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We sell water through our retail operations under a license issued in July 1990 by the Cayman Islands government (the “1990 license”) that granted Cayman Water the exclusive right to provide potable water to customers within its licensed service area.
−Removed: Although the 1990 license was not expressly extended after January 2018, we continue to supply water under the terms of the 1990 license, as further discussed in the following paragraph.
+Added: Although the 1990 license was not expressly extended after January 2018, we continue to supply water under
+Added: the terms of the 1990 license, as further discussed in the following paragraph.
Pursuant to the 1990 license, Cayman Water has the exclusive right to produce potable water and distribute it by pipeline to its licensed service area, which consists of two of the three most populated areas of Grand Cayman Island:
Seven Mile Beach and West Bay.
−Removed: For the three months ended March 31, 2022 and 2021, we generated approximately 32% and 33%, respectively, of our consolidated revenue
−Removed: and 46% and 49%, respectively, of our consolidated gross profit from the retail water operations conducted under the 1990 license.
+Added: For the three months ended June 30, 2022 and 2021, we generated approximately 31% and 34%, respectively, of our consolidated revenue and 46% and 48%, respectively, of our consolidated gross profit from the retail water operations conducted under the 1990 license.
+Added: For the six months ended June 30, 2022 and 2021, the Company generated approximately 32% and 34%, respectively, of its consolidated revenue and 46% and 48%, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.
The 1990 license was originally scheduled to expire in July 2010 but was extended several times by the Cayman Islands government in order to provide the parties with additional time to negotiate the terms of a new license agreement.
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Such impairment losses could have a material adverse impact on our consolidated financial condition and results of operations.
−Removed: Periodically, our Bahamas subsidiary experiences substantial delays in the collection of its accounts receivable.
−Removed: As a result, our Bahamas subsidiary could have insufficient liquidity to continue operations, and our consolidated results of operations could be materially adversely affected.
−Removed: CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $21.2 million as of March 31, 2022 and $21.5 million as of December 31, 2021.
−Removed: Approximately 77% of the March 31, 2022 accounts receivable balance was delinquent as of that date.
−Removed: The delay in collecting these accounts receivable has adversely impacted the liquidity of this subsidiary.
−Removed: As of April 30, 2022, CW-Bahamas’ accounts receivable from the WSC totaled approximately $18.7 million.
−Removed: From time to time (including presently), CW-Bahamas has experienced delays in collecting its accounts receivable from the WSC.
−Removed: When these delays occur, we hold discussions and meetings with representatives of the WSC and The Bahamas government, and as a result, payment schedules are developed for WSC’s delinquent accounts receivable.
−Removed: All previous delinquent accounts receivable from the WSC, including accrued interest thereon, were eventually paid in full.
−Removed: Based upon this payment history, CW-Bahamas has never been required to provide an allowance for doubtful accounts for any of its accounts receivable, despite the periodic accumulation of significant delinquent balances.
−Removed: As of March 31, 2022, we have not provided an allowance for doubtful accounts for CW-Bahamas’ accounts receivable from the WSC.
−Removed: Presently, Moody’s Investors Service and Standard & Poor’s have assigned a credit rating to The Bahamas of Ba3 and B+, respectively.
−Removed: If CW-Bahamas is ultimately unable to collect a significant portion of its delinquent accounts receivable, one or more of the following events may occur:
−Removed: (i) CW-Bahamas may not have sufficient liquidity to meet its obligations;
−Removed: (ii) we may be required to cease the recognition of revenue on CW-Bahamas’ water supply agreements with the WSC;
−Removed: and (iii) we may be required to provide an allowance for doubtful accounts for CW-Bahamas’ accounts receivable.
−Removed: Any of these events could have a material adverse impact on our consolidated financial condition, results of operations, and cash flows.
Most of our services segment revenue is generated under short-term contracts.
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PERC, our principal services segment subsidiary, generates most of its revenue from contracts (“O&M contracts”) to operate and maintain water treatment and reuse facilities owned by third parties.
−Removed: For the three months ended March 31, 2022, we generated revenue of approximately $3.6 million under these O&M contracts.
+Added: For the three and six months ended June 30, 2022, we generated revenue of approximately $3.5 million and $7.1 million, respectively, under these O&M contracts.
PERC’s O&M contracts have terms ranging from one to five years, with varying renewal options exercisable solely at the discretion of the customer.
−Removed: Approximately 19% of PERC’s revenue for the three months ended March 31, 2022 was generated under O&M contracts that expire at various dates through December 31, 2022.
+Added: Approximately 36% of PERC’s revenue for the six months ended June 30, 2022 was generated under O&M contracts that expire at various dates through June 30, 2023.
If we are unable to obtain extensions of these expiring O&M contracts, or are unable to replace the revenue lost from contracts that expire with revenue from new O&M contracts, our consolidated financial condition, results of operations, and cash flows would be adversely affected.
−Removed: If the future financial performance of either Aerex or PERC falls short of our most recent financial projections for these subsidiaries, we may be required to record impairment losses to reduce the carrying values of the goodwill and intangible assets of our manufacturing and/or services reporting units.
+Added: If the future financial performance of Aerex falls short of our most recent financial projections for this subsidiary, we may be required to record impairment losses to reduce the carrying values of the goodwill and intangible assets of our manufacturing reporting unit.
Approximately 80% of Aerex’s revenue, and 89% of Aerex’s gross profit, for the year ended December 31, 2020 were generated from sales to one customer.
While Aerex sells various products to this customer, Aerex’s revenue from this customer has historically been derived primarily from one specialized product.
−Removed: In October 2020, this customer informed Aerex that, for inventory management purposes, it was suspending its purchases of the specialized product from Aerex following 2020 for a period of approximately one year.
+Added: In October 2020, this customer informed
+Added: Aerex that, for inventory management purposes, it was suspending its purchases of the specialized product from Aerex following 2020 for a period of approximately one year.
This customer informed Aerex at that time that it expected to recommence its purchases of the specialized product from Aerex beginning with the first quarter of 2022.
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In late July 2021, this former major customer communicated to Aerex that it expected to recommence its purchases of the specialized product from Aerex in 2022 and subsequent years, but informed Aerex that such purchases would be at substantially reduced annual amounts, as compared to the amounts it had purchased from Aerex in 2020 and prior years (based upon the most recent communications from the customer, such purchases may not recommence until 2023).
−Removed: Our updated sales estimate for this customer based on this new information was also substantially below the anticipated sales to this customer for 2022 and subsequent years that we used in the discounted cash flow projections we prepared for purposes of testing our manufacturing reporting unit’s goodwill for possible impairment as of December 31, 2020.
−Removed: Furthermore, Aerex’s efforts to replace the revenue previously generated from this customer with revenue from existing and new customers have been adversely impacted by the continuing negative economic impacts of the COVID-19 pandemic, which have increased Aerex’s raw material costs, resulted in raw material shortages and extended delivery times for such materials, and also adversely affected Aerex’s current and prospective customer base.
−Removed: Accordingly, in light of this new information from Aerex’s former major customer and the on-going weak economic conditions, we updated our projections of future cash flows for the manufacturing reporting unit and tested its goodwill for possible impairment as of June 30, 2021 using the discounted cash flow and guideline public company methods, with a weighting of 80% and 20% applied to these two methods, respectively.
+Added: Our updated sales estimate for this customer based on this new information was substantially below the anticipated sales to this customer for 2022 and subsequent years that we used in the discounted cash flow projections we prepared for purposes of testing our manufacturing reporting unit’s goodwill for possible impairment as of December 31, 2020.
+Added: Furthermore, Aerex’s efforts to replace the revenue previously generated from this customer with revenue from existing and new customers have been adversely impacted by the continuing negative economic conditions (caused in part by the COVID-19 pandemic) which have increased Aerex’s raw material costs, resulted in raw material shortages and extended delivery times for such materials, and also adversely affected the overall financial condition of Aerex’s current and prospective customer base.
+Added: Accordingly, in light of this new information from Aerex’s former major customer and the on-going weak economic conditions that we believed would continue through 2022, we updated our projections of future cash flows for the manufacturing reporting unit and tested its goodwill for possible impairment as of June 30, 2021 using the discounted cash flow and guideline public company methods, with a weighting of 80% and 20% applied to these two methods, respectively.
Based upon this testing, we determined that the carrying value of our manufacturing reporting unit exceeded its fair value by $2.9 million, and we recorded an impairment loss to reduce our manufacturing reporting unit’s goodwill by this amount for the three months ended June 30, 2021.
The accounting estimates and assumptions we employ to estimate the fair values of our manufacturing and reporting units constitute “critical accounting estimates” for us because:
−Removed: ● the nature of these estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change (for example, should interest rates rise significantly in the future we would likely be required to increase the discount rate we use under the discounted
−Removed: cash flow method we use to estimate the fair values of our reporting units, and such increased discount rate in and of itself could decrease the estimated fair value of our reporting units under the discounted cash flow method);
+Added: ● the nature of these estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change (for example, should interest rates rise significantly in the future we would likely be required to increase the discount rate we use under the discounted cash flow method we use to estimate the fair values of our reporting units, and such increased discount rate in and of itself could decrease the estimated fair value of our reporting units under the discounted cash flow method);
● the impact of the estimates and assumptions on financial condition and results of operations is material.
We believe the inherent uncertainties associated with the accounting estimates and assumptions we use for our estimates of our reporting units’ fair values have increased due to current, less predictable economic conditions, which have resulted in increasing raw material prices, extended and unexpected delays in the procurement and delivery of our raw materials, and have also, we believe, adversely affected our customers.
−Removed: Based upon our most recent estimation prepared as of December 31, 2021, the fair value of our manufacturing reporting unit exceeded its carrying value by only 15%.
−Removed: If we determine in the future that Aerex’s discounted future cash inflows will be less than our present expectations, we may be required to record additional impairment losses to reduce the remaining carrying values as of March 31, 2022 of our manufacturing reporting unit’s goodwill of $1,985,211 and its remaining unamortized intangible assets balances of $824,445 recorded as a result of the acquisition of Aerex.
−Removed: Any such impairment losses could have a material adverse impact on our consolidated results of operations.
−Removed: Based upon our most recent estimation prepared as of December 31, 2021, the fair value of our services reporting unit exceeded its carrying value by only 15%.
−Removed: If we determine in the future that PERC’s discounted future cash inflows will be less than our present expectations, we may be required to record impairment losses to reduce the carrying values as of March 31, 2022 of our services reporting unit’s goodwill of $5,320,416 and its remaining unamortized intangible assets balances of $2,429,721 recorded as a result of the acquisition of PERC.
+Added: Based upon our estimation prepared as of December 31, 2021, the fair value of our manufacturing reporting unit exceeded its carrying value by only 15%.
+Added: If we determine in the future that Aerex’s discounted future cash inflows will be less than our present expectations, we may be required to record additional impairment losses to reduce the remaining carrying values as of June 30, 2022 of our manufacturing reporting unit’s goodwill of $1,985,211 and its remaining unamortized intangible assets balances of $801,111 recorded as a result of the acquisition of Aerex.
Any such impairment losses could have a material adverse impact on our consolidated results of operations.
10 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.