What changed in this filing

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Item 1. Business

2023-03-30 compared with 2022-03-29 · 50 added, 60 removed, 304 unchanged (27% of the section changed)

21 unchanged sentences

Water Treatment Plant Location

United States

In estimated millions of gallons per day.

9 unchanged sentences

We continue to seek to expand our existing operations in the markets we believe have significant unfulfilled demands for desalinated potable water, water treatment and reuse systems and our other products and services.

These markets include the Caribbean and the United States.

These markets include the United States and the Caribbean.

We may also pursue business in other markets where we believe we can be successful.

Complementary products, services and businesses .

We continue to aggressively pursue acquisitions or joint ventures that (i) complement and enhance our existing businesses;

We continue to pursue acquisitions or joint ventures that (i) complement and enhance our existing businesses;

(ii) expand our product and service offerings and markets;

and (iv) support our objective to be a comprehensive water solutions provider.

and (iii) support our objective to be a comprehensive water solutions provider.

We conduct our operations in the Cayman Islands, The Bahamas, the United States, and the British Virgin Islands through our subsidiaries and our affiliate.

Our corporate organizational structure is as follows.

Our corporate organizational structure as of December 31, 2022 is as follows:

Retail Segment

1 unchanged sentence

Cayman Water operates under an exclusive retail license granted by the Cayman Islands government to provide water to customers within a prescribed service area on Grand Cayman that includes the Seven Mile Beach and West Bay areas, two of the three most populated areas in the Cayman Islands.

Cayman Water owns and operates four seawater reverse osmosis desalination plants.

Cayman Water and the Water Authority-Cayman (“WAC”) (which is owned by the government) are Grand Cayman’s only water utilities.

Water owns and operates four seawater reverse osmosis desalination plants.

Cayman Water and the Water Authority-Cayman (“WAC”), a government-owned utility and regulatory agency, are Grand Cayman’s only water utilities.

Aquilex, Inc.

1 unchanged sentence

Aquilex, a U.S.

company, provides financial, engineering, information technology, administrative and supply chain management support services to our subsidiaries and affiliate.

company located in Coral Springs, Florida, provides financial, engineering, information technology, administrative and supply chain management support services to our subsidiaries and affiliate.

We include Aquilex in our retail segment for financial segment reporting purposes;

4 unchanged sentences

Ocean Conversion (Cayman) Limited (“OC-Cayman”).

OC-Cayman provides bulk water under long-term contracts to the WAC, a government-owned utility and regulatory agency, which distributes the water to properties located outside our exclusive retail license service area on Grand Cayman.

OC-Cayman provides bulk water under long-term contracts to the WAC, which distributes the water to properties located outside our exclusive retail license service area on Grand Cayman.

OC-Cayman built, sold and operates three seawater reverse osmosis desalination plants owned by the WAC.

10 unchanged sentences

In August 2020, we purchased an additional 10% ownership interest of PERC, increasing our ownership of this subsidiary to 61%.

In January 2023, we acquired the remaining 39% ownership interest in PERC.

Manufacturing Segment

Aerex Industries, Inc.

In 2016, we purchased, through CW-Holdings, 51% of the equity in Aerex, a U.S.

company located in Fort Pierce, Florida.

Aerex is an original equipment manufacturer of a wide range of specialized and custom products and systems applicable to desalination, municipal water treatment and industrial water and wastewater treatment.

Aerex, a U.S.

company located in Fort Pierce, Florida, is an original equipment manufacturer of a wide range of specialized and custom products and systems applicable to desalination, municipal water treatment and industrial water and wastewater treatment.

Aerex’s products include reverse osmosis desalination equipment, membrane separation equipment, filtration equipment, piping systems, vessels and custom fabricated components.

Aerex also offers engineering, design, consulting, inspection, training and equipment maintenance services to its customers.

In January 2020, we acquired the remaining 49% equity interest in Aerex.

Ocean Conversion (BVI) Ltd.

3 unchanged sentences

We account for our investment in OC-BVI under the equity method of accounting.

Discontinued Operations

Mexico project development

Discontinued Operations - Mexico Project Development

Consolidated Water Cooperatief, U.A.

3 unchanged sentences

CW-Cooperatief owns 99.9% of NSC, a Mexican company.

NSC was formed to pursue a project encompassing the design, construction, ownership and operation of a 100 million gallon per day seawater reverse osmosis desalination plant which was to be located in northern Baja California, Mexico and accompanying pipeline to deliver water to the Mexican potable water system (the “Project”).

NSC was formed to pursue a project encompassing the design, construction, ownership and operation of a 100 million gallon per day seawater reverse osmosis desalination plant which

was to be located in northern Baja California, Mexico and accompanying pipeline to deliver water to the Mexican potable water system (the “Project”).

On August 22, 2016, the Public Private Partnership Agreement for the Project (the “APP Contract”) was executed between AdR, the Comisión Estatal del Agua de Baja California (“CEA”), the Government of Baja California as represented by the Secretary of Planning and Finance and the Public Utilities Commission of Tijuana (“CESPT”).

1 unchanged sentence

As a result of the cancellation of the APP Contract, we 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 impairment loss these subsidiaries incurred, have been reclassified from the services segment to discontinued operations in our consolidated financial statements.

Accordingly, the assets and liabilities of CW-Cooperatief, NSC and AdR, as well as all expenses we incur in connection with our on-going international arbitration with the Mexico government to obtain reimbursement for the costs we incurred in connection with the Project are reported as discontinued operations in our consolidated financial statements.

Our Operations

3 unchanged sentences

For fiscal years 2022 and 2021, our retail water operations accounted for approximately 27%, and 33%, respectively, of our consolidated revenue.

This business produces and supplies water to end-users, including residential, commercial and government customers in the Cayman Islands.

Retail Operations in the Cayman Islands

This business produces and supplies potable water to end-users, including residential, commercial and government customers in the Cayman Islands.

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.

Although the 1990 license was not expressly extended after January 2018, we continue to supply water under the terms of the 1990 license, as discussed in the following paragraphs.

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:

3 unchanged sentences

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.

We continue to pay the royalty of 7.5% of revenue we collect 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.

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

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

24 unchanged sentences

Receivables not collected within 45 days subject the customer to disconnection from water service.

In 2021 and 2020, bad debts represented less than 1% of our total annual retail sales.

Bad debts have historically represented less than 1% of our total annual retail sales.

In addition to their past due invoice balance, customers that have had their service disconnected must pay re-connection charges.

3 unchanged sentences

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

In November 2021, the Cayman Islands government eliminated certain travel restrictions for COVID-19 vaccinated travelers that allowed tourists to enter the Cayman Islands for the first time since March 2020.

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.

In August 2022, the Cayman Islands government lifted the COVID-19 pandemic related travel restrictions that had eliminated tourist travel to the Cayman Islands since March 2020.

Bulk Water Operations

5 unchanged sentences

The water we provide to the WAC is produced at three seawater reverse osmosis desalination plants in Grand Cayman owned by the WAC but designed, built and operated by OC-Cayman:

the North Sound, Red Gate and North Side Water Works (“NSWW”) plants, which have production capacities of approximately 1.6 million, 1.3 million and 2.4 million gallons of water per day, respectively.

the North Sound, Red Gate and North Side Water

Works (“NSWW”) plants, which have production capacities of approximately 1.6 million, 1.3 million and 2.4 million gallons of water per day, respectively.

The plants we operate for the WAC are located on land owned by the WAC.

3 unchanged sentences

We sell bulk water in The Bahamas through our majority-owned subsidiary, CW-Bahamas, to the WSC, which distributes the water through its own pipeline system to residential, commercial and tourist properties on the Island of New Providence.

We also sold water to a private resort on Bimini through December 18, 2020.

We supply bulk water in The Bahamas from our Windsor and Blue Hills plants.

1 unchanged sentence

We supply water from the Blue Hills plant, our largest seawater reverse osmosis desalination facility with a capacity of 12.0 million gallons per day, under the terms of a water supply agreement with the WSC that expires in March 2032 that requires us to deliver and requires the WSC to purchase a minimum of 63.0 million gallons of water each week.

The Bimini plant supplied water to a private resort under a water supply agreement that expired on December 18, 2020.

This plant ceased operations on that date and the plant’s remaining assets were sold to one of our former customers in Bimini.

The high-pressure pumps at our Windsor and Blue Hills plants in The Bahamas are diesel engine-driven.

Electricity for the remainder of our plant operations is supplied by Bahamas Power and Light (“BPL”).

Electricity for the remainder of our plant operations is supplied by Bahamas Power and Light Company (“BPL”).

We maintain a standby generator with sufficient capacity to operate essential equipment at our Windsor and Blue Hills plants and are able to produce 100% of the production capacity with these plants during temporary interruptions in the electricity supply from BPL.

4 unchanged sentences

DesalCo also conducts research and development.

DesalCo sometimes tests new components and

technology offered by suppliers in our business and, at times, collaborates with suppliers in the development of their products.

DesalCo sometimes tests new components and technology offered by suppliers in our business and, at times, collaborates with suppliers in the development of their products.

Presently, DesalCo is providing management and purchasing services to our affiliate OC-BVI in the British Virgin Islands.

In the past, DesalCo has provided consulting services to the WSC and constructed and sold desalination plants to the WAC.

In the past, DesalCo has provided consulting services to the WSC and constructed and sold desalination plants to the WAC, and is presently constructing the Red Gate desalination plant for the WAC.

On October 24, 2019, we acquired 51% of the common stock of PERC, a U.S.

4 unchanged sentences

PERC’s primary markets are California and the Southwest U.S., but it conducts business in other areas of the U.S.

In January 2023, we acquired the remaining 39% ownership interest in PERC.

Manufacturing Operations

For fiscal years 2022 and 2021, our manufacturing operations accounted for approximately 7% and 6%, respectively, of our consolidated revenue.

Our manufacturing operations consists of Aerex, an original equipment manufacturer and service provider of a wide range of specialized and custom products applicable to desalination, municipal water treatment and industrial water and wastewater treatment.

Our manufacturing operations consist of Aerex, an original equipment manufacturer and service provider of a wide range of specialized and custom products applicable to desalination, municipal water treatment and

industrial water and wastewater treatment.

Aerex’s products include reverse osmosis desalination equipment, membrane separation equipment, filtration equipment, piping systems, vessels and custom fabricated components.

33 unchanged sentences

We believe that this technology is the most effective and efficient conversion process for our markets.

However, we are always seeking ways to maximize efficiencies in our current processes and investigating new, more efficient processes to convert seawater to potable water.

we are always seeking ways to maximize efficiencies in our current processes and investigating new, more efficient processes to convert seawater to potable water.

The equipment at our desalination plants is among the most energy efficient available and we monitor and maintain the equipment in an efficient manner.

11 unchanged sentences

Aerex has manufactured key components for some of our desalination plants and we expect Aerex to continue to do so from time to time, however, our other businesses are not dependent on Aerex.

Our access to seawater for processing into potable water is granted through our licenses and contracts with governments of the various jurisdictions in which we have our operations.

Our access to seawater for processing into potable water is granted through our licenses and contracts with governments of the various jurisdictions in which we operate.

Seasonal Variations in Our Business

Demand for our water in the Cayman Islands, The Bahamas and the British Virgin Islands is affected by variations in the level of tourism and 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 airfares.

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.

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

In November 2021, the Cayman Islands government eliminated certain travel restrictions for

COVID-19 vaccinated travelers that allowed tourists to enter the Cayman Islands for the first time since March 2020.

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.

The COVID-19 pandemic and the resulting cessation of tourism to the Cayman Islands significantly reduced demand for our water in 2021.

In August 2022, the Cayman Islands government lifted the COVID-19 pandemic related travel restrictions that had eliminated tourist travel to the Cayman Islands since March 2020.

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

The business conducted by Aerex and PERC is generally not subject to seasonal variations.

5 unchanged sentences

The following paragraphs set forth some of the key governmental regulations in the jurisdictions in which we operate outside of the United States.

The Cayman Islands

Cayman Islands

The Cayman Islands are a British Overseas Territory with a stable political climate since 1670, when the Treaty of Madrid ceded the Cayman Islands to England.

The Queen of England appoints the Governor of the Cayman Islands to make laws with the advice and consent of the Parliament of the Cayman Islands.

The King of England appoints the Governor of the Cayman Islands to make laws with the advice and consent of the Parliament of the Cayman Islands.

The Parliament of the Cayman Islands consists of 19 elected members and two members appointed by the Governor from the Civil Service.

8 unchanged sentences

We have been advised by the Government of the Cayman Islands that we will not receive any duty concessions in any new retail water license signed with the government.

The Commonwealth of The Bahamas is an independent nation and a constitutional parliamentary democracy with the Queen of England as the constitutional head of state.

The Commonwealth of The Bahamas is an independent nation and a constitutional parliamentary democracy with the King of England as the constitutional head of state.

The basis of the Bahamian law and legal system is the English common law tradition with a Supreme Court, Court of Appeals, and a Magistrates court.

2 unchanged sentences

We are also required to pay a value added tax on materials and services we purchase.

The British Virgin Islands

The British Virgin Islands (the “BVI”) is a British Overseas Territory, with the Queen of England as the Head of State and Her Majesty’s representative, the Governor, responsible for external affairs, defense and internal security, the Civil Service and administration of the courts.

British Virgin Islands

The British Virgin Islands (“BVI”) is a British Overseas Territory, with the King of England as the Head of State and His Majesty’s representative, the Governor, responsible for external affairs, defense and internal security, the Civil Service and administration of the courts.

Since 1967, the BVI has held responsibility for its own internal affairs.

11 unchanged sentences

We operate all but one of the reverse osmosis desalination plants owned by the WAC on Grand Cayman and supply water under two agreements held by OC-Cayman with the WAC.

According to the most recent information published by the Economics and Statistics Office of the Cayman Islands Government, the population of the Cayman Islands was estimated in 2021 to be 69,656.

According to the figures published by the Department of Tourism Statistics Information Center, in 2021 as compared to 2020, tourist air arrivals decreased by 86% to approximately 17,000 and cruise ship tourist arrivals decreased to zero.

According to the most recent information published by the Economics and Statistics Office of the Cayman Islands Government, the population of the Cayman Islands was estimated in 2021 to be 71,105 after the census count.

According to the figures published by the Department of Tourism Statistics Information Center, in 2022 as compared to 2021, tourist air arrivals increased over 1000% to approximately 284,000 and tourist cruise ship arrivals increased from zero to approximately 743,000.

We believe that our water sales in the Cayman Islands are more positively impacted by stay-over tourists that arrive by air than by those arriving by cruise ship, since cruise ship tourists generally only visit the island for one day or less and do not remain on the island overnight.

Our water sales in the Cayman Islands are also greatly impacted by rainfall patterns and amounts on Grand Cayman.

The COVID-19 pandemic and the resulting cessation of tourism to the Cayman Islands 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.

The Bahamas government, through the WSC, supplies all of the piped water on the island of New Providence, Bahamas, which includes Nassau, the largest city, political capital and commercial hub of The Bahamas.

3 unchanged sentences

more recent estimates suggest it is approximately 275,000.

According to statistics published by the Bahamas Ministry of Tourism, the number of cruise ship arrival and air arrival tourists to New Providence exceeded 2.8 million and 1.3 million, respectively, in 2019 and are estimated to have dropped by more than 70% in each case in 2020 to approximately 575,000 and 335,000, respectively.

In 2021, cruise ship arrivals decreased 20% to approximately 465,000 and air arrivals increased from approximately 335,000 to approximately 650,000.

According to statistics published by the Bahamas Ministry of Tourism, the number of cruise ship arrival and air arrival tourists to New Providence were approximately 590,000 and 320,000, respectively, in 2020 and were approximately 465,000 and 650,000, respectively, in 2021.

The most current data published by the Bahamas Ministry of Tourism for 2022 shows that the number of cruise ship arrival and air arrival tourists were approximately 2,136,000 and 1,137,000, respectively.

British Virgin Islands .

5 unchanged sentences

The last express extension of this license expired on January 31, 2018.

However, we continue to operate under the terms of this license, providing water services to the level and quality specified in the 1990 license and in accordance with its legal obligations, treating those obligations set forth in

the license as operative notwithstanding the expiration of the express extension.

Negotiations for a new license are on-going.

8 unchanged sentences

In the British Virgin Islands, SUEZ/Veolia operates seawater reverse osmosis desalination plants in West End, Tortola, and on Virgin Gorda and generally bids against OC-BVI for projects.

Seven Seas Water owns and operates a 2.75 million gallon per day desalination plant in Parakeeta Bay, Tortola for the British Virgin Islands government.

Seven Seas Water owns and operates a 2.75 million gallon per day desalination plant in Parakeeta Bay, Tortola for the British Virgin Islands

We expect that OC-BVI will be required to compete against SUEZ/Veolia, Seven Seas Water and other parties for any future business opportunities that may arise in the British Virgin Islands.

28 unchanged sentences

We have no collective bargaining agreements with our employees, and none are represented by labor unions.

We consider our relationships with our employees to be good.

During the COVID-19 pandemic, we have implemented a number of significant safety measures based on current guidelines recommended by the Centers for Disease Control for employees who work at our facilities.

We consider our relationships with our employees to be very good.

During the COVID-19 pandemic, we implemented a number of significant safety measures based on current guidelines recommended by the Centers for Disease Control for employees who work at our facilities.

Available Information

2 unchanged sentences

We have adopted a written code of conduct and ethics that applies to all of our employees and Directors, including, but not limited to, our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions.

The Code of Business Conduct and Ethics, the charters of the Audit Committee, Compensation Committee, Nominations and Corporate Governance Committee and the Corporate Governance Guidelines of our Board of Directors are available at the Investors section of our website.

The Code of Business Conduct and Ethics, the charters of the Audit Committee, Compensation Committee, Nominations and Corporate Governance Committee, Environmental and Social Governance Committee and the Corporate Governance Guidelines of our Board of Directors are available at the Investors section of our website.

You may access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, plus amendments to such reports as filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, on our website and on the website of the Securities and Exchange Commission (the “SEC”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business