What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-05-15 · 138 added, 63 removed, 474 unchanged (30% of the section changed)

53 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31,

Cost of revenue ( including purchases from related parties of $- in 2023 and $ 839,432 in 2022)

General and administrative expenses ( including purchases from related parties of $- in 2023 and $ 24,231 in 2022)

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenue ( including related party expenses of $0 and $ 640,937 for the three months ended, and $ 0 and $ 1,480,369 for the six months ended, June 30, 2023 and 2022, respectively)

General and administrative expenses ( including related party expenses of $0 and $ 24,231 for the three months ended, and $ 0 and $ 48,462 for the six months ended, June 30, 2023 and 2022, respectively)

Gain on asset dispositions and impairments, net

13 unchanged sentences

Total loss from discontinued operations

( 1,027,147 )

Net income attributable to Consolidated Water Co.

28 unchanged sentences

Balance as of March 31, 2023

Issue of share capital

Buyback of preferred stock

Exercise of options

Dividends declared

( 1,340,972 )

Stock-based compensation

Balance as of June 30, 2023

preferred stock

7 unchanged sentences

Balance as of March 31, 2022

Issue of share capital

Exercise of options

Dividends declared

( 1,301,840 )

( 1,766,040 )

Stock-based compensation

Balance as of June 30, 2022

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

Net cash provided by operating activities - continuing operations

4 unchanged sentences

( 2,518,493 )

Maturity of certificate(s) of deposit

Maturity of certificate of deposit

Additions to property, plant and equipment and construction in progress

( 3,110,041 )

( 1,796,196 )

Proceeds from asset dispositions

3 unchanged sentences

( 5,528,658 )

( 1,790,329 )

Cash flows from financing activities

3 unchanged sentences

Dividends paid to preferred shareholders

Dividends paid to non-controlling interests

Buyback of redeemable preferred stock

Proceeds received from exercise of stock options

Principal repayments on long-term debt

2 unchanged sentences

( 3,093,063 )

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

( 3,251,032 )

Cash and cash equivalents at beginning of period

3 unchanged sentences

Non-cash transactions:

Issuance of 13,309 and 9,295 , respectively, shares of redeemable preferred stock for services rendered

Issuance of 44,783 and 41,830 , respectively, shares of common stock for services rendered

3 unchanged sentences

Transfers from construction in progress to property, plant and equipment

Transfers from prepaids to property, plant and equipment

Transfers from prepaids to inventory

Right-of-use assets obtained in exchange for new operating lease liabilities

Purchase of equipment through issuance of long-term debt

Transfers from prepaid expenses to property, plant and equipment

Transfers from prepaid expenses to inventory

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

11 unchanged sentences

(“Aerex”), Aquilex, Inc.

(“Aquilex”), Cayman Water Company Limited (“Cayman Water”), Ocean Conversion (Cayman) Limited (“OC-Cayman”), PERC Water Corporation ("PERC"), DesalCo Limited (“DesalCo”), Consolidated Water Cooperatief, U.A.

(“Aquilex”), Cayman Water Company Limited (“Cayman Water”), Consolidated Water Cooperatief, U.A.

(“CW-Cooperatief”), Consolidated Water U.S.

Holdings, Inc.

(“CW-Holdings”);

(“CW-Holdings”), DesalCo Limited (“DesalCo”), Kalaeloa Desalco LLC (“Kalaeloa Desalco”), Ocean Conversion (Cayman) Limited (“OC-Cayman”), and PERC Water Corporation ("PERC");

and (ii) majority-owned subsidiaries Consolidated Water (Bahamas) Ltd.

6 unchanged sentences

After giving effect to this purchase, CW-Holdings owns 100 % of the outstanding capital stock of PERC.

In September 2021, Kalaeloa Desalco was formed to pursue a project encompassing the design, construction, operations and maintenance of a seawater reverse osmosis desalination plant in Oahu, Hawaii.

On June 2, 2023, Kalaeloa Desalco, which is jointly owned by PERC and CW-Holdings, signed a definitive agreement with the Honolulu Board of Water Supply to design, build, operate and maintain a 1.7 million gallons per day seawater reverse osmosis desalination plant in Oahu, Hawaii.

The accompanying interim condensed consolidated financial statements are unaudited.

11 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 $ 25,779 and $ 22,046 for the three months ended March 31, 2023 and 2022, respectively, and are included in “Other income (expense) - Other” in the accompanying condensed consolidated statements of income.

Net foreign currency gains arising from transactions and re-measurements were $ 24,397 and $ 6,988 for the three months ended June 30, 2023 and 2022, respectively, and $ 50,176 and $ 29,034 for the six months ended June 30, 2023 and 2022, and are included in “Other income (expense) - Other” in the accompanying condensed consolidated statements of income.

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 March 31, 2023 and December 31, 2022 include approximately $ 5.1 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 June 30, 2023 and December 31, 2022 include approximately $ 5.1 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 March 31, 2023 and December 31, 2022 were approximately $ 7.3 million and $ 5.7 million, respectively.

The equivalent United States dollar cash balances for deposits held in The Bahamas as of June 30, 2023 and December 31, 2022 were approximately $ 10.1 million and $ 5.7 million, respectively.

Goodwill and intangible assets:

Goodwill represents the excess cost of an acquired business over the fair value of the assets and liabilities of the acquired business.

Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are tested for impairment annually or upon the identification of a triggering event.

Goodwill represents the excess cost of an acquired business over the fair value of the assets and liabilities of the acquired business as of the date of acquisition.

Goodwill and intangible assets recorded as a result of a business combination and determined to have an indefinite useful life are not amortized but are tested for impairment annually or upon the identification of a triggering event.

Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed periodically for impairment.

1 unchanged sentence

Management identifies the Company’s reporting units for goodwill impairment testing purposes, which consist of Cayman Water, the bulk segment (which is comprised of CW-Bahamas and OC-Cayman), PERC, and the manufacturing segment (i.e., Aerex), and determines the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units.

The Company determines the fair value of each reporting unit and compares these fair value to the carrying amount of the reporting units.

To the extent the carrying amount of the reporting unit exceeds the fair value of the reporting unit, an impairment loss is recorded.

The Company determines the fair value of each reporting unit and compares these fair values to the carrying amounts of the reporting units.

To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit, an impairment loss is recorded.

As of December 31, 2022, the Company elected to assess qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment testing conducted in prior years for all goodwill reporting units other than the manufacturing reporting unit.

5 unchanged sentences

These seven-year projections were based upon historical and anticipated future results, general economic and market conditions, and considered the impact of planned business and operational strategies.

The discount rates for the calculations represented the estimated cost of capital for market participants at the time of each analysis.

The discount rates for the calculations represented the estimated cost of capital for market participants at the time of the analysis.

The Company also estimated the fair value of its manufacturing reporting unit for the year ended December 31, 2022 by applying the guideline public company method.

The Company weighted the fair values estimated for its manufacturing reporting unit under each method and summed such weighted fair values to estimate the overall fair value for the reporting unit.

The respective weightings the Company applied to each method for the year ended December 31, 2022 were 80 % to the discounted cash flow method and 20 % to the guideline public company method.

The respective weightings the

Company applied to each method for the year ended December 31, 2022 were 80 % to the discounted cash flow method and 20 % to the guideline public company method.

The fair value the Company estimated for its manufacturing reporting unit exceeded its carrying amount by 63 % as of December 31, 2022.

conditions, which have resulted in increasing raw material prices, extended and unexpected delays in the procurement and delivery of its raw materials, and have also, the Company believes, adversely affected its customers.

The Company believes the inherent uncertainties associated with the accounting estimates and assumptions it uses for its estimates of its manufacturing reporting unit’s fair value have increased due to the current, less predictable economic conditions, which have resulted in increasing raw material prices, extended and unexpected delays in the procurement and delivery of its raw materials, and have also, the Company believes, adversely affected its customers.

Should interest rates rise significantly in the future the Company would likely be required to increase the discount rate it uses under the discounted cash flow method to estimate the fair value of this reporting unit, and such increased discount rate in and of itself could decrease the estimated fair value of the manufacturing reporting unit under the discounted cash flow method.

As noted previously, based upon its estimation prepared as of December 31, 2022, the fair value of the Company’s manufacturing reporting unit exceeded its carrying value by 63 %.

However, if the Company determines in the future that Aerex’s discounted future cash inflows will be less than its present expectations, the Company may be required to record additional impairment losses to reduce the remaining carrying values of its manufacturing segment’s goodwill and its remaining unamortized intangible assets balances, which amounted to $ 1,985,211 and $ 731,111 , respectively, as of March 31, 2023.

As noted previously, based upon the Company’s estimation prepared as of December 31, 2022, the fair value of the Company’s manufacturing reporting unit exceeded its carrying value by 63 %.

However, if the Company determines in the future that Aerex’s discounted future cash inflows will be less than its present expectations, the Company may be required to record additional impairment losses to reduce the remaining carrying values of its manufacturing reporting unit’s goodwill and its remaining unamortized intangible assets balances, which amounted to $ 1,985,211 and $ 707,778 , respectively, as of June 30, 2023.

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

9 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Retail revenue

23 unchanged sentences

The Company recognizes revenue for its construction and custom/specialized manufacturing contracts over time under the input method using costs incurred (which represents work performed) to date relative to total estimated costs at completion to measure progress toward satisfying a contract’s performance obligations as such measure best reflects the transfer of control of the promised good to the customer.

Contract costs include labor, materials and amounts payable to subcontractors.

Contract costs include labor, materials and subcontractor costs.

The Company follows this method since it can make reasonably dependable estimates of the revenue and costs applicable to the various stages of a contract.

2 unchanged sentences

The cumulative amount of revenue recorded on a contract at a specified point in time is that percentage of total estimated revenue that incurred costs to date comprise of estimated total contract costs.

If, as work progresses, the actual contract costs exceed estimates, the profit recognized on revenue from that contract decreases.

Due to the extended time it may take to complete many of the Company’s contracts and the scope and nature of the work required to be performed on those contracts, the estimations of total revenue and costs at completion is complicated and subject to many variables and, accordingly, are subject to changes.

When adjustments in estimated total contract revenue or estimated total contract costs are required, any changes from prior estimates are recognized in the current period for the inception-to-date effect of such changes.

The Company recognizes the full amount of any estimated loss on a contract at the time the estimates indicate such a loss.

1 unchanged sentence

Contract liabilities on uncompleted contracts, if any, are classified as current liabilities.

During the three months ended June 30, 2023, the Company adjusted its previous estimates of the total contract costs for two of its construction contracts.

These adjustments increased the services segment’s income from operations and the Company’s consolidated net income by $ 1 ,761,753 for the three and six months ended June 30, 2023.

This adjustment increased diluted earnings per share by $ 0.1 1 for the three and six months ended June 30, 2023.

The Company has elected the “right to invoice” practical expedient for revenue recognition on its services agreements and recognizes revenue in the amount to which the Company has a right to invoice.

15 unchanged sentences

( 5,890,199 )

The significant increase in contract liabilities from December 31, 2022 to March 31, 2023 is primarily attributable to billings on PERC’s construction contract with Liberty Utilities for a water treatment facility in Arizona.

As of March 31, 2023, the Company had unsatisfied or partially unsatisfied performance obligations for contracts in progress representing approximately $ 86.2 million in aggregate transaction price for contracts with an original expected length of greater than one year .

The significant increase in contract liabilities from December 31, 2022 to June 30, 2023 is primarily attributable to billings on PERC’s construction contract with Liberty (Litchfield Park Water & Sewer) Corp.

(“Liberty Utilities”) for a water treatment facility in Arizona.

As of June 30, 2023, the Company had unsatisfied or partially unsatisfied performance obligations for contracts in progress representing approximately $ 67.3 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 $ 45.6 million during the remainder of the year ending December 31, 2023 and approximately $ 21.7 million thereafter .

In addition, the Company recognized revenue of $ 666,368 in the three months ended March 31, 2023, that was included in the contract liability balance as of December 31, 2022.

In addition, the Company recognized revenue of approximately $ 7.2 million in the six months ended June 30, 2023, that was included in the contract liability balance as of December 31, 2022.

Practical Expedients and Exemptions

9 unchanged sentences

The manufacturing segment manufactures and services a wide range of custom and specialized water-related products applicable to commercial, municipal and industrial water production, supply and treatment.

Consistent with prior periods, the Company records all non-direct general and administrative expenses in its retail business segment and does not allocate any of these non-direct expenses to its other three business segments.

Consistent with prior periods, the Company records all non-direct general and

administrative expenses in its retail segment and does not allocate any of these non-direct expenses to its other three business segments.

The accounting policies of the segments are consistent with those described in Note 2.

2 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 March 31, 2023

Three Months Ended June 30, 2023

Manufacturing

1 unchanged sentence

General and administrative expenses

(Loss) gain on asset dispositions and impairments, net

Income from operations

Gain on asset dispositions and impairments, net

Income (loss) from operations

Other income, net

6 unchanged sentences

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the three months ended March 31, 2023 for the retail, bulk, services and manufacturing segments were $ 626,637 , $ 728,129 , $ 171,349 and $ 67,963 , respectively.

Three Months Ended March 31, 2022

Depreciation and amortization expenses for the three months ended June 30, 2023 for the retail, bulk, services and manufacturing segments were $ 593,337 , $ 840,200 , $ 174,084 and $ 68,160 , respectively.

Three Months Ended June 30, 2022

Manufacturing

11 unchanged sentences

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the three months ended March 31, 2022 for the retail, bulk, services and manufacturing segments were $ 615,685 , $ 702,259 , $ 158,999 and $ 71,208 , respectively.

As of March 31, 2023

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.

Six Months Ended June 30, 2023

Manufacturing

Cost of revenue

General and administrative expenses

Gain (loss) on asset dispositions and impairments, net

Income (loss) from operations

Other income, net

Income before income taxes

Provision for income taxes

Net income from continuing operations

Income from continuing operations attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co.

Net loss from discontinued operations

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the six months ended June 30, 2023 for the retail, bulk, services and manufacturing segments were $ 1,219,974 , $ 1,568,329 , $ 345,433 and $ 136,123 , respectively.

Six Months Ended June 30, 2022

Manufacturing

Cost of revenue

General and administrative expenses

Gain on asset dispositions and impairments, net

Income (loss) from operations

Other income, net

Income before income taxes

Benefit from income taxes

Net income from continuing operations

Income from continuing operations attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co.

Net loss from discontinued operations

( 1,027,147 )

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for 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.

As of June 30, 2023

Manufacturing

Accounts receivable, net

Inventory, current and non-current

Contract assets

Property, plant and equipment, net

7 unchanged sentences

Inventory, current and non-current

Contract assets

Property, plant and equipment, net

8 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income from continuing operations attributable to Consolidated Water Co.

2 unchanged sentences

Total loss from discontinued operations

( 1,027,147 )

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

8 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 gallons 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.

4 unchanged sentences

In August 2016, NSC and NuWater incorporated a new company under the name Aguas de Rosarito S.A.P.I.

(“AdR”) to pursue completion of 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.

(“AdR”) to pursue completion of 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.

NSC initially owned 99.6 % of the equity of AdR.

4 unchanged sentences

The first phase was to be operational within 36 months of commencing construction and the second phase was to be operational by January 2025.

The APP Contract further required AdR to operate and

maintain the plant and aqueduct for a period of 37 years starting from the commencement of operation of the first phase.

The APP Contract further required AdR to operate and maintain the plant and aqueduct 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 aqueduct would have been transferred to CEA.

11 unchanged sentences

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 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.

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 would 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.

2 unchanged sentences

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.

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

During July 2022, the State initiated discussions with the Company to potentially resolve the issues related to the cancellation by the government of the Rosarito desalination plant contract as well as potentially addressing the State’s acute water shortage issues.

9 unchanged sentences

Total liabilities of discontinued operations

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Provision for uncollected value added taxes

8 unchanged sentences

These leases contain both lease and non-lease components, which the Company has elected to treat as a single lease component.

The Company elected not to recognize leases that have an original lease term, including reasonably certain renewal or purchase obligations, of twelve months or less in its condensed consolidated balance sheets for all classes of underlying assets.

The Company elected not to recognize leases that have an original lease term, including reasonably certain

renewal or purchase obligations, of twelve months or less in its condensed consolidated balance sheets for all classes of underlying assets.

Lease costs for such short-term leases are expensed on a straight-line basis over the lease term.

19 unchanged sentences

The components of lease costs were as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease costs

3 unchanged sentences

Supplemental cash flow information related to leases is as follows:

Three Months Ended March 31,

Six Months Ended June 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 March 31, 2023 were as follows:

Future lease payments relating to the Company’s operating lease liabilities from continuing operations as of June 30, 2023 were as follows:

Years ending December 31,

4 unchanged sentences

Noncurrent lease obligations

As of March 31, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022, 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.

10 unchanged sentences

The Company reviews its fair value hierarchy classifications on a quarterly basis.

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

As of March 31, 2023 and December 31, 2022, the Company does not have assets and liabilities measured at fair value to present in the fair value hierarchy.

Changes in the

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

As of June 30, 2023 and December 31, 2022, the Company does not have assets and liabilities measured at fair value to present in the fair value hierarchy.

Contingencies

The Company sells water through its 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.

The Company sells water through its Cayman Water 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, the Company continues to supply water under the terms of the 1990 license, as further discussed in the following paragraph.

1 unchanged sentence

Seven Mile Beach and West Bay.

For the three months ended March 31, 2023 and 2022, the Company generated approximately 24 % and 32 %, respectively, of its consolidated revenue and 40 % and 46 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the three months ended June 30, 2023 and 2022, the Company generated approximately 17 % and 31 %, respectively, of its consolidated revenue and 27 % and 46 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the six months ended June 30, 2023 and 2022, the Company generated approximately 20 % and 32 %, respectively, of its consolidated revenue and 32 % and 46 %, 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.

1 unchanged sentence

The Company continues 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 its understanding of its legal obligations, treating those obligations set forth in the 1990 license as operative notwithstanding the expiration of the express extension.

The Company continues to pay the royalty of 7.5 % of revenue it collects required under the 1990 license.

The Company continues to pay a royalty of 7.5 % of the revenue that Cayman Water collects as required under the 1990 license.

In October 2016, the Government of the Cayman Islands passed legislation which created a new utilities regulation and competition office (“OfReg”).

6 unchanged sentences

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

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $ 16.6 million and $ 16.3 million as of March 31, 2023 and December 31, 2022.

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $ 16.4 million and $ 16.3 million as of June 30, 2023 and December 31, 2022.

Approximately 64 % of these accounts receivable balances were delinquent as of both of those dates.

4 unchanged sentences

CW-Bahamas has received correspondence from the Ministry of Finance of the Government of The Bahamas that stated the Government intends to return all of CW-Bahamas’ accounts receivable from the WSC to current status.

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.

In a 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 Baa3.

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.

Moody’s iterated these ratings in April 2023, noting that such ratings are “stable.” Based upon its review of this Moody’s correspondence, the Company continues to believe no allowance for doubtful accounts is required for CW-Bahamas’ accounts receivable from the WSC.

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

4 unchanged sentences

Related party transactions

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

The Company, through PERC and the services segment, purchased engineering and technology support services from various companies formerly affiliated with PERC, as a minority shareholder in these companies was also a minority shareholder of PERC.

On January 4, 2023, as a result of CW-Holdings' exercise of a call option in October 2022, CW-Holdings purchased the remaining 39 % ownership interest in PERC.

After giving effect to this purchase, CW-Holdings owns 100 % of the outstanding capital stock of PERC and there are no longer any minority shareholders of PERC, and therefore no longer any related party transactions.

During the three months ended March 31, 2022, the Company made total purchases of services from these companies of approximately $ 839,000 .

After giving effect to this purchase, CW-Holdings owns 100 % of the outstanding capital stock of PERC and, consequently, transactions with the formerly affiliated companies no longer constitute related party transactions.

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

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

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

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

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

During the three months ended March 31, 2022, the Company recognized approximately $ 24,000 of expense related to this lease.

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

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

12 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-Q

Item 1. Financial Statements