What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-11 · 104 added, 114 removed, 524 unchanged (29% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets

4 unchanged sentences

Contract assets

Net asset arising from put/call options

Current assets of discontinued operations

6 unchanged sentences

Operating lease right-of-use assets

Net asset arising from put/call options

Long-term assets of discontinued operations

37 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenue (including purchases from related parties of $ 640,937 and $ 129,401 for the three months ended, and $ 1,480,369 and $ 285,383 for the six months ended, June 30, 2022 and 2021, respectively)

General and administrative expenses (including purchases from related parties of $ 24,231 and $ 24,299 for the three months ended, and $ 48,462 and $ 28,728 for the six months ended, June 30, 2022 and 2021, respectively)

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue (including purchases from related parties of $ 685,481 and $ 104,813 for the three months ended, and $ 2,165,850 and $ 390,196 for the nine months ended, September 30, 2022 and 2021, respectively)

General and administrative expenses (including purchases from related parties of $ 24,231 and $ 24,231 for the three months ended, and $ 72,693 and $ 52,959 for the nine months ended, September 30, 2022 and 2021, respectively)

Gain (loss) on asset dispositions and impairments, net

( 3,144,961 )

( 3,145,573 )

Income (loss) from operations

( 1,556,091 )

Income from operations

Other income (expense):

3 unchanged sentences

Equity in the earnings of OC-BVI

Net unrealized gain on put/call options

Other income, net

Income (loss) before income taxes

( 1,322,977 )

Net unrealized gain (loss) on put/call options

Other income (expense), net

Income before income taxes

Income tax provision (benefit)

Net income (loss) from continuing operations

( 1,316,132 )

Net income from continuing operations

Income from continuing operations attributable to non-controlling interests

Net income (loss) from continuing operations attributable to Consolidated Water Co.

( 1,513,270 )

Net income from continuing operations attributable to Consolidated Water Co.

Loss from discontinued operations

( 1,078,367 )

Net income (loss) attributable to Consolidated Water Co.

( 1,533,064 )

( 1,542,540 )

Net income (loss) attributable to Consolidated Water Co.

Basic earnings (loss) per common share attributable to Consolidated Water Co.

31 unchanged sentences

Balance as of June 30, 2022

Conversion of preferred stock

Exercise of options

Dividends declared

( 1,302,110 )

( 1,940,385 )

Stock-based compensation

Balance as of September 30, 2022

preferred stock

21 unchanged sentences

Balance as of June 30, 2021

Conversion of preferred stock

Exercise of options

Dividends declared

( 1,294,870 )

Stock-based compensation

Balance as of September 30, 2021

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash provided by operating activities - continuing operations

Net cash used in operating activities - discontinued operations

( 1,123,193 )

Net cash provided by operating activities

2 unchanged sentences

( 2,518,493 )

( 2,500,000 )

Maturity of certificate of deposit

10 unchanged sentences

Dividends paid to non-controlling interests

( 1,102,475 )

Repurchase of redeemable preferred stock

Proceeds received from exercise of stock options

Payments made on note payable

Payments on note payable

Net cash used in financing activities

53 unchanged sentences

The exchange rates for conversion of Mexican pesos and euros into US$ vary based upon market conditions.

Net foreign currency gains arising from transactions and re-measurements were $ 6,988 and $ 14,159 for the three months ended June 30, 2022 and 2021, respectively, and $ 29,034 and $ 14,051 for the six months ended June 30, 2022 and 2021, and are included in “Other income (expense) - Other” in the accompanying condensed consolidated statements of income (loss).

Net foreign currency gains (losses) arising from transactions and re-measurements were ($ 8,068 ) and $ 15,302 for the three months ended September 30, 2022 and 2021, respectively, and $ 20,966 and $ 29,353 for the nine months ended September 30, 2022 and 2021 and are included in “Other income (expense) - Other” in the accompanying condensed consolidated statements of income (loss).

Cash and cash equivalents:

Cash and cash equivalents consist of demand deposits at banks and certificates of deposit at banks with an original maturity of three months or less.

Cash and cash equivalents as of June 30, 2022 and December 31, 2021 include approximately $ 7.4 million and $ 7.4 million, respectively, of certificates of deposits with an original maturity of three months or less.

Cash and cash equivalents as of September 30, 2022 and December 31, 2021 include approximately $ 7.5 million and $ 7.4 million, respectively, of certificates of deposits with an original maturity of three months or less.

Certain transfers from the Company’s Bahamas bank accounts to Company bank accounts in other countries require the approval of the Central Bank of The Bahamas.

The equivalent United States dollar cash balances for deposits held in The Bahamas as of June 30, 2022, and December 31, 2021 were approximately $ 11.5 million and $ 3.9 million, respectively.

The equivalent United States dollar cash balances for deposits held in The Bahamas as of September 30, 2022 and December 31, 2021 were approximately $ 4.7 million and $ 3.9 million, respectively.

Certificate of deposit:

As of June 30, 2022 and December 31, 2021, the Company held a certificate of deposit in The Bahamas of $ 2.5 million and $ 2.5 million, respectively, with an original maturity of six months.

As of December 31, 2021, the Company held a certificate of deposit in The Bahamas of $ 2.5 million with an original maturity of six months.

Goodwill and intangible assets:

14 unchanged sentences

Based upon its estimation prepared as of December 31, 2021, the fair value of the Company’s manufacturing reporting unit exceeded its carrying value by only 15 %.

If the Company determines in the future that Aerex’s discounted future cash inflows will be less than its present expectation, the Company may be required to record additional impairment losses to reduce the remaining carrying values as of June 30, 2022 of its manufacturing reporting unit’s goodwill of $ 1,985,211 and its remaining unamortized intangible assets balances of $ 801,111 recorded as a result of the acquisition of Aerex.

If the Company determines in the future that Aerex’s discounted future cash inflows will be less than its present expectation, the Company may be required to record additional impairment losses to reduce the remaining carrying values as of September 30, 2022 of its manufacturing reporting unit’s goodwill of $ 1,985,211 and its remaining unamortized intangible assets balances of $ 777,778 recorded as a result of the acquisition of Aerex.

Any such impairment losses could have a material adverse impact on the Company’s consolidated results of operations.

2 unchanged sentences

The following table presents the Company’s revenue disaggregated by revenue source.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Retail revenue

33 unchanged sentences

Revenue recognized and amounts billed on contracts in progress are summarized as follows:

September 30,

Revenue recognized to date on contracts in progress

5 unchanged sentences

The above net balances are reflected in the accompanying condensed consolidated balance sheets as follows:

September 30,

Contract assets

3 unchanged sentences

( 2,094,576 )

As of June 30, 2022 , the Company had unsatisfied or partially unsatisfied performance obligations for contracts in progress representing approximately $ 102.7 million in aggregate transaction price for contracts with an original expected length of greater than one year .

As of September 30, 2022 , the Company had unsatisfied or partially unsatisfied performance obligations for contracts in progress representing approximately $ 104.8 million in aggregate transaction price for contracts with an original expected length of greater than one year .

The Company expects to earn revenue as it satisfies its performance obligations under those contracts in the amount of approximately $ 12.6 million during the remainder of the year ending December 31, 2022 and approximately $ 92.2 million thereafter .

In addition, the Company recognized revenue of $ 286,000 in the six months ended June 30, 2022, that was included in the contract liability balance as of December 31, 2021.

In addition, the Company recognized revenue of $ 396,000 in the nine months ended September 30, 2022, that was included in the contract liability balance as of December 31, 2021.

Practical Expedients and Exemptions

14 unchanged sentences

The Company’s segments are strategic business units that are managed separately because each segment sells different products and/or services, serves customers with distinctly different needs and generates different gross profit margins.

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Manufacturing

1 unchanged sentence

General and administrative expenses

Gain on asset dispositions and impairments, net

Gain on asset dispositions

Income (loss) from operations

Other income, net

Other income (loss), net

Income before income taxes

5 unchanged sentences

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the three months ended June 30, 2022 for the retail, bulk, services and manufacturing segments were $ 637,796 , $ 704,841 , $ 168,078 and $ 70,307 , respectively.

Three Months Ended June 30, 2021

Depreciation and amortization expenses for the three months ended September 30, 2022 for the retail, bulk, services and manufacturing segments were $ 567,086 , $ 707,788 , $ 175,732 and $ 71,734 , respectively.

Three Months Ended September 30, 2021

Manufacturing

1 unchanged sentence

General and administrative expenses

Gain (loss) on asset dispositions and impairments, net

( 2,900,000 )

( 2,896,640 )

Gain on asset dispositions

Income (loss) from operations

( 3,368,425 )

( 1,556,091 )

Other income, net

Loss before income taxes

( 1,322,977 )

Income before income taxes

Income tax benefit

Net loss from continuing operations

( 1,316,132 )

Net income from continuing operations

Income attributable to non-controlling interests

Net loss from continuing operations attributable to Consolidated Water Co.

( 1,513,270 )

Net income from continuing operations attributable to Consolidated Water Co.

Loss from discontinued operations

Net loss attributable to Consolidated Water Co.

( 1,078,367 )

Depreciation and amortization expenses for the three months ended June 30, 2021 for the retail, bulk, services and manufacturing segments were $ 632,953 , $ 906,292 , $ 204,000 and $ 70,134 , respectively.

Six Months Ended June 30, 2022

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the three months ended September 30, 2021 for the retail, bulk, services and manufacturing segments were $ 625,640 , $ 761,429 , $ 203,411 and $ 70,679 , respectively.

Nine Months Ended September 30, 2022

Manufacturing

1 unchanged sentence

General and administrative expenses

Gain on asset dispositions and impairments, net

Gain on asset dispositions

Income (loss) from operations

8 unchanged sentences

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the six months ended June 30, 2022 for the retail, bulk, services and manufacturing segments were $ 1,253,481 , $ 1,407,100 , $ 327,077 and $ 141,515 , respectively.

Six Months Ended June 30, 2021

Depreciation and amortization expenses for the nine months ended September 30, 2022 for the retail, bulk, services and manufacturing segments were $ 1,820,567 , $ 2,114,888 , $ 502,809 and $ 213,249 , respectively.

Nine Months Ended September 30, 2021

Manufacturing

12 unchanged sentences

Income from continuing operations attributable to non-controlling interests

Net loss from continuing operations attributable to Consolidated Water Co.

Net income from continuing operations attributable to Consolidated Water Co.

Loss from discontinued operations

( 1,542,540 )

Net loss attributable to Consolidated Water Co.

Depreciation and amortization expenses for the six months ended June 30, 2021 for the retail, bulk, services and manufacturing segments were $ 1,267,208 , $ 1,860,052 , $ 404,495 and $ 145,667 , respectively.

As of June 30, 2022

Depreciation and amortization expenses for the nine months ended September 30, 2021 for the retail, bulk, services and manufacturing segments were $ 1,892,848 , $ 2,621,481 , $ 607,906 and $ 216,346 , respectively.

As of September 30, 2022

Manufacturing

20 unchanged sentences

The following summarizes information related to the computation of basic and diluted EPS:

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss) from continuing operations attributable to Consolidated Water Co.

( 1,513,270 )

Three Months Ended September 30,

Nine Months Ended September 30,

Net income from continuing operations attributable to Consolidated Water Co.

preferred stock dividends

Net income (loss) from continuing operations available to common shares in the determination of basic earnings per common share

( 1,516,445 )

Net income from continuing operations available to common shares in the determination of basic earnings per common share

Loss from discontinued operations

( 1,078,367 )

Net income (loss) available to common shares in the determination of basic earnings per common share

( 1,533,064 )

( 1,542,540 )

Net income (loss) available to common shares in the determination of basic earnings per common share

Weighted average number of common shares in the determination of basic earnings per common share attributable to Consolidated Water Co.

7 unchanged sentences

(“CW-Cooperatief”), and its Mexico subsidiary, N.S.C.

(“NSC”), of a project (the “Project”) that

encompassed 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 accompanying pipelines to deliver water to the Mexican potable water system.

(“NSC”), of a project (the “Project”) that encompassed 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 accompanying pipelines to deliver water to the Mexican potable water system.

Through a series of transactions that began in 2012, NSC purchased 20.1 hectares of land for approximately $ 21.1 million on which the proposed Project’s plant was to be constructed.

1 unchanged sentence

A consortium (the “Consortium”) comprised of NSC, Suez Medio Ambiente México, S.A.

(“Suez MA”), a subsidiary of SUEZ International, S.A.S., and NuWater S.A.P.I.

a subsidiary of SUEZ International, S.A.S., and NuWater S.A.P.I.

(“NuWater”) submitted its tender for the Project in April 2016 and in June 2016, the State designated the Consortium as the winner of the tender process for the Project.

19 unchanged sentences

To date, AdR has not received a formal response from CEA or CESPT to its submission of non-recoverable expenses.

Kingdom of the Netherlands and the United Mexican States entered into force as of October 1, 1999 (the “Treaty”).

The Company believes CW-Cooperatief, as a Netherlands company, has certain rights relating to its investments in NSC and AdR under the Agreement on Promotion, Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the United Mexican States entered into force as of October 1, 1999 (the “Treaty”).

On April 16, 2021, CW-Cooperatief submitted a letter to the President of Mexico and other Mexican federal government officials alleging that the State’s termination of the APP Contract constituted a breach by Mexico of its international obligations under the Treaty, entitling CW-Cooperatief to full reparation, including monetary damages.

This letter invites Mexico to seek a resolution of this investment dispute through consultation and negotiation, but states that if the dispute cannot be resolved in this manner, CW-Cooperatief elects to refer the dispute to the International Centre for the Settlement of International Disputes for arbitration, as provided for in the Treaty.

This letter invited Mexico to seek a resolution of this investment dispute through consultation and negotiation, but stated that if the dispute cannot be resolved in this manner, CW-Cooperatief elects to refer the dispute to the International Centre for the Settlement of International Disputes for arbitration, as provided for in the Treaty.

On June 29, 2021, the Mexican Ministry of Economy responded to CW-Cooperatief’s letter and proposed to hold a consultation meeting.

1 unchanged sentence

On February 9, 2022, CW-Cooperatief, filed a Request for Arbitration with the International Centre for Settlement of International Disputes requesting that the United Mexican States pay CW-Cooperatief damages in excess of US$ 51 million plus MXN$ 137 million (with the exact amount to be quantified in the proceedings), plus fees, costs and pre- and post-award interest.

CW-Cooperatief intends to pursue vigorously the relief sought in the arbitration, in addition to pursuing all other legal remedies and courses of action available under the operative contracts and applicable law with respect to their rights, damages, fees and expenses.

The Company cannot provide any assurances that CW-Cooperatief will be able to obtain the relief sought in the arbitration, and CW-Cooperatief will incur legal and other arbitration-related expenses that the Company expects will be material to its consolidated results of operations and cash flows.

3 unchanged sentences

As a result of the cancellation of the APP Contract, in 2020 the Company discontinued all development activities associated with the Project and commenced active marketing efforts to sell the land NSC purchased for the Project.

Accordingly, the assets and liabilities of CW-Cooperatief, NSC and AdR, as well as all Project development expenses and the costs for legal and administrative activities to pursue reimbursement from the State of Baja California following the cancellation of the APP Contract, have been reclassified from the services segment to discontinued operations in the accompanying consolidated financial statements.

Accordingly, the assets and liabilities of CW-Cooperatief, NSC and AdR, as well as all Project development expenses and the costs for legal and administrative activities to pursue reimbursement from the State of Baja California following the cancellation of the APP Contract, have been classified as discontinued operations in the accompanying consolidated financial statements.

Summarized financial information for the discontinued Mexico project development operation is as follows:

September 30,

Prepaid expenses and other current assets

2 unchanged sentences

Total liabilities of discontinued operations

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Provision for uncollected value added taxes

1 unchanged sentence

Depreciation expense

Project Litigation

Immediately following CW-Cooperatief’s acquisition of its initial 50 % ownership in NSC, the remaining 50 % ownership interest in NSC was held by an unrelated company, Norte Sur Agua, S.

NSA subsequently transferred ownership of half of its shares in NSC to EWG Water LLC (“EWG”) and the other half of its shares in NSC to an individual (the “individual shareholder”).

In February 2012, CW-Cooperatief paid $ 300,000 to enter into an agreement (the “Option Agreement”) that provided it with an option, exercisable through February 7, 2014, to purchase the shares of NSC owned by the individual shareholder for a price of $ 1.0 million along with an immediate usufruct and power of attorney to vote those shares.

Such shares constituted 25 % of the ownership of NSC as of February 2012.

In May 2013, NSC repaid a $ 5.7 million loan payable to CW-Cooperatief by issuing additional shares of its stock.

As a result of this share issuance to CW-Cooperatief, we indirectly acquired 99.99 % of the ownership of NSC.

The Option Agreement contained an anti-dilution provision that required CW-Cooperatief to transfer or otherwise cause the individual shareholder to acquire, for a total price of $ 1 (regardless of their par or market value), shares in NSC of an amount sufficient to maintain the individual shareholder’s 25 % ownership interest in NSC if (i) any new shares of NSC were issued subsequent to the execution of the Option Agreement (causing the individual shareholder’s 25 % ownership interest in NSC to be decreased);

and (ii) CW-Cooperatief did not exercise its share purchase option by February 7, 2014.

CW-Cooperatief exercised its option and paid the $ 1.0 million to the individual shareholder to purchase the Option Agreement shares in February 2014.

In January 2018, EWG initiated an ordinary mercantile claim against the individual shareholder, NSC and CW-Cooperatief, (with AdR being named as a third party to be called to trial) before the Tenth Civil Judge in Tijuana, Baja California for Mercantile Matters (the “Tenth Civil Judge”).

In the ordinary mercantile claim, EWG challenged, among other things, the transactions contemplated under the Option Agreement, and therefore, the capital investment transactions that increased the ownership interest of CW-Cooperatief in NSC to 99.99 % as a consequence of the Option Agreement.

EWG requested that the court, as a preliminary matter (a) suspend the effectiveness of the challenged transactions;

(b) order certain public officials in Mexico to record the pendency of the lawsuit in the public records (including a special request to register a lien over the real estate owned by NSC);

and (d) order public officials in Mexico and credit institutions abroad to refrain from authorizing or executing any legal act related with the activities of the plaintiff, the co-defendants and the third party called to trial to avoid damages to third parties, including those with whom negotiations or any form of commercial or administrative activities, or activities of any other nature related with the “Rosarito” water desalination project, are being conducted.

The Tenth Civil Judge granted, ex-parte, the preliminary relief sought by EWG, which resulted in the issuance of official writs to several governmental and public entities involved with the “Rosarito” water desalination project, including the registration of the pendency of the lawsuit in certain public records.

On October 1, 2020 and following an order from a Federal Judge obtained by NSC, the Tenth Civil Judge resolved to (i) move the claim of EWG to arbitration, and (ii) suspend the corresponding ordinary mercantile procedure.

EWG challenged such resolution, arguing that its notification was not lawful.

The Tenth Civil Judge dismissed such challenge, and thereafter EWG filed a remedy against such dismissal.

NSC appeared before the court to vigorously oppose such remedy, and the remedy was subsequently dismissed.

To date, arbitration has not been initiated by either party.

The Company leases consist primarily of leases for office and warehouse space.

For leases with terms greater than twelve months, the related asset and obligation are recorded at the present value of the lease payments over the term.

Many of these leases contain rental escalation clauses which are factored into the determination of the lease payments when

Many of these leases contain rental escalation clauses which are factored into the determination of the lease payments when appropriate.

When available, the lease payments are discounted using the rate implicit in the lease;

however, the Company’s current leases do not provide a readily determinable implicit rate.

Company’s current leases do not provide a readily determinable implicit rate.

Therefore, the Company’s incremental borrowing rate is estimated to discount the lease payments based on information available at the lease commencement.

7 unchanged sentences

The following table presents the lease-related assets and liabilities and their respective classification on the condensed consolidated balance sheets:

September 30,

Prepaid expenses and other current assets

15 unchanged sentences

The components of lease costs were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease costs

3 unchanged sentences

Supplemental cash flow information related to leases is as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

Cash paid for amounts included in measurement of liabilities:

1 unchanged sentence

Operating cash outflows for operating leases - discontinued operations

Future lease payments relating to the Company’s operating lease liabilities from continuing operations as of June 30, 2022 were as follows:

Future lease payments relating to the Company’s operating lease liabilities from continuing operations as of September 30, 2022 were as follows:

Years ending December 31,

4 unchanged sentences

Noncurrent lease obligations

As of June 30, 2022 and December 31, 2021, the carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued expenses, accrued compensation, dividends payable and other current liabilities approximate their fair values due to the short-term maturities of these instruments.

As of September 30, 2022 and December 31, 2021, the carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued expenses, accrued compensation, dividends payable and other current liabilities approximate their fair values due to the short-term maturities of these instruments.

Under US GAAP, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

12 unchanged sentences

Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value as of June 30, 2022 and December 31, 2021:

June 30, 2022

The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value as of September 30, 2022 and December 31, 2021:

September 30, 2022

Certificate of deposit

3 unchanged sentences

Net asset arising from put/call options

The activity for the Level 3 asset for the six months ended June 30, 2022:

The activity for the Level 3 asset for the nine months ended September 30, 2022:

Net asset arising from put/call options

1 unchanged sentence

Unrealized gain

Balance as of June 30, 2022

Balance as of September 30, 2022

The put/call options are reported at fair value at their net asset or liability balance in the condensed consolidated balance sheets.

6 unchanged sentences

driver for the Cayman Islands, temporarily ceased due to closing of the country to tourist arrivals by air and sea travel and has yet to return to pre-pandemic levels.

Tourist arrivals to The Bahamas by air and sea also declined significantly due to the pandemic and continue to be less than prior to the pandemic.

Tourist arrivals to The Bahamas by air and sea also declined significantly due to the pandemic.

Overall economic activity in the United States was adversely affected by COVID-19.

6 unchanged sentences

Seven Mile Beach and West Bay.

For the three months ended June 30, 2022 and 2021, the Company generated approximately 31 % and 34 %, respectively, of its consolidated revenue and 46 % and 48 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the six months ended June 30, 2022 and 2021, the Company generated approximately 32 % and 34 %, respectively, of its consolidated revenue and 46 % and 48 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the three months ended September 30, 2022 and 2021, the Company generated approximately 25 % and 32 %, respectively, of its consolidated revenue and 44 % and 44 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the nine months ended September 30, 2022 and 2021, the Company generated approximately 29 % and 33 %, respectively, of its consolidated revenue and 45 % and 47 %, respectively, of its 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.

10 unchanged sentences

Such impairment losses could have a material adverse impact on the Company’s consolidated financial condition and results of operations.

As of March 31, 2022 and December 31, 2021, CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the Water and Sewerage Corporation of The Bahamas (“WSC”) amounted to $ 21.2 million and $ 21.5 million, respectively.

As December 31, 2021, CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the Water and Sewerage Corporation of The Bahamas (“WSC”) amounted to $ 21.5 million.

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

4 unchanged sentences

Such correspondence also indicated that the Government intends to return all of CW-Bahamas’ accounts receivable from the WSC to current status.

During the three months ended June 30, 2022, CW-Bahamas received approximately $ 16.4 million in payments on its accounts receivable from the WSC.

As of June 30, 2022, CW-Bahamas’ accounts receivable from the WSC had been reduced to $ 13.5 million.

As of September 30, 2022, CW-Bahamas’ accounts receivable from the WSC amounted to $ 15.2 million.

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.

Moody’s also lowered The Bahamas’ local currency ceiling to Baa3 from Baa2 and its foreign currency ceiling to Ba1 from Baa.

Based upon its review of this Moody’s report, the Company continues to believe no allowance for doubtful accounts is required for CW-Bahamas’ accounts receivable from the WSC.

Related party transactions

The Company, through PERC and the services segment, purchases engineering and technology support services from various companies with a minority shareholder in those companies who is also a minority shareholder of PERC.

During the three months ended June 30, 2022 and 2021, the Company made total purchases of services from these companies of approximately $ 641,000 and $ 129,000 , respectively, and approximately $ 1,480,000 and $ 285,000 during the six months ended June 30, 2022 and 2021, respectively.

These total purchases are included in the Company’s cost of revenue in the accompanying condensed consolidated statements of income.

During the three months ended September 30, 2022 and 2021, the Company made total purchases of services from these companies of approximately $ 685,000 and $ 105,000 , respectively, and approximately $ 2,166,000 and $ 390,000 during the nine months ended September 30, 2022 and 2021, respectively.

These total purchases are included in the Company’s cost of revenue in the accompanying condensed consolidated statements of income (loss).

PERC has entered into a sublease agreement with one of these related companies that commenced on March 14, 2021 and ended August 31, 2021.

This lease has been extended on a month-to-month basis subsequent to August 31, 2021.

During the three months ended June 30, 2022 and 2021, the Company recognized approximately $ 24,000 and $ 24,000 of expense related to this lease, respectively, and approximately $ 48,000 and $ 29,000 during the six months ended June 30, 2022 and 2021, respectively.

This lease amount is included in the Company's general and administrative expenses in the accompanying condensed consolidated statements of income.

The total amount of accounts payable outstanding to these companies as of June 30, 2022 and December 31, 2021, was approximately $ 767,000 and $ 164,000 , respectively.

During the three months ended September 30, 2022 and 2021, the Company recognized approximately $ 24,000 and $ 24,000 of expense related to this lease, respectively, and approximately $ 73,000 and $ 53,000 during the nine months ended September 30, 2022 and 2021, respectively.

This lease expense is included in the Company's general and administrative expenses in the accompanying condensed consolidated statements of income (loss).

The total amount of accounts payable outstanding to these companies as of September 30, 2022 and December 31, 2021, was approximately $ 569,000 and $ 164,000 , respectively.

Impact of recent accounting standards

2 unchanged sentences

Subsequent events

In October 2022, the Company exercised its option to purchase the shares constituting the remaining 39 % minority interest in PERC at a price to be determined by an independent valuation, which is currently in-process.

The Company evaluated subsequent events through the time of the filing of this report on Form 10-Q.

1 unchanged sentence

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-Q

Item 1. Financial Statements