4 unchanged sentences
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 discussed in the following paragraphs.
+Added: Although the 1990 license has not been expressly extended after January 2018, we continue to supply water under the terms of the 1990 license, as discussed in the following paragraphs.
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:
4 unchanged sentences
We continue to operate under the terms of the 1990 license, providing water services to the level and quality specified in the 1990 license and in accordance with our understanding of its legal obligations, treating those obligations set forth in the 1990 license as operative notwithstanding the expiration of the express extension.
−Removed: We continue to pay the royalty of 7.5% of revenue we collect required under the 1990 license.
+Added: We continue to pay a royalty of 7.5% of the revenue we collect as required under the 1990 license.
In October 2016, the Government of the Cayman Islands passed legislation which created a new utilities regulation and competition office (“OfReg”).
7 unchanged sentences
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.
+Added: As a result, our Bahamas subsidiary could have insufficient liquidity to continue operations, and our consolidated financial results could be materially adversely affected.
CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $26.9 million as of December 31, 2023.
4 unchanged sentences
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 December 31, 2022, we have not provided an allowance for doubtful accounts for CW-Bahamas’ accounts receivable from the WSC.
−Removed: In its latest report dated October 6, 2022, Moody’s Investor Services (“Moody’s”) downgraded the Government of The Bahamas’ long-term issuer and senior unsecured ratings to B1 from Ba3.
+Added: Based upon this payment history, we have not provided for a material allowance for credit losses for CW-Bahamas’ accounts receivable from the WSC as of December 31, 2023.
+Added: In a report dated October 6, 2022, Moody’s Investor Services (“Moody’s”) downgraded the Government of The Bahamas’ long-term issuer and senior unsecured ratings to B1 from Ba3.
Moody’s also lowered The Bahamas’ local currency ceiling to Baa3 from Baa2 and its foreign currency ceiling to Ba1 from Baa3.
+Added: Moody’s iterated these ratings in April and October 2023, noting that such ratings are “stable.”
If CW-Bahamas is unable to collect a significant portion of its delinquent accounts receivable, one or more of the following events may occur:
1 unchanged sentence
(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.
+Added: and (iii) we may be required to provide a material allowance for credit losses for CW-Bahamas’ accounts receivable.
Any of these events could have a material adverse impact on our consolidated financial condition, results of operations, and cash flows.
−Removed: Most of our services segment revenue is generated under short-term contracts.
−Removed: An inability to obtain extensions of these contracts or to obtain new contracts to replace the revenue that is lost from contracts that are not extended could adversely impact our financial results.
−Removed: 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 2022, we generated revenue of approximately $13.7 million under these O&M contracts.
−Removed: PERC’s O&M contracts have terms ranging from one to ten years, with varying renewal options exercisable solely at the discretion of the customer.
−Removed: Approximately 16% of PERC’s revenue for 2022 was generated under O&M contracts that expire at various dates through December 31, 2023.
−Removed: 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 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 segment.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: As a result of this anticipated loss of revenue for Aerex, we updated our projections for our manufacturing reporting unit’s future cash flows.
−Removed: Such projections assumed, in part, that Aerex’s major customer would recommence its purchases from Aerex in 2022 but at a reduced aggregate amount, as compared to 2020.
−Removed: Based upon these updated projections, we tested our manufacturing reporting unit’s goodwill for possible impairment as of December 31, 2020 using the discounted cash flow and guideline public company methods, with a weighting of 80% and 20% applied to these two methods, respectively.
−Removed: As a result of these impairment tests, we determined that the estimated fair value of our manufacturing reporting unit exceeded its carrying value by approximately 31% as of December 31, 2020.
−Removed: 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.
−Removed: 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.
−Removed: Furthermore, Aerex’s efforts to replace the revenue previously generated from this customer with revenue from existing and new customers were adversely impacted by the negative economic conditions (caused in part by the COVID-19 pandemic).
−Removed: These negative economic conditions also increased Aerex’s raw material costs, resulted in raw material shortages and extended delivery times for such materials, and adversely affected the overall financial condition of 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 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.
−Removed: 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 segment’s goodwill by this amount for the three months ended June 30, 2021.
−Removed: 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 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);
−Removed: ● the impact of the estimates and assumptions on financial condition and results of operations is material.
−Removed: 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 estimation prepared as of December 31, 2022, the fair value of our manufacturing reporting unit exceeded its carrying value by 63%.
−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
−Removed: of our manufacturing segment’s goodwill and its remaining unamortized intangible assets balances, which amounted to $1,985,211 and $754,444, respectively, as of December 31, 2022.
−Removed: Any such impairment losses could have a material adverse impact on our consolidated results of operations.
−Removed: Current economic conditions are adversely impacting the supply chain for our operations and could have a material adverse impact on our financial results.
−Removed: As a result of the current economic conditions, we are experiencing issues with our supply chain for the raw materials, components, chemicals, and capital expenditures used in our operations, including rapidly increasing prices, scarcities/shortages, and longer fulfillment times and unexpected delays for our orders to suppliers.
−Removed: Should these economic conditions and issues continue, our operations could be adversely affected, which could have a material adverse impact on our consolidated financial condition, results of operations, and cash flows.
The profitability of our contracts is dependent upon our ability to accurately estimate construction and operating costs.
1 unchanged sentence
Additionally, the terms of our water supply contracts may require us to guarantee the price of water on a per unit basis, subject to certain annual inflation and monthly energy cost adjustments, and to assume the risk that the costs associated with producing this water may be greater than anticipated.
−Removed: Because we base our contract prices in part on our estimation of future construction, manufacturing and operating costs, the profitability of our plants and our manufacturing and management contracts is dependent on our ability to estimate these costs accurately.
+Added: Because we base our contract prices in part on our estimation of future construction, manufacturing and operating costs, the profitability of our plants and our manufacturing and operations and maintenance contracts is dependent on our ability to estimate these costs accurately.
The cost of materials and services and the cost of the delivery of such services may increase significantly after we submit our bid for contract, which could cause the gross profit for a contract to be less than we anticipated when the bid was made.
−Removed: The profit margins we initially expect to generate from a management contract could be further reduced if future operating costs for that contract exceed our estimates of such costs.
+Added: The profit margins we initially expect to generate from an operations and maintenance contract could be further reduced if future operating costs for that contract exceed our estimates of such costs.
Any construction, manufacturing, and operating costs for our contracts that significantly exceed our initial estimates could have a material adverse impact our consolidated financial condition, results of operations, and cash flows.
3 unchanged sentences
Our business is highly dependent on the purchase of our products and services by government and municipalities, and we believe that contracts with similar termination provisions will continue to be a source of a substantial portion of our revenue for the foreseeable future.
−Removed: If a customer terminates one of our contracts for convenience, we generally may recover, at most, our incurred or committed costs, settlement expenses, and payment for on work completed or products delivered prior to the termination.
+Added: If a customer terminates one of our contracts for convenience, we generally may recover, at most, our incurred or committed costs, settlement expenses, and payment for work completed or products delivered prior to the termination.
As such, the termination of any of these contracts prior to their stated term may result in us realizing less than the full consideration payable under the contract.
9 unchanged sentences
A downturn in tourism or greater than expected rainfall in the locations we serve could adversely impact our results of operations and cash flows.
−Removed: The COVID-19 pandemic and the resulting cessation of tourism to the Cayman Islands through August 2022 significantly reduced demand for our water.
−Removed: We are unable at this time to determine if or when demand for our water in the Cayman Islands will return to pre-pandemic levels.
+Added: During the COVID-19 pandemic, the resulting cessation of tourism to the Cayman Islands through August 2022 significantly reduced demand for our water.
Performance shortfalls under any of our bulk supply contracts could result in penalties or cancellation of the contract.
6 unchanged sentences
Damage to our customers’ properties and the adverse impact on tourism could result in a decrease in water demand.
−Removed: A natural disaster could also disrupt the delivery of equipment and supplies, including electricity, necessary to our operations.
+Added: A natural disaster could also disrupt the delivery of equipment and supplies,
+Added: including electricity, necessary to our operations.
These and other possible effects of natural disasters could have a material adverse impact on our consolidated financial condition, results of operations, and cash flows.
5 unchanged sentences
Potential government decisions, actions and regulations could negatively affect our operations.
−Removed: We are subject to the local regulations of the Cayman Islands, The Bahamas and the British Virgin Islands, all of which are subject to change.
+Added: We are subject to the local regulations of the countries in which we operate, all of which are subject to change.
Any government that regulates our operations may issue legislation or adopt new regulations, including but not limited to:
16 unchanged sentences
In addition, any complaints or lawsuits against us based on water quality and contamination may receive negative publicity that can damage our reputation and adversely affect our business and trading price of our common stock.
−Removed: If we fail to abide by laws, rules and regulations relating to human and workers’ rights, we could be subject to suit and our reputation could be harmed, which could result in losses in our business and financial results.
+Added: If we fail to abide by laws, rules and regulations relating to human and workers’ rights, we could be subject to various actions and our reputation, business and financial results could be adversely affected.
We are subject to various federal, state, local and foreign laws and regulations concerning human rights, including laws prohibiting discrimination, harassment, and forced or child labor, and establishing wage and hour standards.
27 unchanged sentences
We depend on these parties to pay us on a timely basis.
−Removed: Our outstanding accounts receivable are not covered by collateral or credit insurance.
+Added: outstanding accounts receivable are not covered by collateral or credit insurance.
Any delay or default in payment could adversely affect our consolidated financial condition, results of operations, and cash flows.
We are exposed to the risk of variations in currency exchange rates.
−Removed: Although we report our results in United States dollars, most of our revenue is earned in other currencies.
+Added: Although we report our results in United States dollars, a significant portion of our revenue is earned in other currencies.
These currencies have been fixed to the United States dollar for more than 20 years.
12 unchanged sentences
In addition, six of our 14 Directors and Officers reside outside the United States.
−Removed: As a result, it may be difficult for investors to execute service of process within the United States upon us and such other persons, or to enforce judgments obtained against such persons in United States courts, and bring any action, including actions predicated upon the civil liability
−Removed: provisions of the United States securities laws.
+Added: As a result, it may be difficult for investors to execute service of process within the United States upon us and such other persons, or to enforce judgments obtained against such persons in United States courts, and bring any action, including actions predicated upon the civil liability provisions of the United States securities laws.
In addition, it may be difficult for investors to enforce, in original actions brought in courts or jurisdictions located outside of the United States, rights predicated upon the United States securities laws.
6 unchanged sentences
The average daily trading volume of our common stock in 2023 was approximately 131,600 shares, a much lower trading volume than that of many other companies listed on the NASDAQ Global Select Market.
−Removed: A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the market of willing buyers and sellers of our common stock at any given time.
+Added: A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the market of willing buyers and
+Added: sellers of our common stock at any given time.
This presence in turn depends on the individual decisions of investors and general economic and market conditions over which we have no control.
Due to the limited volume of trading in our common stock, an investor in our stock may have difficulty selling larger volumes of our common stock in the manner, or at the price, that might be attainable if our common stock were more actively traded.
−Removed: UNRESOLVED STAFF COMMENTS
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.