 10 or more machines and not just continue to take step by step in growth, but really stimulate that. So I'll talk about that near the end of the presentation. And in terms of the size of the actual products that the value of the products that are dried and then sold. I mean the food industry is already quite large and $36 billion of freeze dried foods sold per year. I expect it to grow significantly at 7.6% CAGR. Cannabis market, and we participate in that, but I really hone in on the food industry right now, cannabis, who knows how fast it's going to grow [indiscernible] between now and 2030. And so as we move forward, again, our primary focus this year will be on food. And if serendipitously, we sign cannabis deals, great. We'll put some effort towards that. So we have unique technology, certainly a unique business model. And this is where sometimes the sales process gets prolonged a little bit as folks do their due diligence on alternative technologies is that we have that royalty component tied to the gross revenue produced by each license partner, typically between 2% and 5% or the royalty structured as a per pound or per kilogram fee. And then lastly, certain new licenses, which won't be affected necessarily from like the lack of success or the large success of our partners is based on time. So every quarter, they pay a set fee and that goes consistently through the term of the license. But that being said, during the sales process, we need to be able to justify that carried interest, which is supported by the ongoing technology support, 24/7 remote support on all machines, making sure they're operating efficiently and optimally. And ultimately, sharing -- mentioned how are you expanding your intellectual property protection and new innovation. Well, when we do find something that's innovative and creates value, we share that make it available to all parties that are appropriate. We have seen a good growth in royalties in the past few years as illustrated on this slide. And that's our primary focus is diversifying the portfolio and growing it as fast as we can. The toll drying service that we established a few years back that we branded REVworx has done some very good things for us as a sales tool, having many companies come through and have that risk that they had perceived deteriorate and lower and move forward with next steps during the sales process. We've done a number of line trials in small-scale production runs for Canadian entities. And for 2024, right now, we have lined up a very large dairy company, a very large cranberry company, and we're hoping an instant noodle company for a few line rents for the first half of this year. Ultimately, though, at full capacity utilization, it's going to be de minimis in regards to impact on revenue. I mean the max revenue we forecast for that particular operation, it would be around $2 million to $2.5 million. Whereas every time we sell a large-scale machine, it's going to be north of CAD 2 million as we're selling at around USD 2 million per unit.

So on the cold drying, it's, however, a little bit of business, but really, it's more for business development work clients can then run small batches and sort of do some test marketing and to get more comfortable to them to really pony up for the big spend on a machine and the ongoing royalty.

Precisely. If it's convenient enough to do the processing in Vancouver and the economics work in the initial stages, then this is a great platform to launch new products to then justify the business case and allow them to feel comfortable about deploying CapEx, bring manufacture in-house. And it will continue to act in that manner. I don't foresee clients of REVworx to be long-term partners necessarily, but just using it just for what that -- what I just summarized.

All right.

So further to the technologies value proposition, like why do folks choose to work with EnWave and entering these long-term technology licensing arrangements. I have to say that our team has done a phenomenal job historically in the support, again, both on the technology use, training, product development, process development and ultimately, that know-how, which we've already spoken about that we've built over the past dozen years or so, allows for quick implementation and hopefully launching products to market that resonate with each of our license partners and consumers. Our sales process varies in time. It's starting to shorten given the number of commercially successful products in market. But it usually starts, as we talked about, collaborative R&D, people coming to our innovation center in Vancouver, doing product development or renting a machine, a 10-kilowatt small unit replacement at one of their facilities after the process protocol and products have been to done. We look at the COGS models and then forecast what the payback period could be on the CAPEX, and assuming all those boxes are ticked and derisked on the buyer side, we are concurrently negotiating the license agreement with the commercial terms, including what area they can use the technology, what products they can produce. And of course, the structure of the royalty that they will be paying ongoing. And once that's done, we're sending machines out for installation and support by our group and then continue to support thereafter. We want to make sure they're using those machines as much as possible and that there are no hiccups along the way.

Brent, when you reach out -- you've been doing this for a while now. And when you reach out to companies, do they now kind of know who you are the basic technology? Or -- or do they -- you have to sort of walk them through the basic steps of what you do and it's brand new to them? Or has the understanding within the food industry sort of accepted this as an alternative or an option for drawing?

We are far more known now than perhaps we were even 3 years ago. As a function of partnering with more blue-chip license partners, our portfolio of licensees used to be relatively quite unknown business-to-business co-manufacturers or SMEs when they're going to direct-to-consumer. But more recently, we've attracted some well-known names. And of course, that goes out and forming news releases where other competitors are monitoring what they're doing. And as a result, we're getting a lot more inbounds from larger companies than we had in the past. So there still is a learning curve certainly once you start the dialogue. But at least they come in with some baseline understanding of what the technology could prospectively do for their individual businesses.

And I guess they appreciate that there's not -- other large players are already using it. So there's not -- you're not the first guy trying this out, that other big names are using it. So there's got to be some level of comfort that you can go industrial scale on this.

Very much so and they can collect data from certain consumer products that are already out there to see what the velocities are and how well they're doing in the market. And from a category standpoint, how is the category growing or not growing and whether it's time to invest. And of course, if we partner with a blue-chip company that's already in market, they have to determine do they want to go and compete with them or go a different direction with products that are complementary, but may not be exactly the same.

All right.

So this slide provides an overview of some of the companies, the most of the companies that we have license agreements with and have purchased machinery and are commercializing products in different verticals within the food space. On the right, you can see obviously, a few of the packages that are already available. And I could talk about individual companies here, but maybe I'll save it for the Q&A for folks to ask about. From a high level, just more recently, we finished the large-scale installation at Calbee in Japan. Bill's been operating large-scale machinery since June, July of last year and growing capacity utilization. MicroDried, which is one of our longer-standing partners is running a great business, but B2B and very quiet, not necessarily promoting who they are, supporting very large consumer packaged goods companies. So they sell to the biggest cereal companies in the world. It's not [indiscernible] or General Mills doing the manufacturing, they're actually buying the products for MicroDried and, of course, driving royalties for EnWave through that structure. And then there's a few other companies that just this year have invested in, I would say, more material marketing and sales efforts. Alpina in Colombia for cheese snacks and cheese snack mixes. Say, Bridgeford, who will be doing the Cheesecake production for the U.S. Armed Forces, gets their machine installed in February, March of this year. So looking forward to that. Yes, there's -- I mean I can go on and on, there's 50-odd partners for updates. But overall, we're seeing good royalty growth within our current portfolio and communication and guidance based on what they know for volume estimates for -- hopefully, we see additional purchase orders on large machines within the year. Our machines themselves, we have 3 primary scales. We would recommend that the [indiscernible] primary skills given the additional cost of changing it from 60 to 80 or 100 to 90. But the 10-kilowatt unit is primarily used for product and process development. We have over 40 of these machines deployed globally with different companies. Many of which are only using them now for product development, whereas in the first instance, they were using it for commercial production and then graduated on to a larger scale machine. We have 18 large-scale machines deployed right now. and a number that are just being started up, I mentioned Bridgeford as being one of them, Calbee more recently another that will add to that amount. And our large-scale machines coming either the 60-kilowatt or the 100, 120-kilowatt range. The size of these machines are optimal when you max out the processing protocol times. If you make a machine that's too big, you're not really harnessing the full energy utilization available in the machine. And so we won't build larger machines, more so we'll just work to try and be efficient in terms of footprint utilization, putting multiple machines side by side within the processing facilities of our partners. So right now, our manufacturing capacity with existing personnel in our expense structure, which we've done a good job of reducing the past year, significant reduction in expenses could produce up to 10 large-scale machines, and that is -- aligns well with our key suppliers for stainless steel, magnetrons, power supplies, et cetera. with the ability to get to that point and deploy up to 10 machines per year. We're looking to grow our [indiscernible] portfolio, as I've alluded to prior, which will help smooth the quarter-to-quarter revenue. And historically, EnWave has always been quite volatile based on how many large-scale machines we sell each quarter, given that they're over $2 million a pop. And as I mentioned before, we're about a $12 million business that is impactful at this point. So as we continue to grow in advance as a business and get to the point where we're not generating 100 -- sorry, $1.5 million in royalty. But in a few years' time, get to the point where we're going to get $4 million to $5 million in royalty per year, which at that point would cover the majority of our expenses, those large-scale POs are less -- well, they're still important, of course, but less materially important on a quarter-by-quarter basis. By growing the royalty streams and reducing our expenses, we've also done a good job at maintaining healthy margin within the business. And on the machine sales, royalty, of course, is 100%. So on a blended basis, still a very strong margin at EnWave. This slide illustrates royalty growth from third parties as we've seen it. year-by-year, year-by-year fiscal. The material uptick between 2021 and 2022 was as a result of deploying, installing and having folks start up their machines during that period, which means that we sold them between, call it, 2020 to 2021. And we didn't sell many large-scale machines that were actually installed and used between 2021 and 2022, which then sees a small uptick for 2023. Now if we look to the next slide here, where we see a more material uptick in the number of kilowatts of machinery that we have actually deployed and installed between '22 and '23, our expectation is that we should see a more similar jump in royalty growth between 2023 and 2024 based on the increased installed capacity, but also on the increased capacity utilization from many of our current license partners. So looking back over a fiscal year 2023 and the highlights within Q4 more recently, we signed a new license with Michael Foods, which for those of you who aren't familiar, one of the largest purveyors of egg products industrially in the United States, and they're part of the Post Holdings ecosystem. And so we're really happy that we have this technology into their innovation arm and how that's proliferating into different parts of the business. We're hopeful that we'll see new projects outside of ag applications spawn and also the U.S. Armed Forces is very focused on introducing ag-based shelf-stable ration components in the future, and we're hopeful that Michael Foods can be a beneficiary of that need. We also are working right now with a major pet treat producer in the United States, and we're at the point where a decision is imminent on a go/no-go basis for large-scale machinery. And we're hopeful that this moves ahead. We're doing all that we can to ensure an amicable outcome on the negotiation side. And then lastly, in Q4, we did confirm another large-scale line for a company called BranchOut Snacks, which is also publicly traded on the NASDAQ. They are commercializing a line of high-quality fruit and vegetable snack products. They've got distribution into Walmart and Costco and a bunch of other meaningful retailers. And we've seen, as a result, on a quarter-by-quarter basis, their royalties continue to grow. We're very optimistic about this relationship and looking forward to delivering this next machine to them in the latter half of 2024. From a financial perspective, we had small revenue growth year-over-year in the continuing operations side. We had small royalty growth, and we showed positive adjusted EBITDA in fiscal '23 as opposed to a small loss year-over-year, which is good progress, but not good enough progress. We, again, need to accelerate the number of machines that we're selling in order to get to a better financial position. Few things that I'll touch upon before jumping into the summary regarding NutraDried, which was our former operating subsidiary producing the Moon Cheese product. For the longer-standing shareholders who know the struggles in that business, and that was the primary cause of the cash burn that we saw the past 2.5, 3 years, deciding to wind down that business and ultimately sell those assets in the early parts of calendar 2023. Having completed that transaction as of March and having the new operator in place with a reduced expense structure, we've seen good royalty payments through the continued sales of Munchies in the U.S. and a number of other co-manufacturing projects that are in the pipeline for the acquirer makes us believe that we'll continue to see royalty growth from them. Partly to do with the wind down, but we'll also be receiving up to an additional USD 700,000 in cash from the IRS based on employing folks in that business through the COVID pandemic. To date, we received just under USD 500,000 and anticipating that the remaining amount will be awarded sometime this calendar year, which obviously hasn't been attributed to our current cash position that we reported as of the end of the fiscal year '23 at $4.2 million. Again, no debt on the balance sheet. Having just talked about NutraDried and the plans moving forward, just to quantify the sales of the assets, we ended up selling one of the 200-kilowatt units to them as well as the brand assets and all of the other know-how associated for $2.6 million, the majority of that has been paid with the exception of monthly installments that we're receiving for the payment of the 100-kilowatt acquisition. So longer term, we have in the range of, call it, another $700,000 USD to be collected month-by-month and there's interest also being collected on that principle that's being paid to pay off the 100-kilowatt acquisition. With that sale of assets, really helped our team obviously tighten up the expense structure, but more so the focus from management and sales on selling more REV machines and driving the pipeline to expand upon our royalty portfolio. So what we look forward to in 2024, 2025, quite simple, sell more machines and do so on a less lumpy basis. And ensuring that the pipeline remains full, working through the sales process as fast as we can. Part of the plan for growth that, as I mentioned earlier, is that we are evaluating the possibility of hiring between 3 and 4 new technical sales, full-time employees that should be domiciled in specific regions. So we have boots on the ground to help accelerate these different projects. We have historically engaged with a number of third-party machine resellers to help bring in new projects and sell more machines, which has been fine. We've had a moderate level of success. But considering that they're also representing a handful of other technologies, most of which don't have a licensing royalty model to implement. They have to deploy their resources appropriately to the products they're going to sell the most of. And so we want to make sure that the folks that are working towards selling our tech are just focused on our tech and not others. And so that's part of our plan this year is to roll that out. And the second part of the plan is to continue the consideration of having machines ready for deployment once POs are signed to shorten the lead time of delivery, which obviously accelerates our royalty recognition on a percentage completion basis and starts the royalty generation with the purchaser sooner than we can now, which when we get a purchase order, the build time is still between 6 to 8 months before commissioning.

So just to clarify that, you're going to be building up a little bit of inventory or at least work in progress -- sort of key components. So that when you do get the purchase order, it's less time and until you ship it out the door.

That's the goal, of course, with our current cash position and our inventory level is the where they are. We're comfortable with our inventory being in around that $3 million mark. And near-term deployment opportunities for our 10-kilowatt inventory, we'll then turn obviously, inventory back into cash and then we'll allocate more of that commitment towards larger machine componentry versus the fleet of 10 kilowatts that we now have. So it's going to be a bit of a balancing act and being able to execute on, but that's something that we're focused on achieving, assuming that we consulate some of these larger near-term opportunities.

I would think if you've got a more steady production schedule on your manufacturing side that allows for better manufacturing efficiencies where it's not stop, go, stop, go, you're just continually in that process as long as you don't build too much.

Correct. Absolutely. And also, you can achieve economies of scale with supplier. So you negotiate better terms when you're buying 2 instead of 1 of whatever that widget may be. And we know what those savings are because we're constantly collecting quotes to make sure that our costs are always appropriate and based on the pricing strategy that we have. And so yes, more sales, the better, helps everywhere in the business. That's for sure. That's for sure. So path to profitability is to maintain, the expense structure that we have selling at a minimum, 4 to 6. 4 to 6 large-scale machines makes us a breakeven business for the year. And so getting past that point and selling more in any given year, obviously, is going to lead to profitability. So that's our focus, continue to use REVworx as a sales tool, which it has been for us the past few months. We see, as I mentioned before, some different new food application opportunities that we think can become material in the scope of our portfolio rather than just reliance primarily upon food, vegetable and dairy is driving the majority of our royalty generation. The competitive advantage and positioning of EnWave right now is still strong. We continue to monitor all new patents that are filed in this area through our IP lawyer, and we'll act if anything comes about that perspectively could be competitive at scale as we go. So I won't talk through -- our Board of Directors -- most folks on the line know who our director makeup -- who our director makeup is. But I just wanted to point out on the management team, Mehmet Sucu, and Dr. John Zhang, who have really been the drivers of the technology and process improvement that we've seen over the past 6 or so years and are the leaders, respectively, on the delivery of the machinery in Mehmet and John, the post sales, servicing and support and new product development and execution. So with that, I'll pause, and we can continue the discussion and answer any questions that there are.

All right. Brent, thanks that was, yes, quite in-depth there. Obviously, it was a hot topic a bunch of years ago, not so much now. Can you just give us a bit of an overview on the cannabis market? How is the traction and your success been in drawing it out and speeding up their inventory and drying process? And does that translate into better sales for your customers? Or just give us some perspectives on the cannabis market?

Short story [indiscernible] experience. Clearly, when it was hot, and we were a benefactor of that with -- to be frank, a completely overinflated stock price at the time, like more capitalization had nothing to do with our fundamentals, but just the hype in the space, where we sold a few machines to Tilray, Aurora, [indiscernible] at the time. Only one of those companies, [indiscernible] actually took a machine and installed it. And even them, they purchased too many machines. So it has to put some back, which we took a few back for paying on the dollar and then redeployed. But thankfully, they did use that one machine and collected enough quantitative data to prove out what we were promoting as a value proposition. And so they were in the space, and it was working. And then, we entered into a second large Canadian LP about a year or so ago, that's been installed. They can be used every single day, maxing out the usage of it because it is fast like we're talking 1.5 hours and it's producing smokable product with all of the quantitative metrics that they needed to match up with their current air dried product or room [ REV-dried ] product. And so it works. It works. There's a clear value proposition here. The challenge in the cannabis space is engaging now with companies that have enough capital to deploy new CapEx that feel comfortable perhaps displacing some of their current processes. And we do have leads and we -- and I'm sure there's going to be news this year in the cannabis space for us, but it's not a supreme area of focus for us because that quality of partner, it's [indiscernible] far between. [indiscernible] far between whereas we're quite busy right now with both our current food partners and new ones we're trying to convert.

All right? You've announced some big food -- agri food companies in the past, Dole is probably the most well-known of those names. Your arrangements typically -- have they purchase one and then there's sort of a follow-on order for expansion. Do we find out -- let's say, obviously, if you make an ongoing sale, we hear about that if it doesn't go ahead. Like how do we get updated on how those businesses are progressing? Obviously, well, things are in negotiation. You can't really comment on it. But I guess, more conceptually, what can you say on how that process works and keeping investors up to date?

Yes, that's a challenge. Part of it is a challenge because of the confidential nature of certain relationships where they don't want their name on a news release associated with a slowdown in their business development efforts. You used maybe Dole as an example, right, Dole marquee blue-chip partner has a machinery. Sales are growing, royalties are growing quarter-to-quarter. They've asked for a bit more time this year, latter half of this year to make a decision on their second large-scale machine but have also concurrently engaged with a number of our additional license partners in Mexico and other spots to do co-manufacturing for them, rather than buy more machines. They'll just leverage their available capacity and take more products to market. Both scenarios are driving royalties for EnWave. And so what I've been able to say, Dole's delayed 6 months. News release? No. Not able to do that. But today, I'm here, I'm providing you an overview and an update and those who are paying attention will understand the challenges that we're facing in that area.

All right. All right. You mentioned it briefly, you did several years ago have some news on the pharma side. Are there still opportunities there? And are you -- like how are you approaching that what could potentially be a gigantic market, but obviously, such a regulated industry and lots of hurdles getting into that. Is that still something on the future horizon?

Definitely an iron in the fire. But the strategy when we signed the joint partnership with GEA Lyophil, which is one of the largest sellers of pharmaceutical [indiscernible] equipment. They have a plant in Germany and they've been collaborating with several of the largest pharmaceutical companies globally on different vaccinations and what have you. And those collaborations are direct between those 2 parties with support remotely from our scientists to optimize processing protocols. If any one of those projects moves forward, meaning a larger scale, continuous line to be delivered to one of those pharma companies, then certainly that's an announceable material development, and we'll make sure that the capital markets knows that. If anything does evolve that way, we have an arrangement where the larger machinery, which has to have certain, obviously, certifications and it's going to be more expensive given the componentry that needs to be used. Would be built by GEA Lyophil, and so we would take a cut on the revenues that are generated through those arrangements.