3. Discontinued operations – CW-Bali

Through its subsidiary CW-Bali, the Company built and operates a seawater reverse osmosis plant with a production capacity of approximately 790,000 gallons per day located in Nusa Dua, one of the primary tourist areas of Bali, Indonesia. The Company built this plant based upon its belief that future water shortages in this area of Bali would eventually enable it to sell all of this plant’s production. Since inception of CW-Bali’s operations in 2013, the sales volumes for its plant have not been sufficient to cover its operating costs and CW-Bali has incurred net losses. The Company’s net losses from CW-Bali for its two most recent fiscal years ended December 31, 2016 and 2015, were approximately ($2.5 million) and ($861,000), respectively. The results of CW-Bali were included in the retail segment for segment reporting purposes.

In late 2015, the Company decided to seek a strategic partner for CW-Bali to (i) purchase a major portion of its equity ownership in CW-Bali; (ii) lead CW-Bali’s sales and marketing efforts; (iii) liaise with the local water utility; and (iv) assist with CW-Bali’s on-going funding requirements. Although discussions were held and due diligence information was exchanged with potential strategic partners, the Company did not receive an offer for an investment in, a purchase of, or a joint venture for CW-Bali from any of these potential partners on terms it deemed acceptable.

On May 23, 2017, after considering CW-Bali’s historical and projected operating losses, its on-going funding requirements, the current business and economic environment in Bali and the Company’s inability to obtain a strategic partner for CW-Bali, the Company’s Board of Directors formally resolved to discontinue CW-Bali’s operations. The Company plans to cease the production of water in Bali and exit the Bali market at the earliest practical date, which the Company believes will be within six months.

Based upon this decision to discontinue CW-Bali’s operations, the Company estimated the future cash flows the Company will receive under various scenarios from the disposition of its investment in CW-Bali and assigned a probability to each scenario to determine an estimated fair value of its investment in CW-Bali. Based upon this probability-weighted sum, the Company recorded an impairment loss of $1.0 million for the three months ended June 30, 2017 to reduce the carrying value of its investment in CW-Bali (which includes $549,555 in cumulative translation adjustments reflected in stockholders’ equity) to its estimated fair value of approximately $832,000. The Company may be required to record additional losses if it is ultimately unable to sell its investment in CW-Bali or CW-Bali’s net assets for this estimated fair value.

Summarized financial information for CW-Bali as of June 30, 2017 and for the three months and six months ended June 30, 2017 and 2016 is as follows:

	June 30,		December 31,
	2017		2016
	(Unaudited)
Current assets	$	154,331	$	480,979
Property, plant and equipment, net		154,501		612,568
Inventory, non-current		-		47,272
Other assets		-		112,324
Total assets of discontinued operations	$	308,832	$	1,253,143

Total liabilities of discontinued operations	$	55,329	$	58,521

	Three Months ended June 30,				Six Months ended June 30,
	2017		2016		2017		2016
Revenues	$	34,567	$	19,433	$	62,221	$	46,411
Loss from operations		(70,758)		(157,318)		(150,423)		(303,943)
Impairment loss		(1,000,000)		-		(1,000,000)		-
Net loss		(1,071,001)		(142,659)		(1,150,850)		(127,974)
Depreciation		23,583		76,361		47,165		151,543