No problem. I assumed they picked up a water services agreement on this one, which might not be correct.
Regarding the scam conclusion, I think (knowing the former CEO) it could well have been a scam while the former CEO was there. I don't think it is now. My guess is Mike Stark had no idea what terrible condition the P&L was in when he signed on, and he is genuinely trying to turn the business around.
But if you Google the former CEO, Western Water, San Diego, and Mafia, a lot of interesting links and stories pop up. The only thing potentially more egregious than that guy's background is the lousy due diligence the investment houses did prior to the IPO. How anybody who analyzes businesses for a living could have failed to recognize this lipstick-laden pig is one for the record books, I guess.
I believe the former CEO's plan was to build the thing up just enough to sell BasinWater to an unwitting larger company. The problem was that he couldn't find a larger water treatment company stupid enough to take the bait. He tried to do that initially, but at least one company he attempted to sell BasinWater to concluded that the technology was not that impressive, the asking price was ridiculous, and the former CEO's requirement to remain as president was equally as ridiculous. My understanding is that at least two companies listened to the BasinWater snake oil slide shows and took a pass. The IPO was not the original intent; it became the Plan B the former CEO turned to only after the initial approach failed (the initial plan being to pick up a lot of long term municipal contracts at any cost and sell the business to one of the larger water treatment companies).
I continue to be amazed at the softballs the analysts have tossed during the quarterly conference calls, and the fact that the SEC has not weighed in yet. I feel for the people who bought at the IPO and hung on to this thing.
1) BWTR's business model requires they spend $ up front for even prospective customers to build a treatment facility which they then must prove operates as promised. IF it does, then they then can sign a contract with the municipal water utility to treat water over a long contract term. they will get paid back over many years, profits, if any (and it seems most if not all of their contracts to date have been losers) are realized many years down the road. So, the business model eats cash, even if it is successful.
2) I think this is a scam. It seems they will sign a contract with any municipality that will sign a contract with them, and then they will go around trumpeting how many contract they have signed, etc. The devil, of course, is in the details. It appears that under their contracts the municipality takes no risk and puts up no cash. It appears that historically BWTR signed contracts that were very unprofitable for them, and now they have a $7m "contract loss reserve" which is their estimate of future cash losses they expect to pay out on existing contracts. That's what they have had to brag about. There are lots of other service providers in this business (look at TTEK, up 4% today, for example), and I do not believe that BWTR has any proprietary technology -- why would a municipality hire them other than the fact that they will front all the cash, take all the risk, and offer contracts that are attractive to the customer, but are losers to BWTR?
I do believe this has been a scam. "Water" plays were a hot mania a while back, so they rode the wave. It's sad to see a capable investor like Jack Robinson (#2 holder) get scammed on stuff like this.
If it's a 300 gpm system, it would probably sell for around $350K as an outright purchase.
If it's treating for nitrate and uranium, the nitrate will load up the resin more quickly than the uranium and the regens will be paced by nitrate saturation. Based on that, I would guess their per acre-foot treatment fee is around $150/AF. Assuming the plant runs 24/7 (which is unrealistic, but conservative in the sense that it presents a best-case value scenario), that would be about 72.6 AF treated per year. At $150/AF, that's a 7-year value of $508K. Taking it back to present value, it's about $494K (assuming 8% money).
So, the total value should be in the range of $844K.