What changed in this filing

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Item 1A. Risk Factors

2021-03-31 compared with 2020-03-16 · 181 added, 378 removed, 17 unchanged (97% of the section changed)

Investing in our common stock involves

Before investing in our common stock, you should consider carefully the factors discussed below and the information contained

in this Annual Report.

Each of these risks, as well as other risks and uncertainties not presently known to us or that we currently

deem immaterial, could adversely affect our business, results of operations, cash flows and financial condition, and cause the

value of our common stock to decline, which may result in the loss of part, or all, of your investment.

Our exclusive license to provide water

to retail customers in the Cayman Islands has not been expressly extended and we are presently unable to predict the outcome of

our on-going negotiations relating to this license.

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.

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.

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:

Mile Beach and West Bay.

In 2019 and 2018, we generated approximately 38% and 39%, respectively, of our consolidated revenue and

53% and 54%, respectively, of our 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.

The most recent express extension of the license expired on

January 31, 2018.

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.

We continue to pay the royalty

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”).

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 retail license

negotiations from the Water Authority-Cayman to OfReg in May 2017.

We began license negotiations with OfReg in July 2017

and such negotiations are continuing.

We have been informed during our retail license negotiations, both by OfReg and its predecessor

in these negotiations, that the Cayman Islands government seeks 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.

We are presently unable to determine what

impact the resolution of our retail license negotiations 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.

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

We have paid $24.2 million for land,

rights of way and equipment and incurred development expenses of approximately $30.8 million to date for a possible project in

We expect to expend significant additional funds in 2020 to continue to pursue this project.

However, we may not be successful

in completing this project.

We own 99.99% of NSC, a development stage

Mexico company formed to pursue a project encompassing the construction, operation and minority ownership of a 100 million gallon

per day seawater reverse osmosis desalination plant to be located in northern Baja California, Mexico and an accompanying pipeline

to deliver water to the Mexican potable water system (the “Project”).

As of December 31, 2019, our consolidated

balance sheet includes purchases for the Project of approximately $24.2 million for land, rights of way and equipment.

development activities we have conducted, which include conducting an equipment piloting plant and water data collection program

at the proposed feed water source, completing various engineering studies and obtaining various governmental permits, pursuing

debt and equity funding, and maintaining a corporate presence in Mexico have resulted in additional developmental expenses totaling

$30.8 million from the inception of our efforts on this project in 2010 through December 31, 2019.

In August 2014, the State of Baja

California (the “State”) enacted new legislation to regulate Public-Private Association projects which involve the

type of long-term contract between a public-sector authority and a private party that we are seeking to complete the Project (the

“APP Law”).

Pursuant to this new legislation, in November 2015 the State officially commenced a tender process

for the Project, the scope of which the State defined as a first phase to be operational in 2019 consisting of a 50 million gallon

per day plant and a pipeline that connects to the Mexican potable water infrastructure and a second phase to be operational in

2024 consisting of an additional 50 million gallons per day of production capacity.

Our consortium (“Consortium”) which

included our subsidiary NSC and Suez Medio Ambiente México, S.A.

de C.V., (“Suez MA”), a subsidiary of SUEZ

International, S.A.S.

submitted its tender for the Project in April 2016 and in June 2016, the State designated our Consortium

as the winner of the tender process for the Project.

In August 2016, NSC incorporated

Aguas de Rosarito S.A.P.I.

(“AdR”), a special purpose company, to complete the Project and executed a shareholders

agreement for AdR agreeing among other things that:

(i) AdR would purchase the land and other Project assets from NSC on

the date that the Project begins commercial operation and (ii) AdR would enter into a Management and Technical Services Agreement

with NSC effective on the first day that the Project begins commercial operation.

On August 22, 2016, the Public Private

Partnership Agreement for the Project (“APP Contract”), was executed between AdR, the Comisión Estatal del

Agua de Baja California (“CEA”), the Government of Baja California represented by the Secretary of Planning and Finance

and the Public Utilities Commission of Tijuana (“CESPT”).

The APP Contract requires AdR to design, construct, finance

and operate a seawater reverse osmosis desalination plant (and accompanying aqueduct) with a capacity of up to 100 million gallons

per day in two phases:

the first with a capacity of 50 million gallons per day and an aqueduct to the Mexican potable water system

in Tijuana, Baja California and the second phase with a capacity of 50 million gallons per day.

The first phase must be operational

within 36 months of commencing construction and the second phase must be operational by July 2024.

The APP Contract further

requires AdR to operate and maintain the plant and aqueducts for a period of 37 years starting from the commencement of operation

of the first phase.

At the end of the operating period, the plant and aqueducts will be transferred to CEA.

In February 2017,

AdR submitted proposals to the CEA requesting the definition of a mechanism in the APP Contract to update the consideration under

the APP Contract for changes in foreign exchange rates, lending rates and certain laws which have impacted the Project.

2018, AdR and the CEA executed an amendment to the APP Contract which, among other things, increases the scope of Phase 1 of the

Project by including the aqueduct originally designated for Phase 2, and addresses AdR’s concerns regarding the impact on

the Project for changes in the exchange rate for the peso relative to the dollar and changes in interest rates that have occurred

subsequent to the submission of the Consortium’s bid for the Project.

As a result of this amendment to the APP Contract,

the final cost of Phase 1 and the related consideration to be charged by AdR under the APP Contract will be determined based upon

the bid submitted by the Consortium, the changes set forth in the amendment to the APP Contract and the economic conditions (e.g.

interest rates and currency exchange rates) in effect on the financial closing date for Phase 1.

In February 2018, AdR executed a subscription

agreement (the “Agreement”) for the equity funding required for the Project.

The Agreement calls for NSC to retain

a minimum of 25% of the equity in AdR.

One or more affiliates of Greenfield SPV VII, S.A.P.I.

(“Greenfield”),

a Mexico company managed by an affiliate of a leading U.S.

asset manager, will acquire a minimum of 55% of the equity of AdR.

Agreement also provides Suez MA with the option to purchase 20% of the equity of AdR.

If Suez MA does not exercise this option,

NSC will retain 35% of the equity of AdR and Greenfield will acquire 65% of the equity of AdR.

The Agreement will become effective

when the conditions precedent related to the Project are met.

The aggregate investment to be made by the equity partners in the

Project, in the form of equity and subordinated shareholder loans, is presently estimated at approximately 20% of the total cost

of Phase 1 of the Project.

This Agreement was originally scheduled to expire on June 30, 2019 but has been extended to April 30,

The APP Contract does not become effective

until the following remaining open conditions, among others, have been met:

the State has established

and registered various payment trusts, guaranties and bank credit lines for specific use by the Project;

AdR has obtained

all rights of way required for the aqueduct;

all debt financing

agreements necessary to provide the funding to AdR for the first phase of the Project have been executed.

Since the signing of the APP Contract,

the Congress of the State of Baja California, Mexico (the “Congress”) has faced several legal challenges, some of which

remain unresolved, to the legal Decretos (decrees) they have passed to ratify and authorize the payment obligations of the corresponding

public entities under the APP Contract and to authorize the corresponding public entities to obtain a credit facility to guarantee

their payment obligations.

The resolution of these legal challenges could adversely impact our ability to complete the Project.

In addition, NSC has been sued by its minority shareholder in a court in Tijuana, Mexico and this litigation could delay or adversely

impact the Project.

If AdR is ultimately unable to proceed

with the Project due to (i) the legal challenges to the Decretos;

(ii) the litigation initiated by NSC’s minority

(iii) failure by any of the parties involved to meet the conditions necessary for the APP Contract to become

or (iv) any other reason, the land NSC has purchased and the rights of way payments it has made may lose their

strategic importance derived from their association with the Project and consequently may decline in value.

If AdR does not proceed

with the Project, NSC may ultimately be unable to sell this land or recoup its rights of way deposits for amounts at least equal

to their aggregate carrying values as of December 31, 2019 of approximately $24.2 million.

Any loss on the sale of the land,

or impairment losses NSC may be required to record as a result of a decrease in the (i) fair value of the land;

or (ii) value

of the rights of way arising from an inability to complete the Project could have a material adverse impact on our financial condition

and results of operations.

Periodically, our Bahamas subsidiary

experiences substantial delays in the collection of its accounts receivable.

As a result, our Bahamas subsidiary could have insufficient

liquidity to continue operations, and our consolidated results of operations could be materially adversely affected.

CW-Bahamas’

accounts receivable balances

due from the WSC amounted to $18.4 million as of December 31, 2019 and $17.6 million as of December 31, 2018.

Approximately

76% of the December 31, 2019 accounts receivable balance was delinquent as of that date.

The delay in collecting these accounts

receivable has adversely impacted the liquidity of this subsidiary.

Historically, 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.

Investing in our common stock involves risks.

Before investing in our common stock, you should consider carefully the factors discussed below and the information contained in this Annual Report.

Each of these risks, as well as other risks and uncertainties not presently known to us or that we currently deem immaterial, could adversely affect our business, results of operations, cash flows and financial condition, and cause the value of our common stock to decline, which may result in the loss of part, or all, of your investment.

The COVID-19 pandemic will likely continue to have a material adverse impact on our financial performance and financial condition in the future, to an extent and for a period of time that cannot presently be determined.

The worldwide coronavirus (COVID-19) pandemic was formally recognized by the World Health Organization on March 11, 2020.

In response to this pandemic, the governments of the countries in which we operate - the Cayman Islands, The Bahamas, and the United States - implemented preventative measures to slow the spread of COVID-19, measures which have had profound adverse consequences for the economies of those countries.

Tourism, a major economic driver for the Cayman Islands, has temporarily ceased due to closing of the country to tourist arrivals by air and sea travel.

Tourists arrivals to The Bahamas by air and sea have declined significantly due to the pandemic and continue to be only a small fraction of pre-pandemic numbers due to travel restrictions within and outside of The Bahamas, as well the continued reluctance of people to travel internationally.

Overall economic activity in the United States has also declined precipitously.

As a result of the impact of the COVID-19 pandemic on the economies of the countries in which we operate, we have experienced, and will continue to experience, decreases in our consolidated revenue, cash flows generated from operations, and overall liquidity as compared to comparable prior periods.

Furthermore, the economic downturn created by the COVID-19 pandemic is adversely impacting our customers.

Such adverse impacts, should they continue for a prolonged period of time, could require us to reassess the expected future cash flows from our four reporting units and could require us to record impairment losses to reduce the carrying values of one or more of these reporting units due to a decline in their fair values.

Although we cannot presently quantify the future financial impacts of the COVID-19 pandemic on our company, we believe such impacts will likely continue to have a material adverse impact on our consolidated financial condition, results of operations, and cash flows.

Given the uncertainty associated with the resolution of this pandemic, we cannot presently determine how long such adverse financial impacts may last.

Our exclusive license to provide water to retail customers in the Cayman Islands has not been expressly extended and we are presently unable to predict the outcome of our on-going negotiations relating to this license.

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.

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.

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.

In 2020 and 2019, we generated approximately 32% and 38%, respectively, of our consolidated revenue and 44% and 53%, respectively, of our 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.

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

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.

We continue to pay the royalty 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 Water Authority-Cayman 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 the Cayman Islands government seeks 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.

We are presently unable to determine what impact the resolution of our retail license negotiations 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.

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

Periodically, our Bahamas subsidiary experiences substantial delays in the collection of its accounts receivable.

As a result, our Bahamas subsidiary could have insufficient liquidity to continue operations, and our consolidated results of operations could be materially adversely affected.

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $16.8 million and $18.4 million as of December 31, 2020 and 2019, respectively.

Approximately 76% of the December 31, 2020 accounts receivable balance was delinquent as of that date.

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

Historically, 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.

All previous delinquent accounts receivable from the WSC were eventually paid in full.

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.

As of December 31, 2019, we have not provided an allowance for CW-Bahamas’

accounts receivable from the WSC.

We believe the delays we have experienced

in collecting CW-Bahamas’

receivables have been extended by the impact of Hurricane Dorian, which devastated the northern

Bahamas in September 2019.

If CW-Bahamas continues to be unable to

collect a significant portion of its delinquent accounts receivable, one or more of the following events may occur:

(i) CW-Bahamas

may not have sufficient liquidity to meet its obligations;

(ii) we may be required to cease the recognition of revenue on

CW-Bahamas’

water supply agreements with the WSC;

and (iii) we may be required to provide an allowance for CW-Bahamas’

accounts receivable.

Any of these events could have a material adverse impact on our results of operations, financial position

and cash flows.

The profitability of our contracts

is dependent upon our ability to accurately estimate construction and operating costs.

The cost estimates we prepare in connection

with the construction and operation of our plants are subject to inherent uncertainties.

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.

Because we base our contract prices in part on our estimation of future construction and operating costs, the profitability of

our plants and management contacts 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 plant, which could cause

the gross profit for a plant to be less than we anticipated when the bid was made.

The profit margins we initially expect to generate

from a plant could be further reduced if future operating costs for that plant exceed our estimates of such costs.

operating costs could be affected by a variety of factors, including lower than anticipated production or treatment efficiencies

and geo-hydrological conditions at the plant site that differ materially from those we believe would exist at the time we submitted

Any construction and operating costs for our plants that significantly exceed our initial estimates could adversely impact

our results of operations, financial condition and cash flows.

A significant portion of our consolidated

revenue is derived from our water supply agreements with the WSC.

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.

As of December 31, 2020, we have not provided an allowance for doubtful accounts for CW-Bahamas’ accounts receivable from the WSC.

We believe the delays we have experienced in collecting CW-Bahamas’ receivables have been further extended by the impact of the COVID-19 pandemic on the economy of The Bahamas .

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

(i) CW-Bahamas may not have sufficient liquidity to meet its obligations;

(ii) we may be required to cease the recognition of revenue on CW-Bahamas’ water supply agreements with the WSC;

may be required to provide an allowance for doubtful accounts 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.

Most of our services segment revenue is generated under short term contracts.

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.

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.

For the year ended December 31, 2020, we generated revenue of approximately $9.2 million 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.

Approximately 19% of PERC’s revenue for the year ended December 31, 2020 was generated under O&M contracts that expire at various dates through December 31, 2021.

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 could be adversely affected.

If Aerex’s future financial performance falls short of our most recent financial projections for this subsidiary, we may be required to record an impairment loss to reduce the carrying value of the goodwill recorded for our manufacturing reporting unit.

In February 2016, we acquired a 51% ownership interest in Aerex.

In connection with this acquisition, we recorded initial goodwill of $8,035,211.

Aerex’s actual results of operations in the six months following our acquisition of this company fell significantly short of the projected results that were included in the overall cash flow projections we utilized to determine the purchase price for Aerex and the fair values of its assets and liabilities.

Due to this shortfall in Aerex’s results of operations, we updated our projections for Aerex’s future cash flows and tested Aerex’s goodwill for possible impairment as of September 30, 2016 by estimating its fair value using the discounted cash flow method.

As a result of this impairment testing, we determined that the carrying value of our Aerex goodwill exceeded its fair value and recorded an impairment loss of $1,750,000 for the three months ended September 30, 2016 to reduce the carrying value of this goodwill to $6,285,211.

As part of our annual impairment testing of goodwill performed during the fourth quarter of each year, we updated our projections for Aerex’s future cash flows, determined that the carrying value of our Aerex goodwill exceeded its fair value, and recorded an impairment loss of $1,400,000 for the three months ended December 31, 2017 to further reduce the carrying value of this goodwill to $4,885,211.

Approximately 80% and 68% of Aerex’s revenue, and 89% and 68% of Aerex’s gross profit, for the years ended December 31, 2020 and 2019, respectively, were generated from sales to one customer.

In October 2020, this customer verbally informed Aerex that, for inventory management purposes, it was suspending its purchases from Aerex following 2020 for a period of approximately one year.

This customer has verbally informed Aerex that it presently expects to recommence its purchases from Aerex beginning with the first quarter of 2022.

However, we can offer no assurances that this customer will recommence its purchases from Aerex at that time.

Furthermore, any such future purchases (should they occur) may not generate as much revenue and gross profit as Aerex has historically earned from this customer.

We are seeking to replace the anticipated loss in revenue and gross profit from this customer by increasing sales of other products that we manufacture to new and existing customers, however, we may not be able to do so.

As a result of this anticipated loss of revenue for Aerex, we updated our projections for our manufacturing reporting unit’s future cash flows.

Such projections assume, in part, that Aerex’s major customer will recommence its purchases from Aerex in 2022 but at a reduced aggregate amount, as compared to 2020 and 2019.

Based upon these updated projections, we tested our manufacturing reporting unit’s goodwill for possible impairment as of December 31, 2020.

As a result of this impairment testing, we determined that the estimated fair value of our manufacturing reporting unit exceeded its carrying value as of December 31, 2020.

However, we may be required to record an impairment loss in the future to reduce the carrying value of our manufacturing reporting unit’s goodwill should we determine that Aerex’s future net cash inflows will be less than our most current expectations.

Any such impairment loss could have a material adverse impact on our consolidated financial condition and results of operations.

The profitability of our contracts is dependent upon our ability to accurately estimate construction and operating costs.

The cost estimates we prepare in connection with the construction and operation of our plants are subject to inherent uncertainties.

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.

Because we base our contract prices in part on our estimation of future construction and operating costs, the profitability of our plants and management 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 plant, which could cause the gross profit for a plant to be less than we anticipated when the bid was made.

The profit margins we initially expect to generate from a plant could be further reduced if future operating costs for that plant exceed our estimates of such costs.

These future operating costs could be affected by a variety of factors, including lower than anticipated production or treatment efficiencies and geo-hydrological conditions at the plant site that differ materially from those we believed would exist at the time we submitted our bid.

Any construction and operating costs for our plants that significantly exceed our initial estimates could adversely impact our results of operations, financial condition and cash flows.

A significant portion of our consolidated revenue is derived from our water supply agreements with the WSC.

The loss of the WSC as a customer would adversely affect us.

One bulk water customer, the WSC, accounted

for approximately 33% of our consolidated revenue for the year ended December 31, 2019.

If, for financial or other reasons,

the WSC does not comply with the terms of our water supply agreements our results of operations, cash flows and financial condition

could be adversely affected.

Our operations are affected by tourism

and are subject to seasonal fluctuations and other factors beyond our control that could affect the demand for our water.

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 the coronavirus (COVID-19), which is expected to impact the world

economy in 2020), and increased costs of fuel and airfare.

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.

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

Performance shortfalls under any of our bulk supply contracts

could result in penalties or cancellation of the contract.

Our bulk water supply agreements require

us to meet specified minimum quality, quantity or energy consumption guarantees.

Membrane fouling or other technical problems could

occur at any of our plants, and if we are unable to meet the guarantees due to such technical problems, we could be in default

of the supply agreement and subject to various adverse consequences, including financial penalties or cancellation of the agreement.

Our operations could be harmed by natural

disasters such as hurricanes, tropical storms or earthquakes.

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.

One bulk water customer, the WSC, accounted for approximately 30% of our consolidated revenue for the year ended December 31, 2020.

If, for financial or other reasons, the WSC does not comply with the terms of our water supply agreements our consolidated financial condition, results of operations, and cash flows could be materially adversely affected.

Our operations are affected by tourism and are subject to seasonal fluctuations and other factors beyond our control that could affect the demand for our water.

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.

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.

The COVID-19 pandemic and the resulting cessation of tourism to the Cayman Islands have significantly reduced demand for our water.

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.

Demand in The Bahamas has not been affected to the same degree by the recent drop in tourism resulting from the COVID-19 pandemic.

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

Our bulk water supply agreements require us to meet specified minimum quality, quantity and energy consumption guarantees.

Membrane fouling or other technical problems could occur at any of our plants, and if we are unable to meet the guarantees due to such technical problems, we could be in default of the supply agreement and subject to various adverse consequences, including financial penalties or cancellation of the agreement.

Our operations could be harmed by natural disasters such as hurricanes, tropical storms or earthquakes.

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 our storage tanks.

Any future disaster could

cause us to lose use of our equipment and properties and incur additional repair costs.

Damage to our customers’

and the adverse impact on tourism could result in a decrease in water demand.

A natural disaster could also disrupt the delivery

of equipment and supplies, including electricity, necessary to our operations.

These and other possible effects of natural disasters

could have an adverse impact on our results of operations, cash flows and financial condition.

Contamination

of our water may cause disruption in our services and adversely affect our revenue .

Our feed water and/or processed water

may become contaminated by natural occurrences and by inadvertent or intentional human interference, including acts of terrorism.

If our feed water and/or processed water becomes contaminated, we may have to interrupt our supply of potable water until we are

able to install treatment equipment or substitute the flow of water from an uncontaminated water source.

In addition, we may incur

significant costs in order to treat contaminated feed or processed water through expansion of our current treatment facilities,

or development of new treatment methods.

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 an adverse effect

on our results of operations, cash flows and financial condition.

Potential government decisions, actions

and regulations could negatively affect our operations.

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.

Any government that regulates

our operations may issue legislation or adopt new regulations, including but not limited to:

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

Damage to our customers’ properties and the adverse impact on tourism could

result in a decrease in water demand.

A natural disaster could also disrupt the delivery of equipment and supplies, 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..

Contamination of our water may cause disruption in our services and adversely affect our revenue .

Our feed water and/or processed water may become contaminated by natural occurrences and by inadvertent or intentional human interference, including acts of terrorism.

If our feed water and/or processed water becomes contaminated, we may have to interrupt our supply of potable water until we are able to install treatment equipment or substitute the flow of water from an uncontaminated water source.

In addition, we may incur significant costs in order to treat contaminated feed or processed water through expansion of our current treatment facilities, or development of new treatment methods.

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 an adverse effect on our results of operations, cash flows and financial condition.

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

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.

Any government that regulates our operations may issue legislation or adopt new regulations, including but not limited to:

● restricting foreign ownership (by us);

5 unchanged sentences

● causing currency exchange fluctuations/devaluations or enacting changes in tax laws.

As new laws and regulations are issued,

we may be required to modify our operations and business strategy, which we may be unable to do in a cost-effective manner.

by us to comply with applicable regulations could result in the loss of our authorizations to operate, the assessment of penalties

or fines, or otherwise may have a material adverse impact on our results of operations, financial condition and cash flows.

As new laws and regulations are issued, we may be required to modify our operations and business strategy, which we may be unable to do in a cost-effective manner.

Failure by us to comply with applicable regulations could result in the loss of our authorizations to operate, the assessment of penalties or fines, or otherwise may have a material adverse impact on our consolidated financial condition, results of operations and cash flows.

Unforeseen environmental costs could adversely affect our business and results of operations.

We are subject to various federal, state, local and foreign laws and regulations concerning environmental protection, including laws addressing water quality and contamination, the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites.

In particular, we face increasing complexity in our operations as we adjust to new and future requirements relating to water quality, the composition of our other products, their safe use, the energy consumption associated with our operations, and climate change laws and regulations.

If we were to violate or become liable under environmental laws or if our products become non-compliant with environmental laws, we could incur substantial costs or face other sanctions, which may include restrictions on operating in certain jurisdictions.

Our potential exposure includes fines and civil or criminal sanctions, third-party property damage, personal injury claims and clean-up costs.

Further, liability under some environmental laws relating to contaminated sites can be imposed retroactively, on a joint and several basis, and without any finding of noncompliance or fault.

The amount and timing of costs to comply with environmental laws are difficult to predict.

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.

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.

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.

If we were to violate or become liable under human or workers’ laws, we could incur substantial costs or face other sanctions.

Our potential exposure includes fines and civil or criminal sanctions or liability.

The amount and timing of costs to comply with human and workers’ rights laws are difficult to predict.

Additionally, the success of our business depends on earning and maintaining the trust and confidence of our customers, suppliers, stockholders and the communities in which we operate, our ability to compete for future opportunities, and our reputation among existing and potential clients and partners.

Our reputation is critical to our business and could be impacted by events that may be difficult or impossible to control, and costly or impossible to remediate.

For example, alleged or actual failures by us or our employees to comply with applicable human or workers’ rights laws, rules or regulations, expectations and perceptions of our employment and environmental, social and governance practices, threatened or actual litigation against us or our employees, or the public announcement and potential publicity surrounding any of these issues, even if inaccurate, satisfactorily addressed, or if no violation or wrongdoing actually occurred, could adversely impact our reputation and relationships with customers, suppliers, stockholders and the communities in which we operate, and our ability to renew or negotiate new agreements for projects.

Any such failure or reputational harm could have an adverse effect on our financial condition and results of operations.

We rely on the efforts of key employees.

Our failure to retain these employees could adversely affect our results of operations.

Our success depends upon the abilities

of our Executive Officers.

Our success depends upon the abilities of our Executive Officers.

In particular, the loss of the services of Frederick W.

McTaggart, our President and Chief Executive

Officer, could be detrimental to our operations and our continued success.

McTaggart has an employment agreement expiring

on December 31, 2022.

McTaggart, our President and Chief Executive Officer, could be detrimental to our operations and our continued success.

McTaggart has an employment agreement expiring on December 31, 2023.

Each year, the term of this agreement may be extended for an additional year.

However, we cannot guarantee

McTaggart will continue to work for us during the term of his agreement or will extend his employment agreement

Our business could be adversely affected

by cyber threats or other interruptions in information technology, communications networks and operations.

As part of our operations, we rely on computer

systems to process transactions and communicate with our suppliers and other third parties.

We rely on continued and unimpeded

access to secure network connections to communicate between locations and on reliable internet connections to communicate with

external parties.

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

A significant data security breach, including misappropriation of customer, supplier or employee confidential 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.

We could also experience data losses that would impair our ability to manage our business operations,

including accounting and project costs, manage our water and distribution systems or process transactions and have a negative impact

on our reputation and loss of confidence of our customers, suppliers and others, any of which could have a material adverse impact

on our business, financial condition, results of operations and cash flows.

We are exposed to credit risk through

our relationships with several customers.

We are subject to credit risk posed by

possible defaults in payment by our bulk water customers in the Cayman Islands, The Bahamas and the British Virgin Islands.

are also subject to credit risk posed by possible defaults in payment by our customers in the United States.

Adverse economic conditions

affecting, or financial difficulties of, those parties could impair their ability to pay us or cause them to delay payment.

depend on these parties to pay us on a timely basis.

Our outstanding accounts receivable are not covered by collateral or credit

However, we cannot guarantee that Mr.

McTaggart will continue to work for us during the term of his agreement or will extend his employment agreement with us.

Our business could be adversely affected by cyber threats or other interruptions in information technology, communications networks and operations.

As part of our operations, we rely on computer systems to process transactions and communicate with our suppliers and other third parties.

We rely on continued and unimpeded access to secure network connections to communicate between locations and on reliable internet connections to communicate with external parties.

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.

A significant data security breach, including misappropriation of customer, supplier or employee confidential 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.

We could also experience data losses that would impair our ability to manage our business operations, including accounting and project costs, manage our water and distribution systems or process transactions and have a negative impact on our reputation and loss of confidence of our customers, suppliers and others, any of which could have a material adverse impact on our consolidated financial condition, results of operations and cash flows and our business in general.

We are exposed to credit risk through our relationships with several customers.

We are subject to credit risk posed by possible defaults in payment by our bulk water customers in the Cayman Islands, The Bahamas and the British Virgin Islands.

We are also subject to credit risk posed by possible defaults in payment by our customers in the United States.

Adverse economic conditions affecting, or financial difficulties of, those parties could impair their ability to pay us or cause them to delay payment.

We depend on these parties to pay us on a timely basis.

outstanding accounts receivable are not covered by collateral or credit insurance.

Any delay or default in payment could adversely affect our results of operations, cash flows, and financial condition.

We are exposed to the risk of variations

in currency exchange rates.

Although we report our results in United

States dollars, most of our revenue is earned in other currencies.

Although many of these currencies have been fixed to the United

States dollar for more than 20 years, other currencies (e.g.

the Mexican peso and the euro) are not.

We do not employ hedging strategies

against the foreign currency exchange rate risk associated with conducting business in foreign currencies while reporting in United

States dollars.

If any of the existing fixed exchange rates becomes a floating exchange rate, or the other currencies in which

we conduct business depreciate significantly against the United State dollar, our results of operations, cash flows and financial

condition could be adversely affected.

may not pay dividends in the future.

We are exposed to the risk of variations in currency exchange rates.

Although we report our results in United States dollars, most of our revenue is earned in other currencies.

These currencies have been fixed to the United States dollar for more than 20 years.

Consequently, we do not employ hedging strategies against the foreign currency exchange rate risk associated with conducting business in foreign currencies while reporting in United States dollars.

If any of the existing fixed exchange rates for these other currencies becomes a floating exchange rate and any of these currencies depreciate against the U.S.

dollar, our consolidated financial condition, results of operations and cash flows could be materially adversely affected.

We may not pay dividends in the future.

If dividends are paid, they may be in lesser amounts than past dividends .

Our shareholders may receive dividends

out of legally available funds if, and when, they are declared by our Board of Directors.

We have paid dividends in the past but

may cease to do so at any time.

We may incur increased operating or development expenses or capital requirements or indebtedness

in the future that may restrict our ability to pay dividends.

We may also be restricted from paying dividends in the future due

to restrictions imposed by applicable corporate laws, our results of operations, cash flows and financial condition, covenants

contained in financing agreements, and other factors considered by our Board of Directors.

We may not continue to pay dividends

in the future or, if dividends are paid, they may not be in amounts comparable to past dividends.

Service of process and enforcement

of legal proceedings commenced against us in the United States may be difficult to obtain.

We are incorporated under the laws of

the Cayman Islands and most of our assets are located outside of the United States.

In addition, seven of our 17 Directors and

Executive 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

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.

party in a United States proceeding against us or our Officers or Directors 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.

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.

example, a United States judgment awarding remedies unobtainable in any legal action in the courts of the Cayman Islands, such

as treble damages, would likely not be enforceable under any circumstances.

The relatively low trading volume of

our stock may adversely impact the ability to sell our shares.

For the year ended December 31, 2019,

the average daily trading volume of our common stock was approximately 50,000 shares, a much lower trading volume than that of

many other companies listed on the NASDAQ Global Select Market.

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

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

The election process for our Board

of Directors may discourage, delay or prevent a change of control of our Company.

We have a classified Board of Directors

that consists of three groups.

Our shareholders may receive dividends out of legally available funds if, and when, they are declared by our Board of Directors.

We have paid dividends in the past but may cease to do so at any time.

We may incur increased operating or development expenses or capital requirements or indebtedness in the future that may restrict our ability to pay dividends.

We may also be restricted from paying dividends in the future due to restrictions imposed by applicable corporate laws, our results of operations, cash flows and financial condition, covenants contained in financing agreements, and other factors considered by our Board of Directors.

We may not continue to pay dividends in the future or, if dividends are paid, they may not be in amounts comparable to past dividends.

Service of process and enforcement of legal proceedings commenced against us in the United States may be difficult to obtain.

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

In addition, seven of our 17 Directors and Executive 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.

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 Officers or Directors 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.

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.

For example, a United States judgment awarding remedies unobtainable in any legal action in the courts of the Cayman Islands, such as treble damages, would likely not be enforceable under any circumstances.

The relatively low trading volume of our stock may adversely impact the ability to sell our shares.

For the year ended December 31, 2020, the average daily trading volume of our common stock was approximately 74,000 shares, a much lower trading volume than that of many other companies listed on the NASDAQ Global Select Market.

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.

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.

The election process for our Board of Directors may discourage, delay or prevent a change of control of our Company.

We have a classified Board of Directors that consists of three groups.

Only one group of Directors is elected each year.

The classified nature of our Board may increase

the length of time necessary for an acquirer to change the composition of our Board in order to gain control of our Company.

STAFF COMMENTS

The classified nature of our Board may increase the length of time necessary for an acquirer to change the composition of

our Board in order to gain control of our Company.

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.

What changed 10-K

Item 1A. Risk Factors