What changed in this filing

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Item 1A. Risk Factors

2026-03-16 compared with 2025-03-17 · 41 added, 33 removed, 133 unchanged (36% of the section changed)

3 unchanged sentences

Our exclusive license to provide water to retail customers in the Cayman Islands is presently under renegotiation with OfReg, the Cayman Islands government utility regulatory authority, and we are presently unable to predict the outcome of these on-going negotiations.

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.

We sell water through our retail operations under the 1990 license that granted Cayman Water the exclusive right to provide potable water to customers within its licensed service area.

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:

3 unchanged sentences

The most recent express extension of the license expired on January 31, 2018.

From that date through February 18, 2025, we continued 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.

From that date through February 18, 2025, we continued to operate under the terms of the 1990 license, treating such terms as operative notwithstanding the expiration of the express extension.

We continued to pay a royalty of 7.5% of the revenue we collected 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”).

OfReg is an independent and accountable regulatory body with a view of protecting the rights of consumers, encouraging affordable utility services, and promoting competition.

OfReg, which began operations in January 2017, has the ability to supervise, monitor and regulate multiple utility undertakings and markets.

Supplemental legislation was passed by the Government of the Cayman Islands in April 2017, which transferred responsibility for economic regulation of the water utility sector and the negotiations with us for a new retail license from the WAC to OfReg in May 2017.

We began license negotiations with OfReg in July 2017 and such negotiations are ongoing.

We have been informed during our retail license negotiations, both by OfReg and its predecessor in these negotiations, that they seek to restructure the terms of our license in a manner that could significantly reduce the operating income and cash flows we have historically generated from our retail license.

Under the new regulatory legislation passed in October 2016, Cayman Water must first be granted a concession by the government before obtaining a new (or renewing the old) retail operations license.

On February 18, 2025, Cayman Water received a new concession from government that authorizes and maintains the terms of the 1990 license until a new license from OfReg is negotiated and enacted.

We are presently unable to determine what impact the resolution of our retail license negotiations with OfReg will have on our cash flows, financial condition or results of operations but such resolution could result in a material reduction (or the loss) of the operating income and cash flows we have historically generated from our retail operations and could require us to record impairment losses to reduce the carrying values of our retail segment assets.

In October 2016, the Government of the Cayman Islands passed legislation which created OfReg and, in April 2017, passed supplemental legislation which transferred responsibility for the economic regulation of the water utility sector and the negotiations with us for a new retail license to OfReg.

Under the new regulatory legislation passed in October 2016, Cayman Water was required to first be granted a concession by the government before obtaining a new (or renewing the old) retail operations license.

On February 18, 2025, Cayman Water received a new concession from the government that authorizes and maintains the terms of the 1990 license until a

new license from OfReg is negotiated and enacted.

Negotiations between Cayman Water and OfReg for the new license remain on-going.

We have been informed during our retail license negotiations, both by OfReg and its predecessor in these negotiations, that they seek to restructure the terms of the license in a manner that could significantly reduce the operating income and cash flows we have historically generated from our retail license.

We are presently unable to determine what impact the resolution of our retail license negotiations will have on our consolidated financial condition, results of operations or cash flows but such resolution could result in a material reduction (or the loss) of the operating income and cash flows we have historically generated from our retail operations and could require us to record impairment losses to reduce the carrying values of our retail segment assets.

Such impairment losses could have a material adverse impact on our consolidated financial condition and results of operations.

1 unchanged sentence

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 $28.4 million as of December 31, 2024.

Approximately 81% of this December 31, 2024 accounts receivable balance was delinquent as of that date.

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $20.7 million and $28.4 million as of December 31, 2025 and 2024.

Approximately 71% and 81% of the accounts receivable balances were delinquent as of those dates, respectively.

As of February 28, 2026, this receivable amounted to $22.6 million, of which 75% was delinquent.

The delay in collecting these accounts receivable has adversely impacted the liquidity of this subsidiary.

From time to time (including presently), CW-Bahamas has experienced delays in collecting its accounts receivable from the WSC.

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.

When these delays occur, we hold discussions and meetings with representatives of the WSC and the government of The Bahamas.

All previous delinquent accounts receivable from the WSC, including accrued interest thereon, were eventually paid in full.

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, 2024.

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, 2025, or prior periods.

We continue to be in frequent contact with officials of The Bahamas government, who continue to express their intention to significantly reduce CW-Bahamas’ delinquent accounts receivable balances.

However, we are unable to determine when or if such reduction will occur.

In a report dated October 6, 2022, Moody’s Investor Services (“Moody’s”) downgraded 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.

Moody’s has maintained these ratings through the date of its most current report issued in October 2024.

Moody’s has maintained these ratings through the date of its most current report issued in April 2025.

Based upon our review of this Moody’s correspondence, we continue to believe that no material allowance for credit losses is required for CW-Bahamas’ accounts receivable from the WSC.

If CW-Bahamas is unable to collect a significant portion of its delinquent accounts receivable, one or more of the following events may occur:

7 unchanged sentences

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 a contract, which could cause the gross profit for a contract to be less than we anticipated when the bid was made.

The cost of materials

and services and the cost of the delivery of such services may increase significantly after we submit our bid for a contract, which could cause the gross profit for a contract to be less than we anticipated when the bid was made.

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.

Any construction, manufacturing, and operating costs for our contracts that significantly exceed our initial estimates could have a material adverse impact on our consolidated financial condition, results of operations, and cash flows.

Substantial changes to fiscal, regulation and other federal policies could adversely affect our business, financial condition, operating results and cash flows.

Significant changes in, and uncertainty with respect to, legislation, regulation, government policy and economic conditions could adversely affect our business.

Specific legislative and regulatory proposals that could have a material impact on us include, but are not limited to, modifications to international trade policy (such as tariffs);

public company reporting requirements;

and environmental regulation.

We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the U.S.

and other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation.

Accordingly, it is difficult to predict how such actions may impact our business, or the business or habits of our customers.

Our business operations, as well as the businesses of our customers on which we are substantially dependent, are located in countries at risk for escalating trade disputes, including the U.S.

Any resulting trade wars could have a significant adverse effect on world trade and could adversely impact our consolidated financial condition, results of operations and cash flows.

Certain of PERC’s contracts with its customers, including the contract with the Board of Water Supply of the City of Honolulu, Hawaii, may be terminated at any time at the customer’s convenience or with relatively short advance notice.

11 unchanged sentences

Demand for our water in the Cayman Islands and The Bahamas is affected by variations in the level of tourism and local weather, primarily rainfall.

Tourism in our service areas is affected by the economies of the tourists’ home countries, primarily the United States and Europe, terrorist activity and perceived threats thereof, global health concerns such as COVID-19, and increased costs of fuel and airfare.

COVID-19, and increased costs of fuel and airfare.

In the Cayman Islands, we normally sell more water during the first and second quarters of the year, when the number of tourists is greater and local rainfall is less than in the third and fourth quarters.

A downturn in tourism or greater than expected rainfall in the locations we serve could adversely impact our results of operations and cash flows.

During the COVID-19 pandemic, the resulting cessation of tourism to the Cayman Islands through August 2022 significantly reduced the demand for our water.

During the COVID-19 pandemic, the resulting cessation of tourism to the Cayman Islands through August 2022 significantly reduced the demand for our water and our retail segment’s profitability.

Performance shortfalls under any of our bulk supply contracts could result in penalties or cancellation of the contract.

3 unchanged sentences

A natural disaster could cause major damage to our equipment and properties and the properties of our customers, including the large tourist properties in our areas of operation.

For example, in January 2020, Grand Cayman experienced an earthquake which damaged three of our eight storage tanks.

For example, in January 2020, Grand Cayman experienced an earthquake which damaged three of our eight potable water storage tanks.

Any future disaster could cause us to lose use of our equipment and properties and incur additional repair costs.

7 unchanged sentences

An inability by us to substitute feed water from an uncontaminated water source or to adequately treat the contaminated plant feed water or our processed water in a cost-effective manner may have a material adverse impact on our consolidated financial condition, results of operations, and cash flows.

Our internal controls over financial reporting were not considered to be effective as of December 31, 2024, and our independent auditors may not be able to certify as to their effectiveness in the future, which could adversely affect our business results and operations.

A material weakness was identified in our internal control over financial reporting as of December 31, 2024.

The material weakness related to insufficient information technology general controls designed to monitor direct changes to databases within two accounting systems during the period January 1, 2024 through October 31, 2024.

Although we have taken actions to remediate this weakness, we cannot conclude that our remediation effort has been successful until such time as we have completed sufficient testing of the remediation process and the accompanying internal controls and procedures that rely on the information technology general controls.

We cannot assure you that our remediation efforts will be successful or that other material weaknesses and control deficiencies will not be discovered in the future.

If we identify any other material weaknesses in our internal control over financial reporting, it may cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

Potential government decisions, actions and regulations could negatively affect our operations.

41 unchanged sentences

We have physical, technical and procedural safeguards in place that are designed to protect information and protect against security and data breaches as well as fraudulent transactions and other activities.

Despite these safeguards and our other security processes and protections, we cannot be assured that all our systems and processes are free from vulnerability to evolving and increasingly sophisticated cyber-attacks, to other physical breaches or to inadvertent data disclosure by third parties or by us.

Despite these safeguards and our other security processes and protections, we cannot be assured that all our systems and processes are free from vulnerability to evolving

and increasingly sophisticated cyber-attacks, to other physical breaches or to inadvertent data disclosure by third parties or by us.

A significant data security breach, including misappropriation of customer, supplier or confidential employee information, could cause us to incur significant costs, which may include potential costs of investigations, legal, forensic and consulting fees and expenses, costs and diversion of management attention required for investigation, remediation and litigation, substantial repair or replacement costs.

21 unchanged sentences

We are incorporated under the laws of the Cayman Islands and most of our assets are located outside of the United States.

In addition, six of our 13 Directors and Officers reside outside the United States.

In addition, as of March 9, 2026, six of our 15 Directors and Officers reside outside the United States.

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.

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.

Based on the advice of our Cayman Islands legal counsel, we believe no reciprocal statutory enforcement of foreign judgments exists between the United States and the Cayman Islands, and that foreign judgments originating from the United States are not directly enforceable in the Cayman Islands.

A prevailing party in a United States proceeding against us or our Directors and Officers would have to initiate a new proceeding in the Cayman Islands using the United States judgment as evidence of the party’s claim.

A prevailing party could rely on the summary judgment procedures available in the Cayman Islands, subject to available defenses in the Cayman Islands courts, including, but not limited to, the lack of competent jurisdiction in the United States courts, lack of due service of process in the United States proceeding and the possibility that enforcement or recognition of the United States judgment would be contrary to the public policy of the Cayman Islands.

A prevailing party could rely on the summary judgment procedures available in the Cayman Islands, subject to available defenses in the Cayman Islands courts, including, but not limited to, the lack

of competent jurisdiction in the United States courts, lack of due service of process in the United States proceeding and the possibility that enforcement or recognition of the United States judgment would be contrary to the public policy of the Cayman Islands.

Depending on the nature of damages awarded, civil liabilities under the Securities Act of 1933, as amended (or the Securities Act), or the Securities Exchange Act of 1934, as amended (or the Exchange Act), for original actions instituted outside the Cayman Islands may or may not be enforceable.

6 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.

What changed 10-K

Item 1A. Risk Factors