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Operator: Greetings, and welcome to the EnWave Corporation Q3 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to CEO, Brent Charleton. Please go ahead.
Brent Charleton: Thanks very much, and good morning to everyone who has joined us today for EnWave Q3 fiscal 2025 quarterly conference call. We are pleased with the performance in Q3 with modest improvements year-over-year and consistent revenue quarter-to-quarter as a result of the initial manufacturing and fabrication of two 60-kilowatt machines during the period. Thus far, in Q4, we have continued to expedite completion of the 60-kilowatt machines for our royalty partner, MicroDried, and we're likely to recognize many 10-kilowatt units that are planned for commissioning prior to September 30. Further, we are optimistic regarding additional REV equipment purchase orders, which I'll discuss in more detail momentarily. As always, the information we will present today contains forward-looking information that is based on our management's expectations, estimates and projections. Our statements are not a guarantee of future performance and involve 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 today will be in Canadian dollars, unless otherwise noted. EnWave's third quarter was solid, and we anticipate improvement in Q4, if we were able to transact on a large-scale REV machine opportunity that we are currently negotiating. Given that we've already begun the fabrication of a 100-kilowatt nutraREV machine and have bought back 120-kilowatt quantaREV unit from a U.S. cannabis company, which has already been refurbished to good as new, there is an opportunity to recognize material revenue in Q4 if we sell these machines. Additionally, we continue the manufacturing and fabrication process, as I just spoke about, for each of the 60-kilowatt machines on order for MicroDried, and are scheduled to commission up to 5 10-kilowatt machines before September 30. Our revenues in Q3 were $2.75 million, up 5% year-over-year. Royalties were flat year-over-year due to the termination of the U.S. cannabis partner license, offset by growth in royalties from other partners. We expect continued royalty growth from existing partners through Q4 and throughout fiscal year 2026. Our gross margin was slightly down in the quarter, tied to a bulk discount applied to the MicroDried purchase of two 60-kilowatt machines for their new dairy processing facility, and we expect gross margins to rebound in coming quarters. Year-to-date financial metrics, including revenue, royalties and margin generally improved compared year-over-year. In Q3, and to the date of this call, we confirm the purchase of the two 60-kilowatt quantaREV machines and two 10-kilowatt REV Machines by MicroDried, EnWave's most material royalty partner. And MicroDried intends to expand their fruit and vegetable production capacity, as well as initiate the production of numerous RevDrive dairy applications at a second RevDrive facility being built out in Washington State currently. Additionally, the 120-kilowatt quantaREV unit to Procescir of Mexico has now been delivered, and is expected to be commissioned this month for immediate commercial production. Procescir signed a supply agreement with a leading U.S. snack company that initially requires 60% to 70% of the annual capacity from their new 120-kilowatt line. But we believe the supply arrangement could expand to be more than a single 120-kilowatt machine capacity in 2026. During Q3, we also signed several license agreement amendments with MicroDried Procescir, and Creations Foods, respectively. The amendment with Creations Foods allows for the production of cheese snacks made from block cheese to now be produced as pet treats. The amendment signed Procescir allows for the expanded production of a number of new fruits and vegetables in Mexico for their clients. And lastly, the amendment signed with MicroDried grants the exclusive production rights for apple products in Washington State, Idaho and Oregon in exchange for meeting new and incremental minimum royalty payment requirements. MicroDried also signed that new license with the rights to produce a number of new dairy products at that facility in Washington state, and this license has stand-alone minimum royalty requirements for each product application category licensed. Subsequent to Q3, we sold two additional 10-kilowatt REV Machines to Dairy Concepts, Ireland. They will now operate six 10-kilowatt units for the production of their premium cheese snack SKUs. Dairy Concepts has had tremendous recent success in Marks & Spencer, the largest retail chain in the U.K., and have one additional material distribution, with several other leading grocery and convenience store chains in Europe. In Q3, REVworx continue to service a major U.S. snacking company, producing a significant volume of natural fruit snacks for expanded commercialization. We expect this toll manufacturing relationship to grow in coming quarters as the continued rollout by the U.S. Snack Company Evolves. We are developing new opportunities for REVworx with ingredient and snack companies in North America, with three companies considering production in Q1 of fiscal 2026. REVworx continues to be an important sales tool for our team, allowing them to showcase large-scale REV technology. To date, this fiscal year, we've confirmed three large-scale REV Machines and six 10-kilowatt units. We're currently negotiating with four counter-parties regarding potential near-term large-scale REV Machine purchases. Now our sales pipeline is far more expansive in these opportunities with our growing sales team actively cold calling new prospects, attending multiple international food technology trade shows, triggering outbound e-mail sales sequences and cultivating our relationships with current royalty partners, to help them plan for manufacturing capacity expansion. We are targeting superior machine sale performance in fiscal year 2026, both in the number of large-scale units and 10-kilowatt sales. And of these prospective sales, we anticipate at least half of these potential orders to come from existing royalty partners. In regards to market verticals in which we see the most promise for growth, fruit and vegetables, dairy, pet food, alternative protein, meat snacks, baked good applications continue to dominate our opportunities. Geographically, our new hire in Europe to source several high potential projects. I'm excited to get over there in September to support her by attending PPMA in the U.K., the trade show forthcoming. Moreover, we sourced several legitimate projects in Australia recently, ongoing deals in South America, Japan, North America, and a new territory for us, Northern Africa, in recent months. This summer, we attended the IFT trade show in Chicago and most recently, the AI FST Conference in Australia, which both yielded new prospects for conversion in fiscal year 2026. Forthcoming, we are attending, as I mentioned, PPMA in the U.K., and then Food Tech in Mexico, SupplySide Global in October and PLMA in Vegas during November. Our successful, fully subscribed 3 million, LIFE Offering closed yesterday, enabling the manufacture of two large-scale REV Machines for our inventory, and will allow us to deploy large-scale machinery more expeditiously. It takes us about 6 months to build large-scale REV equipment, prolonging revenue recognition if machines aren't ready made for sale. This capital raise was not a necessity for EnWave, but it advantageous to support faster, potential growth of our royalty base given our robust sales pipeline. We are very pleased with the result of our life private placement and the support of Clarus Securities throughout the process by attracting new Canadian institutions to become shareholders, all of which have communicated their intent to be long-term investors. On the Investor Relations front, we are confirmed to participate at the Small Cap Discoveries Conference in Vancouver in October, as well as the CAN-TECH Conference and the MicroCap Club Conference in Toronto, both in September and October, respectively. And overall, I'm very excited about our growth prospects. We are well capitalized for commercialization of REV technology should -- that it should accelerate, and the majority of our current royalty partners are making positive advancements. If we execute operationally by closing these sales, the cadence and number of machine transactions should elevate our financial performance in coming quarters. Now with my summarized update complete. I'll now ask Dylan to summarize EnWave's detailed quarterly financial performance.
Dylan Murray: Thanks, Brent. Good morning, everyone, and thank you for joining us today. Please note that the figures I'll be discussing can be found in our press release from yesterday, and in the financial statements and MD&A filed on SEDAR, and all amounts are in Canadian dollars unless otherwise noted. I will 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, both in the press release and in our MD&A. Also, please note that the comparative period I'll refer to throughout this presentation is the prior year Q3 ended June 30, 2024. Revenues for Q3 were $2.7 million compared to $2.6 million in Q2 2024, an increase of $122,000, or 5%. And during the period, there was the completed fabrication of a large-scale 120-kilowatt REV Machine for Procescir of Mexico, and the initial fabrication of two 60-kilowatt REV Machines sold to MicroDried, EnWave's longest-standing royalty partner. There were no 10-kilowatt sales recognized in Q3 2025. Revenue from the sale of small-scale 10-kilowatt machines is recognized at a point in time, which is generally upon machine commissioning at the partner's facility. There are currently five 10 kilowatts, one to Hokkai Yamato, two to MicroDried, two to Dairy Concepts, that are in the process of being delivered and on track to be commissioned by the end of the fiscal year. During the quarter, EnWave bought back a 120-kilowatt machine from an Illinois U.S.-based cannabis company that is recognized in inventory at June 30. As the fabrication of this machine has been completed, most of the associated revenue will be recognized upon the sale of the machine. Third-party royalty revenue was $431,000 in Q3 2025, compared to $425,000 in the comparative period, an increase of $6,000, or 1%, and royalties grew due to the increased number of royalty partners and the expansion of both product sales and REV Machine capacity utilization for the quarter, offset by a decrease in royalties associated with the license termination and machinery buyback from the Illinois U.S.-based cannabis company during the period. And for the 9 months ended June 30, third-party royalty revenue was $1.5 million, an increase of $145,000, or 11%, relative to the comparative period in the prior year. As our royalty partners grow their businesses and increased capacity utilization of installed REV equipment, further REV installations will follow from new sales contracts and material royalty growth should continue in the coming quarters. Gross margin for the company in Q3 2025 was 19% compared to 44% in the comparative period. The decrease in margin was primarily a result of the production sales mix, particularly the absence of 10-kilowatt sales during the quarter, and a high-margin large-scale machinery sale in the comparative period. Additionally, a bulk discount was given to MicroDried on the two 60-kilowatt large-scale machines. SG&A expenses, including R&D, were $1.4 million for Q3 2025, an increase of $40,000 from the comparative period, with the increase primarily related to sales personnel, increased trade show attendance, and the timing of patent maintenance fees, offset by a decrease in legal fees. The company will continue to further invest in sales and marketing activities in the coming quarters. Adjusted EBITDA is a non-IFRS financial measure, so please refer to our MD&A for a reconciliation from GAAP net income to adjusted EBITDA. The company reported an adjusted EBITDA loss of $570,000 for Q3 2025, compared to an adjusted EBITDA of $85,000 for Q3 2024, a decrease of $660,000 over the comparative period. The decrease in adjusted EBITDA is primarily attributable to resale of a high-margin large-scale machine in the comparative period, and the absence of small-scale machine sales in Q3 2025, compared to two that were in Q3 2024. And we finished Q3 2025 with cash and cash equivalents of $4.6 million and a net working capital surplus of $7 million as of June 30. EnWave has the credit facility with Desjardins working capital purposes, and the amounts available to the company under the credit facility is calculated as the lesser of $5 million, and a function of royalties, receivables and inventory. As of the date of our quarterly filings, approximately $2.1 million is available to the company at a rate of Canadian prime plus 1.5%, and the facility remains undrawn to date. Subsequent to the quarter, the company entered into an agreement with Clarus Securities as lead agents and sole-book runner, pursuant to which Clarus agreed to sell on the best efforts private placement basis up to 7.5 million common shares of the company at a price per share of $0.40 for aggregate gross proceeds to the company of up to $3 million. The offering closed yesterday, August 21, and was fully subscribed. The company intends to use the funds to increase inventory levels by manufacturing two large-scale machines. The manufacturing and fabrication process takes approximately 6 months per machine to complete. This investment, combined with an expanded marketing presence through increased trade show attendance and sales personnel is designed to ensure faster order fulfillment and support prospective future machine sales. And additionally, as the amounts available to the company under its credit facility with Desjardins is calculated as the lesser of $5 million and a function of royalties receivables and inventory, the company expects that additional credit facility availability will be unlocked on completion of the offering and the manufacturing of two large-scale machines, further bolstering the company's ability to accelerate growth while providing flexibility to optimize its capital structure as appropriate. With our cash on hand as of June 30, together with the recently completed private placement, and anticipated expanded amount available under the company's Desjardins credit facility, we believe EnWave is well capitalized to accelerate the execution of its strategic growth initiatives given the current opportunity pipeline. And finally, subsequent to the quarter, the company signed a new lease agreement at 1639 Fosters Way to be used for machine manufacturing. The manufacturing lease is closer to the company's head office and concurrently, the company signed a termination agreement for its existing manufacturing facility. There's no change to machine manufacturing capacity or capability with the new lease.
Brent Charleton: Thanks very much for that, Dylan. I'd now like to open the call for your questions. Operator, please provide the appropriate instructions.
Operator: [Operator Instructions] We have reached the end of our question-and-answer, so I'd like to turn the floor back over for any further or closing comments.
Brent Charleton: There is actually two questions being submitted through the online submission. So I will address those. The first question was, can we expect an acceleration in the sales of REV Machines in the near future, either from existing customers, or from new customers? And my answer to that is, yes. My personal expectation is that there will be an acceleration of the sales of REV Machines throughout the rest of this quarter and into fiscal '26 based on the robustness of our sales pipeline. And if we look at the breakdown of that pipeline, about 50% of the opportunities, looks like they'll come from existing royalty partners buying additional machines because they've exceeded their current manufacturing capacity based on growing market demand for their products. That's an important thing to consider given that those repeat orders, once those machines are turned on, will likely accelerate royalty growth faster than a new project where that adopter of the technology still has to organize their marketing gain distribution and slowly integrate their products to market, that's an exciting position to be in for the company. The second question is here, what is the biggest obstacle for achieving faster growth for EnWave? And how is this being addressed? And I'll respond to that and state that the technology is mature. The economic models have been developed and are attractive enough to commercialize several different products and different market verticals. I wouldn't say that there's one specific biggest obstacle. There's just a myriad of certain challenges that arise at varying points within a project, whether that be management changeover, restructuring of the counter-parties, looking at what type of products that particular company wants to bring to market? Are they more commoditized good company, versus a premium product company? And those are all discoveries that take place throughout the dialogue. And so there isn't one specific obstacle for these projects. It's more over just the experience of dealing with these different challenges throughout, and working to overcome them quickly to try and convert faster. Okay. I do not see any other questions submitted at this time. But as always, Dylan and I are available to answer questions offline. I'd like to thank everybody for joining us today on our Q3 fiscal 2025 conference call. You may all now disconnect. Thank you.
Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.