Enwave Corp V.ENW

Corporate update

[4u]

As promised, 2010 is turning out to be an exciting year for EnWave’s stakeholders as we recently announced an R&D agreement with Nestlé AS, the world’s largest food and beverage company, and our share value has achieved new highs with improved trading liquidity. The Nestlé agreement represents a major step forward for EnWave as we continue to focus our primary business development efforts on collaborations with leading multinational companies in specific target market segments.

Since our last update in February, we have again made significant progress in all three of our business divisions and provided investors with a number of exciting announcements, including:

• the R&D agreement with Nestlé to test our nutraREV food dehydration technology in one of their corporate divisions;
• the successful completion of the next milestone in the development of our powderREV bulk powder dehydration technology for Danisco SA, the world’s largest producer of probiotics and food cultures; and,
• positive results from tests conducted on the first multiple-vial prototype of our freezeREV pharmaceutical dehydration technology.

I am extremely pleased with the results of our good old fashioned hard work, business development efforts, and innovative spirit, and I can see many more exciting developments shaping up for this company over the coming months.

nutraREVTM for Food Dehydration

In my last letter I stated that “I believe the targets we have set for the sale of at least two more nutraREV food dehydration machines, along with securing a new nutraREV collaboration for the food industry with a global leader are achievable in 2010.” With the announcement on July 26 of a Research & Development agreement with Nestlé AS, we have now delivered on the promised collaboration. We are very excited about this agreement as it marks a major step forward for EnWave in bringing nutraREV to the state of general market acceptance. It also sends a strong signal to other major players in the food processing sector, and I believe that this announcement could accelerate the discussions we currently have underway with a number of companies for both machine sales and collaborations.

In July we sent a strong team to the three-day Institute of Food Technologists (IFT) tradeshow in Chicago, Illinois. For the second year running we were extremely well received by attendees at the show, and this year we saw more senior people at our booth who stayed for longer in order to receive a solid understanding of our Radiant Energy Vacuum dehydration technology. We were accompanied by a representative of our co-marketing partner, Hans Binder Maschinenbau GmbH, who has the only other continuous commercial-scale vacuum microwave technology for food, called MIVAP. We continue to strengthen the relationship between the two companies as, together, MIVAP and nutraREV cover the entire spectrum of dried consumer food: literally, soup to nuts.

Our plans for a new pilot facility are coming along nicely, and we are on schedule to open the doors to customers this September. Our engineering partners at Williams & White are helping to build a pilot-scale nutraREV machine to demonstrate continuous processing and enable customers to produce test-market quantities of nutraDried samples for consumer focus groups before purchasing a nutraREV machine.

We continue to conduct a wide range of product development for interested companies in North, Central and South America, as well as Asia. Our first commercial customer, CAL-SAN, has made progress in establishing a distribution partnership to build market interest for puffed nutraDried blueberries, and we have developed great-tasting, healthy nutraDried banana and pineapple snack chips along with many other new product samples. Through these efforts, we continue to work toward our goal of selling two more nutraREV machines by the end of 2010.

powderREVTM for Bulk Powders

It has now been 15 months since we announced a collaboration to develop our powderREV bulk powder dehydration technology with Danisco AS, the world’s dominant supplier of probiotics and food cultures. In that time we have hit all the milestones the two companies set jointly, and have advanced from a small early-stage proof-of-concept machine that dried only grams of product at a time, to a working pilot-scale machine that produces kilogram quantities of extremely high-quality dried material.

EnWave’s engineers are now building a continuous version of this machine to be tested by EnWave and Danisco at our new pilot facility this fall. Following successful testing, we plan to ship the machine to a Danisco operating site for final evaluation. Our mutual target is to complete testing and enter a long-term exclusive licensing agreement for the global probiotic and food culture market by the middle of 2011, followed by the delivery of the first continuous, commercial powderREV machine in early 2012.

bioREVTM and freezeREVTM for Pharmaceuticals

In July we announced that we began testing a prototype freezeREV pharmaceutical dehydration machine that successfully dried three live or active liquid materials (“biomaterials”) in quantities of up to 100 vials per hour. This is a substantial breakthrough for the Company as it marks a significant scientific advance from our existing single-vial machine currently undergoing tests at our laboratory at the University of British Columbia. Although there are still a number of modifications needed to permit more in-depth testing, we now have the capacity to work with pharmaceutical companies who wish to try the technology as a potential replacement for freeze drying. We are actively pursuing a number of potential partners to join us in a collaboration to further develop this technology.

At the beginning of this year, we shipped a single-vial bioREV/freezeREV machine to the Saskatchewan Research Council to conduct testing on two of their proprietary E.coli swine vaccines. The SRC has a world-class facility for testing new pharmaceutical processing technologies, and we expect to make their scientific results public in Q4 of this year. The SRC testing will compare three important industry measures (moisture content, live activity and shelf-life) post-dehydration using REV technology against the incumbent, freeze drying or lyophilization.

Corporate Activities

On May 31, we received cash from 100% of the warrants from two private placements held in 2008 and 2009 which generated $3.2 million in cash for the Company. Last week we also received our first cash from the conversion of a small amount of the $1.15 warrants coming due in January 2011. We now have just under $6 million in the bank and, with allocated capital projects of less than $1 million and a burn rate of $175,000 per month, we are in an excellent position to deliver on our milestones regardless of the financial climate.

Moving Forward

I am amazed at the rate this company has developed over the past 12 months. It goes to show what a small group of dedicated people can accomplish when they put their collective energies towards one goal. I think that our current market valuation reflects our investors’ belief that we will continue to deliver on our stated milestones, and I am particularly encouraged to see such a tremendous response from the European financial market to ENW/E4U shares over the past few months.

As always, please feel free to contact myself at [e-mail] or Jennifer Thompson, V.P. of Corporate Development & Investor Relations at [e-mail] with your questions or thoughts about the Company.

Best regards,

John McNicol
President & Co-CEO
EnWave Corporation