What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-17 compared with 2024-03-27 · 276 added, 194 removed, 847 unchanged (36% of the section changed)

14 unchanged sentences

We have audited the accompanying consolidated balance sheets of Consolidated Water Co.

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2024, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 17, 2025 , expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of a material weakness.

Basis for Opinion

1 unchanged sentence

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

1 unchanged sentence

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

30 unchanged sentences

March 17, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Shareholders and Board of Directors of

Consolidated Water Co.

Adverse Opinion on Internal Control over Financial Reporting

We have audited Consolidated Water Co.

Ltd.’s (the "Company") internal control over financial reporting as of December 31, 2024 , based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material weakness described in the subsequent paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in “Management’s Annual Report on Internal Control Over Financial Reporting”:

Business process controls (automated and manual) that are dependent on information technology general controls (ITGCs) from January 1, 2024 through October 31, 2024 could have been adversely affected due to the ineffective ITGCs during this time period.

Due to the lack of a sufficient time period over which to demonstrate operating effectiveness, certain annual and quarterly business process controls are considered to be ineffective as of December 31, 2024.

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the fiscal December 31, 2024 financial statements and this report does not affect our report dated March 17, 2025 on those financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the balance sheets as of December 31, 2024 and 2023 and the related statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024 and our report dated March 17, 2025 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “ Management’s Annual Report on Internal Control Over Financial Reporting” .

Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

/s/ Marcum LLP

We have served as the Company’s auditor since 2005.

West Palm Beach, Florida

March 17, 2025

CONSOLIDATED WATER CO.

CONSOLIDATED BALANCE SHEETS

9 unchanged sentences

Inventory, noncurrent

Investment in OC-BVI

Investment in affiliates

Intangible assets, net

4 unchanged sentences

Accounts payable, accrued expenses and other current liabilities

Accounts payable - related parties

Accrued compensation

10 unchanged sentences

Other liabilities

Long-term liabilities of discontinued operations

Total liabilities

20 unchanged sentences

Year Ended December 31,

Cost of revenue ( including related party expense of $ 0 and $2,694,810 in 2023 and 2022)

General and administrative expenses ( including related party expense of $ 0 and $96,924 in 2023 and 2022)

Loss on asset dispositions and impairments, net

Cost of revenue

General and administrative expenses

Gain (loss) on asset dispositions and impairments, net

Income from operations

2 unchanged sentences

Interest expense

Profit-sharing income from OC-BVI

Equity in the earnings of OC-BVI

Equity in the earnings of affiliates

Loss on put/call options

5 unchanged sentences

Net income from continuing operations attributable to Consolidated Water Co.

Loss from discontinued operations

Net income (loss) from discontinued operations

( 1,086,744 )

44 unchanged sentences

Balance as of December 31, 2023

Issuance of share capital

Conversion of preferred stock

Buyback of preferred stock

Exercise of options

Dividends declared

( 6,510,793 )

( 6,742,893 )

Stock-based compensation

Balance as of December 31, 2024

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

6 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on sale of land and project documentation

( 12,134,766 )

Impairment loss for Mexico assets - discontinued operations

6 unchanged sentences

Compensation expense relating to stock and stock option grants

Gain on asset dispositions and impairments, net

Profit-sharing and equity in earnings of OC-BVI

(Gain) loss on asset dispositions and impairments, net

Equity in earnings of affiliates

Distribution of earnings from OC-BVI

1 unchanged sentence

( 1,796,919 )

( 10,970,521 )

Contract assets

2 unchanged sentences

( 3,747,675 )

( 3,387,011 )

Prepaid expenses and other assets

( 3,365,747 )

Accounts payable (including related parties), accrued expenses and other current liabilities

Accounts payable, accrued expenses and other current liabilities

( 2,370,274 )

Contract liabilities

6 unchanged sentences

( 1,142,969 )

( 1,819,943 )

Net cash provided by operating activities

6 unchanged sentences

( 5,047,884 )

Proceeds from asset dispositions

Purchase of remaining non-controlling interest in PERC

( 7,542,761 )

Proceeds from asset dispositions

Investment in affiliate

Proceeds from Mexican settlement agreement

Acquisition of REC, net of cash acquired

( 3,419,916 )

Net cash used in investing activities

Purchase of remaining non-controlling interest in PERC

( 2,440,027 )

Net cash provided by (used in) investing activities

( 10,887,019 )

( 4,981,036 )

Cash flows from financing activities

2 unchanged sentences

( 5,472,790 )

( 5,145,742 )

Dividends paid to preferred shareholders

7 unchanged sentences

( 5,524,565 )

( 6,304,873 )

Net increase (decrease) in cash and cash equivalents

11 unchanged sentences

The Company produces potable water from seawater using reverse osmosis technology and sells this water to a variety of customers, including public utilities, commercial and tourist properties, residential properties and government facilities.

The Company designs, builds and sells water production and water treatment infrastructure and manages water infrastructure for commercial and governmental customers.

The Company designs, constructs and sells water production and water treatment infrastructure and manages water infrastructure for commercial and governmental customers.

The Company also manufactures a wide range of specialized and custom water industry related products and provides design, engineering, operating and other services applicable to commercial, municipal and industrial water production, supply and treatment.

19 unchanged sentences

All significant intercompany balances and transactions have been eliminated in consolidation.

In January 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 for $ 2.4 million in cash, and 368,383 shares of the Company’s common stock having a value of approximately $ 5.36 million based upon the opening trading price of the Company’s common stock on The Nasdaq Global Market on the date of the transaction.

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

In 2019 and 2020, CW-Holdings acquired 61 % of PERC.

In January 2023, CW-Holdings purchased the remaining 39 % ownership interest in PERC for $ 2.4 million in cash, and 368,383 shares of the Company’s common stock having a value of approximately $ 5.36 million based upon the opening trading price of the Company’s common stock on The Nasdaq Global Market on the date of the transaction.

In September 2021, Kalaeloa Desalco was formed to pursue a project in Oahu, Hawaii.

On June 2, 2023, Kalaeloa Desalco 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.

Effective October 1, 2023, the Company purchased, through its wholly-owned subsidiary PERC, a 100 % ownership interest in Ramey Environmental Compliance, Inc., a Colorado company that operates and maintains water and wastewater treatment facilities and provides technical services to clients throughout the Rocky Mountain and Eastern Plains Regions of Colorado.

PERC acquired REC in November 2023 for approximately $ 4.1 million and recorded goodwill and intangible assets from this acquisition of $ 2,436,391 and $ 1,108,390 respectively.

On June 2, 2023, Kalaeloa Desalco signed a definitive agreement with the Honolulu Board of Water Supply to design, construct, operate and maintain a 1.7 million gallons per day seawater reverse osmosis desalination plant in Oahu, Hawaii.

Effective October 1, 2023, the Company purchased, through its wholly-owned subsidiary PERC, a 100 % ownership interest in REC, a Colorado company that operates and maintains water and wastewater treatment facilities and provides technical services to clients throughout the Rocky Mountain and Eastern Plains Regions of Colorado.

PERC acquired REC for approximately $ 4.1 million and recorded goodwill and intangible assets from this acquisition of $ 2,436,391 and $ 1,108,390 respectively.

Foreign currency:

10 unchanged sentences

As of December 31, 2024, the Company had deposits in U.S.

banks in excess of federally insured limits of approximately $ 16.9 million.

banks and brokerages in excess of federally mandated and insured limits of approximately $ 54.7 million.

As of December 31, 2024, the Company held cash in foreign bank accounts of approximately $ 34.1 million .

19 unchanged sentences

The Company records contract assets and contract liabilities to account for these differences in timing.

Contract assets, which include costs and estimated earnings in excess of billings on uncompleted contracts, arise when the Company recognizes revenue for services performed under its construction and manufacturing contracts, but the Company is not yet entitled to bill the customer under the terms of the contract.

Contract liabilities, which include billings in excess

of costs and estimated earnings on uncompleted contracts, represent the Company's obligation to transfer goods or services to a customer for which the Company has been paid by the customer or for which the Company has billed the customer under the terms of the contract.

is not yet entitled to bill the customer under the terms of the contract.

Contract liabilities, which include billings in excess of costs and estimated earnings on uncompleted contracts, represent the Company's obligation to transfer goods or services to a customer for which the Company has been paid by the customer or for which the Company has billed the customer under the terms of the contract.

Revenue for future services reflected in this account is recognized, and the liability is reduced, as the Company subsequently satisfies the performance obligation under the contract.

34 unchanged sentences

The Company evaluates the possible impairment of goodwill annually as part of its reporting process for the fourth quarter of each fiscal year.

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.

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, REC, 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 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.

For the year ended December 31, 2023, the Company elected to assess qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment testing that was conducted in prior years for the reporting units.

The Company assessed the relevant events and circumstances to evaluate whether it is more likely than not that the fair values of such reporting units are less than their carrying values.

For the years ended December 31, 2024 and 2023, the Company elected to assess qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment testing that was conducted in prior years for its reporting units.

The Company assessed the relevant events and circumstances to evaluate whether it is more likely than not that the fair values of such reporting units were less than their carrying values.

The events and circumstances assessed for each reporting unit included macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, and other relevant events.

Based upon this qualitative assessment, the Company determined that it is more likely than not that the fair values of its reporting units exceeded their carrying values as of December 31, 2023.

Based upon this qualitative assessment, the Company determined that it is more likely than not that the fair values of its reporting units exceeded their carrying values as of December 31, 2024 and 2023 .

For the year ended 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 reporting units other than the manufacturing reporting unit.

29 unchanged sentences

The Company recognizes impairment losses on declines in the fair value of the stock of investees that are other than temporary.

Other assets:

Under the terms of CW-Bahamas’ contract with the Water and Sewerage Corporation of The Bahamas (“WSC”) to supply water from its Blue Hills desalination plant, CW-Bahamas was required to reduce the amount of water lost by the public water distribution system on New Providence Island, The Bahamas, over a one-year period by 438 million gallons, a requirement CW-Bahamas met during 2007.

The Company was solely responsible for the engineering, labor and materials costs incurred to reduce the amount of lost water, which were capitalized and are being amortized on a straight-line basis over the original remaining life of the Blue Hills contract.

Such costs are included in other assets and aggregated approximately $ 3.5 million as of December 31, 2023 and 2022.

Accumulated amortization for these costs was approximately $ 3.1 million and $ 2.9 million as of December 31, 2023 and 2022, respectively.

Amortization expense for these costs was $ 179,353 for the years ended December 31, 2023 and 2022.

Income taxes:

2 unchanged sentences

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized

in income in the period that includes the enactment date.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is provided to the extent any deferred tax asset may not be realized.

18 unchanged sentences

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

The Company recognizes revenue from water sales at the time water is supplied to the customer’s premises.

The Company recognizes revenue from retail water sales at the end of the billing cycle based on the water supplied to the customers’ premises.

The amount of water supplied is determined and invoiced based upon water meter readings performed at the end of each month.

All retail water contracts are month-to-month contracts.

The Company has elected the “right to invoice” practical expedient for revenue recognition on its retail water sale contracts and recognizes revenue in the amount to which the Company has a right to invoice, recognizing this revenue from the transfer of goods or services to customers at a point in time.

The Company produces and supplies water to government-owned utilities in the Cayman Islands and The Bahamas.

OC-Cayman provides bulk water to the Water Authority-Cayman (“WAC”), a government-owned utility and regulatory agency, under two agreements.

OC-Cayman provides bulk water to the Water Authority-Cayman (“WAC”), a government-owned utility and regulatory agency, under three agreements.

The WAC in turn distributes such water to properties in Grand Cayman outside of Cayman Water’s retail license area.

The Company sells bulk water in The Bahamas through its majority-owned subsidiary, CW-Bahamas, under two agreements with the Water and Sewerage Corporation of The Bahamas (“WSC”), which distributes such water through its own pipeline system to residential, commercial and tourist properties on the island of New Providence.

The Company has elected the “right to invoice” practical expedient for revenue recognition on its bulk water sale contracts and recognizes revenue in the amount to which the Company has a right to invoice, recognizing this revenue from the transfer of goods or services to customers at a point in time.

Services and Manufacturing revenue

The Company designs, builds, sells, operates and maintains, and provides consulting services related to water, wastewater and water reuse infrastructure through PERC.

All of PERC's customers are companies or governmental entities located in the United States.

Effective October 2023, PERC acquired REC, a company that provides operations and maintenance and consulting services to companies and governmental entities located in the United States.

The Company designs, constructs, sells, operates and maintains, and provides consulting services related to water, wastewater and water reuse infrastructure through PERC.

All of PERC's customers are companies or governmental entities

located in the United States.

Effective October 2023, PERC acquired REC, a company that provides operations and maintenance and consulting services to companies and governmental entities located in the state of Colorado.

The Company also provides design, engineering, management, procurement and construction services for desalination infrastructure through DesalCo, which serves customers in the Cayman Islands, The Bahamas and the British Virgin Islands.

8 unchanged sentences

The Company estimates total costs to be incurred and profit to be earned on each long-term, fixed price contract prior to commencement of work on the contract and updates these estimates as work on the contract progresses.

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.

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 comprised of estimated total contract costs.

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 are complicated and subject to many variables and, accordingly, are subject to changes.

6 unchanged sentences

This adjustment increased basic and diluted earnings per share by $ 0.11 for the year ended December 31, 2023.

The Company has elected the “right to invoice” practical expedient for revenue recognition on its operations and maintenance, design and consulting contracts and recognizes revenue in the amount to which the Company has a right to invoice, recognizing this revenue from the transfer of goods or services to customers at a point in time.

During the years ended December 31, 2024, 2023, and 2022, the Company recognized $ 18,211,554 , $ 77,411,792 and $ 14,146,271 , respectively, of its services revenue from the transfer of goods or services to customers over time.

The remaining services revenue of $ 20,554,858 and $ 14,689,157 , respectively, was recognized from the transfer of goods or services to customers at a point in time.

The remaining services revenue of $ 32,744,935 , $ 20,554,858 and $ 14,689,157 , respectively, was recognized from the transfer of goods or services to customers when invoiced.

During the years ended December 31, 2024, 2023, and 2022, the Company recognized all of its manufacturing revenue from the transfer of goods or services to customers over time.

2 unchanged sentences

Comparative amounts:

Certain amounts presented in the financial statements previously issued for 2022 have been reclassified to conform to the current year’s presentation.

Certain amounts presented in the financial statements previously issued for 2023 and 2022 have been reclassified to conform to the current year’s presentation .

Cash and cash equivalents

45 unchanged sentences

( 4,656,411 )

The significant increase in contract assets from December 31, 2022 to December 31, 2023 is attributable to the construction contract with the WAC for the Red Gate plant in Grand Cayman and the construction contract with Liberty Utilities for a water treatment facility in Arizona.

The significant decrease in contract assets from December 31, 2023 to December 31, 2024 is attributable to the completion of the construction contract with the WAC for the Red Gate plant in Grand Cayman and the completion of the construction contract with Liberty Utilities for a water treatment facility in Arizona.

During the year ended December 31, 2023, the Company adjusted its prior year estimates of the total contract costs for two of its construction contracts.

13 unchanged sentences

Construction in progress

As of December 31, 2023, the Company had outstanding capital commitments of approximately $ 455,000 .

The Company maintains insurance for loss or damage to all fixed assets that it deems susceptible to loss.

2 unchanged sentences

Discontinued operations – Mexico project development

In 2010, the Company began the pursuit, through its Netherlands subsidiary, Consolidated Water Cooperatief, U.A.

(“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.

In 2010, the Company began the pursuit, through its Netherlands subsidiary, CW-Cooperatief, and its Mexico subsidiary, 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.

Following an assessment by the State of Baja, California (the “State”) of the need for such a desalination plant and the passage of enabling legislation in November 2015, the State officially commenced the required public tender for the Project.

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.

(“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.

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.

NSC initially owned 99.6 % of the equity of AdR.

In February 2018, CW-Holdings acquired the remaining 0.4 % ownership in AdR from NuWater.

In November 2015, the State of Baja California (the “State”) officially commenced the public tender for the Project.

A consortium (the “Consortium”) comprised of NSC and two other parties 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.

In August 2016, NSC incorporated a new company under the name 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.

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

The APP Contract required AdR to design, construct, finance and operate a seawater reverse osmosis desalination plant (and accompanying aqueduct) with a capacity of up to 100 million gallons per day in two phases:

the first with a capacity of 50 million gallons per day and an aqueduct to the Mexican public water system in Tijuana, Baja California and the second phase with a capacity of 50 million gallons per day.

the first with a capacity of 50 million gallons per day and an aqueduct to the Mexican public water system in Tijuana, Baja California and the second phase with a

capacity of 50 million gallons per day.

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

1 unchanged sentence

At the end of the operating period, the plant and aqueduct would have been transferred to CEA.

The APP Contract was subsequently amended by the parties in June 2018 to increase the scope of Phase 1 and to allow for changes in the water tariff due to the changes in the exchange rate for the peso, interest rates and construction costs that had and would occur from the date the APP Contract was signed to the date construction commenced.

On June 29, 2020, AdR received a letter (the “Letter”) from the Director General of CEA and the Director General of CESPT terminating the APP Contract.

The Letter requested that AdR provide an inventory of the assets that currently comprise the “Project Works” (as defined in the APP Contract) for the purpose of acknowledging and paying the non-recoverable expenses made by AdR in connection with the Project, with such reimbursement to be calculated in accordance with the terms of the APP Contract.

The applicable law required that this list of non-recoverable expenses made by AdR in connection with the Project be submitted to CEA and CESPT within 20 business days from the date of receipt of the Letter.

AdR initiated an amparo claim before a federal district court in Tijuana, Baja California, to challenge the provision of the applicable law requiring submittal of the list of non-recoverable expenses within the 20 business days term, as AdR considered such term to be unreasonably short due to the magnitude of the Project and the scope of supporting documentation required to be provided with respect to the non-recoverable expenses.

AdR obtained an initial provisional suspension of the lapsing of such 20-day term from the court, and on August 10, 2020 the court made such suspension definitive until the completion of the amparo trial.

As such, the 20-day term for filing the list of non-recoverable expenses was suspended.

Therefore, on August 28, 2020, AdR submitted their list of non-recoverable expenses, including those of NSC, to CEA and CESPT which was comprised of 51,144,525 United States dollars and an additional 137,333,114 Mexican pesos.

In February 2021, AdR withdrew this amparo claim, and such withdrawal was accepted by the federal district court in Tijuana.

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

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”).

The Letter requested that AdR provide an inventory of the assets that comprised the “Project Works” (as defined in the APP Contract) for the purpose of acknowledging and paying the non-recoverable expenses made by AdR in connection with the Project, with such reimbursement to be calculated in accordance with the terms of the APP Contract.

On August 28, 2020, AdR submitted their list of non-recoverable expenses, including those of NSC, to CEA and CESPT which was comprised of 51,144,525 United States dollars and an additional 137,333,114 Mexican pesos.

The Company believed CW-Cooperatief, as a Netherlands company, had 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.

2 unchanged sentences

Two such meetings were held on July 9, 2021 and August 2, 2021 on a confidential basis, without a resolution of the Company’s investment dispute.

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 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.

The Company cannot presently determine the outcome of the discussions and the Company has not terminated its efforts to obtain relief through the international arbitration process as a result of these discussions.

The Company cannot provide any assurances that it will be able to obtain reimbursement for any expenses or investments made with respect to the Project.

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 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.

The Company’s net losses from discontinued operations for the years ended December 31, 2023 and 2022 were ($ 1,086,744 ) and ($ 2,371,049 ), respectively.

In February 2022, CW-Cooperatief, filed a Request for Arbitration with the International Centre for Settlement of International Disputes (“ICSID”) 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.

On May 29, 2024, the Company, through CW-Cooperatief;

NSC, and AdR entered into a settlement agreement (the “Settlement Agreement”) with the State and Banco Nacional de Obras y Servicios Públicos, S.N.C., as trustee under the trust agreement for the trust named Fondo Nacional de Infraestructura (the “Trust”).

Under the Settlement Agreement, CW-Cooperatief requested that ICSID discontinue the arbitration and on May 31, 2024, ICSID issued an order discontinuing the arbitration.

Pursuant to the Settlement Agreement, the Trust purchased the 20.1 hectares of land on which the Project’s plant was to be constructed, including related rights of way (the “Land”), on an “as-is” basis, from NSC for MXN$ 596,144,000 .

The sale of the Land to the Trust was closed on June 14, 2024 at which time the MXN$ 596,144,000 was paid to the Company and converted at the prevailing exchange rate on that date into US$ 31,959,685 .

In connection with the Settlement Agreement on June 14, 2024, the State also paid NSC MXN$ 20,000,000 to purchase certain documentation owned by NSC relating to the Project.

As a result of the Settlement Agreement:

(i) the parties have been released from all obligations owed to each other in connection with the APP Contract and the arbitration;

and (ii) no party to the Settlement Agreement may institute any legal proceedings against another party thereto with respect to the matters which have been addressed by the Settlement Agreement.

The Settlement Agreement and any matter arising out of or in connection with it are governed by the federal laws of Mexico.

The Company’s net income (losses) from discontinued operations for the years ended December 31, 2024, 2023 and 2022 were $ 10,355,184 , ($ 1,086,744 ) and ($ 2,371,049 ), respectively.

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

Accounts receivable

Prepaid expenses and other current assets

3 unchanged sentences

Loss from discontinued operations

( 1,779,582 )

( 1,086,744 )

( 2,371,049 )

Gain on sale of land and project documentation

Depreciation expense

Mexico Project litigation

a) EWG request of precautionary measures

In January 2018, EWG Water LLC (“EWG”) initiated an ordinary mercantile claim against, among others, N.S.C.

(“NSC”) and Consolidated Water Cooperatief, U.A.

(“CW-Cooperatief”) (with Aguas de Rosarito S.A.P.I.

(“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 such claim, EWG challenged, among other things, the transactions contemplated under a certain option agreement (entered into in 2012), and therefore, the capital investment transactions occurring in May 2013 that increased the ownership interest of CW-Cooperatief in NSC to 99.99 %.

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.

Within the above-mentioned claim, the Tenth Civil Judge granted EWG certain preliminary measures against NSC, which were later overturned by an Upper Court.

In July 2023, EWG filed a motion before a local court in Playas de Rosarito, Baja California (the “Rosarito Court”) to obtain precautionary measures consisting of the securing of assets owned by NSC (particularly real estate), as a procedure prior to the commencement of an arbitration that allegedly would be initiated by EWG against NSC to claim the payment of an indemnification for damages derived from a so-called simulation of legal acts.

In the opinion of the Rosarito Court, such motion did not require notification to NSC or the presentation of counterarguments by NSC to the motion prior to securing the assets of NSC.

On July 28, 2023, the Rosarito Court issued a resolution in which it:

(i) granted the precautionary measures requested by EWG, subject to the posting of a bond in the amount of MXN$ 1,500,000 (One Million Five Hundred Thousand Mexican Pesos), and (ii) ordered that once the precautionary measures were executed, EWG would have three business days counted as from the posting of the bond, to initiate and prove to the Rosarito Court that it initiated the arbitration.

To the Company’s knowledge EWG has not posted the bond.

Consequently, NSC has not been summoned to an arbitration procedure.

As EWG has apparently not posted the bond set by the Rosarito Court (i) the precautionary measures have not been enforced, (ii) no securing or attachment has been registered against the real estate of NSC;

and (iii) NSC has not been formally summoned to this procedure.

As stated previously, NSC is unaware of any arbitration commenced by EWG regarding this matter.

b) NSC amparo lawsuit

On August 16, 2023, NSC filed an amparo suit (i.e.

application for constitutional relief) before the Eleventh Federal District Court in Tijuana (“Federal District Court in Tijuana”) against the precautionary measures granted to EWG by the Rosarito Court.

In its amparo suit, NSC also requested the Federal District Court in Tijuana to grant an order to put on hold said precautionary measures.

A preliminary order to stay was granted by the Federal District Court in Tijuana, followed by a definitive injunction, subject to the posting of a guarantee.

NSC has submitted the guarantee to the court.

NSC subsequently filed an extension of the amparo suit introducing new arguments aiming to strengthen NSC´s position.

The amparo extension was admitted through a resolution published on November 7, 2023.

The Federal District Court in Tijuana has not been able to summon EWG on this amparo suit, as it has not been able to determine nor obtain information on an address where EWG can be summoned.

As such, the Federal District Court in Tijuana has requested various authorities to provide information on any domicile where EWG can be summoned.

The responses of some authorities are in process of being received by the Federal District Court in Tijuana.

NSC is waiting until all the authorities provide their official response to determine if there is a viable alternative for summoning EWG.

NSC offered certain evidence consisting of the docket of amparo file number 74/2020, which was processed by the Twelfth Civil District Court in Tijuana.

The Amparo Law provides that any documentary evidence offered by the parties shall be issued without any cost.

Therefore, NSC requested the Court to grant the expedition of said copies for free.

However, this request was denied by the Federal District Court in Tijuana.

Therefore, NSC filed an appeal for review against said decision, which was admitted by the Federal District Court in Tijuana and sent to the Second Collegiate Circuit Court in Tijuana, acting as Court of Appeals, which confirmed the admission of the appeal remedy through a resolution published on January 26, 2024.

The judgment is still pending resolution.

The Company cannot presently determine what impact the resolution of this matter may have on its consolidated financial statements.

Intangible assets

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( 1,313,075 )

( 1,106,615 )

Customer relationships

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

Effective May 1, 2024, the Company entered into a new office lease for the existing office located in Grand Cayman, Cayman Islands under similar terms compared to the prior lease.

This new lease has a term of five years from the commencement date with an option for an additional five-year term.

All lease assets denominated in a foreign currency are measured using the exchange rate at the commencement of the lease.

3 unchanged sentences

Prepaid expenses and other current assets

Current assets of discontinued operations

Operating lease right-of-use assets

1 unchanged sentence

Current maturities of operating leases

Current liabilities of discontinued operations

Noncurrent operating leases

2 unchanged sentences

Operating leases

Operating leases - discontinued operations

Weighted average discount rate:

Operating leases

Operating leases - discontinued operations

The components of lease costs were as follows:

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Discontinued operations

( 10,355,184 )

The Company’s provision for (benefit from) income taxes for the years ended December 31, 2024, 2023, and 2022, which related to U.S.

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Deferred tax assets:

Research and development credit carryforwards

Net operating loss carryforwards

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( 15,678,994 )

( 11,816,716 )

As of December 31, 2023, continuing operations has a federal net loss carryforward of $ 0.6 million and a state net loss carryforward of $ 0.3 million, both of which have an indefinite expiration date.

Discontinued operations has a net loss carryforward of $ 19.5 million that will begin to expire, if unused, in various amounts between 2024 and 2033.

As of December 31, 2024, the Company’s continuing operations have a federal net loss carryforward of approximately $ 400,000 and a state net loss carryforward of approximately $ 38,000 .

The net operating losses (“NOLs”) generated in taxable years beginning before January 1, 2018, may be carried forward up to 20 taxable years.

The unused federal NOLs will expire on various dates starting from 2030.

For NOLs generated in taxable years beginning after December 31, 2017, they are carried forward indefinitely until used and never expire .

Earnings per share

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

Loss from discontinued operations

Income (loss) from discontinued operations

( 1,086,744 )

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Segment information

The Company has four reportable segments:

retail, bulk, services and manufacturing.

The Company has five reportable segments:

retail, bulk, services, manufacturing and corporate.

The retail segment operates the water utility for the Seven Mile Beach and West Bay areas of Grand Cayman pursuant to an exclusive license granted by the Cayman Islands government.

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

The corporate segment consists of various expenses of a general and administrative nature incurred at the parent company level, as well as the expenses incurred by Aquilex, a U.S.

subsidiary that provides financial, engineering, information technology, administrative and supply chain management support services to all the Company’s subsidiaries and its affiliate.

McTaggart, Chief Executive Officer and President, is the Company’s chief operating decision maker (“CODM”).

For the retail, bulk, services, and manufacturing segments, the CODM uses revenue, gross profit, and income before income taxes to assess segment performance and in deciding the allocation of resources to each segment.

The CODM considers actual versus budget and current period versus prior period variances on a monthly, quarterly, and annual basis for each of these financial measures.

The CODM also considers variances from budget and prior period for major corporate expenses (such as employee costs, insurance and professional fee) when making decisions regarding capital and resource allocation.

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

The Company evaluates each segment’s performance based upon its income (or loss) from operations.

All intercompany transactions are eliminated for segment presentation purposes.

Intersegment revenue transactions are insignificant to the Company and are eliminated.

Segment information previously disclosed in 2023 and 2022 did not separately disclose those expenses currently reported in the corporate segment, as such expenses were previously included in the retail segment.

The 2023 and 2022 segment information provided herein has been recast to conform to the current period presentation.

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.

The Company’s income statements by segment, significant segment expenses, and segment assets are presented below.

Year Ended December 31, 2024

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General and administrative expenses

Gain (loss) on asset dispositions and impairments, net

Gain on asset dispositions and impairments, net

Income (loss) from operations

( 14,003,866 )

Interest income

Interest expense

Income from affiliates

Other income, net

Income before income taxes

Income (loss) before income taxes

( 13,172,245 )

Provision for income taxes

Net income from continuing operations

Net income (loss) from continuing operations

( 13,190,321 )

Income from continuing operations attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co.

Loss from discontinued operations

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

( 13,190,321 )

Net income from discontinued operations

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the year ended December 31, 2023 for the retail, bulk, services and manufacturing segments were $ 2,484,845 , $ 3,032,902 , $ 785,347 and $ 273,360 , respectively.

The Company’s cost of revenue consists of:

Year Ended December 31, 2024

Manufacturing

Subcontractor and other project costs

Employee costs

Retail license royalties

Other cost of revenue segment expenses above primarily include chemicals and other supplies, government fees and licenses, and freight costs.

The Company’s general and administrative expenses consist of:

Year Ended December 31, 2024

Manufacturing

Employee costs

Professional fees

Depreciation and amortization

Other general and administrative segment expenses primarily include Board of Directors fees and expenses, maintenance, office rent, amortization of intangible assets, and investor relations costs.

As of December 31, 2024

Manufacturing

Cash and cash equivalents

Accounts receivable, net

13 unchanged sentences

( 13,927,195 )

Interest income

Interest expense

Income from affiliate

Other income, net

Income before income taxes

Provision for income taxes

Net income from continuing operations

Income (loss) before income taxes

( 13,756,830 )

Provision (benefit) for income taxes

Net income (loss) from continuing operations

( 13,678,276 )

Income from continuing operations attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co.

Loss from discontinued operations

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

( 13,678,276 )

Net loss from discontinued operations

( 1,086,744 )

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the year ended December 31, 2022 for the retail, bulk, services and manufacturing segments were $ 2,391,603 , $ 2,836,794 , $ 674,508 and $ 284,403 , respectively.

The Company’s cost of revenue consists of:

Year Ended December 31, 2023

Manufacturing

Subcontractor and other project costs

Employee costs

Retail license royalties

Other cost of revenue segment expenses above primarily include chemicals and other supplies, government fees and licenses, and freight costs.

The Company’s general and administrative expenses consist of:

Year Ended December 31, 2023

Manufacturing

Employee costs

Professional fees

Depreciation and amortization

Other general and administrative segment expenses primarily include Board of Directors fees and expenses, maintenance, office rent, amortization of intangible assets, and investor relations costs.

As of December 31, 2023

Manufacturing

Cash and cash equivalents

Accounts receivable, net

6 unchanged sentences

Assets of discontinued operations

Year Ended December 31, 2022

Manufacturing

Cost of revenue

General and administrative expenses

Gain (loss) on asset dispositions and impairments, net

Income (loss) from operations

( 11,943,295 )

Interest income

Interest expense

Income from affiliate

Net loss on put/call options

Other income (loss), net

Income (loss) before income taxes

( 11,839,149 )

Provision (benefit) for income taxes

Net income (loss) from continuing operations

( 11,839,149 )

Income from continuing operations attributable to non-controlling interests

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

( 11,839,149 )

Net loss from discontinued operations

( 2,371,049 )

Net income attributable to Consolidated Water Co.

The Company’s cost of revenue consists of:

Year Ended December 31, 2022

Manufacturing

Subcontractor and other project costs

Employee costs

Retail license royalties

Other cost of revenue segment expenses above primarily include chemicals and other supplies, government fees and licenses, and freight costs.

The Company’s general and administrative expenses consist of:

Year Ended December 31, 2022

Manufacturing

Employee costs

Professional fees

Depreciation and amortization

Other general and administrative segment expenses primarily include Board of Directors fees and expenses, maintenance, office rent, amortization of intangible assets, and investor relations costs.

Revenue earned by major geographic region was:

12 unchanged sentences

United States

Cost of revenue and general and administrative expenses

Year Ended December 31,

Cost of revenue consist of:

Subcontractor and other project costs

Employee costs

Retail license royalties

Year Ended December 31,

General and administrative expenses consist of:

Employee costs

Professional fees

Directors’ fees and expenses

Amortization of intangible assets

Investor relations

Business development expenses

Provision for credit losses

Computer supplies, software licenses

Stock-based compensation

11 unchanged sentences

The Company has an employee stock option plan for four long-serving employees of the Company.

Under the plan, these employees are granted in each calendar year, as long as the employee is a participant in the Employee Share Incentive Plan, options to purchase common shares.

Under the plan, these employees are granted in each calendar year, as long as the employee is a participant in the Employee Share Incentive

Plan, options to purchase common shares.

The price at which the option may be exercised is the closing market price on the grant date, which is the 40 th day after the date of the Company’s Annual Shareholder Meeting.

43 unchanged sentences

The non-performance-based stock grant rights, which are issued on January 1 of each year, vest in one-third increments at the end of each year over a three-year period.

The number of non-performance-based stock grant rights issued on January 3, 2023 and 2022 were 29,508 and 32,265 , respectively.

The number of non-performance-based stock grant rights issued on the first stock trading day of January 2024, 2023, and 2022, were 12,837 , 29,508 and 32,265 , respectively.

These stock grant rights vest in one-third increments over the three-year periods ending December 31, 2026, 2025 and 2024, respectively.

3 unchanged sentences

The Company recognized $ 509,357 , $ 522,925 and $ 335,964 in stock-based compensation for the year ended December 31, 2024, 2023 and 2022, respectively, related to these grants.

A total of 26,742 stock grant rights were earned as of December 31, 2023 based upon the Company’s actual financial performance relative to the cumulative financial performance targets for the three-year period ended December 31, 2023 The shares associated with these grants will be issued in 2024.

A total of 41,889 stock grant rights were earned as of December 31, 2024, based upon the Company’s actual financial performance relative to the cumulative financial performance targets for the three-year period ended December 31, 2024.

The shares associated with these grants will be issued in 2025.

A total of 26,742 stock grant rights were earned as of December 31, 2023, based upon the Company’s actual financial performance relative to the cumulative financial performance targets for the three -year period ended December 31, 2023.

The shares associated with these grants were issued in 2024.

A total of 13,797 stock grant rights were earned as of December 31, 2022, based upon the Company’s actual financial performance relative to the cumulative financial performance targets for the three-year period ended December 31, 2022.

The shares associated with these grants were issued in 2023.

Non-Executive Directors’ Share Plan

16 unchanged sentences

All relevant foreign currencies other than the Mexican peso and the euro have been fixed to the dollar for more than 50 years and as a result, the Company does not employ a hedging strategy against exchange rate risk associated with the reporting in dollars.

If any of these fixed exchange rates becomes a floating exchange rate or if any of the foreign currencies in which the Company conducts business depreciate significantly against the dollar, the Company’s consolidated results of operations could be adversely affected.

If any of these fixed exchange rates become a floating exchange rate or if any of the foreign currencies in which the Company conducts business depreciate significantly against the dollar, the Company’s consolidated results of operations could be adversely affected.

As of December 31, 2024 and 2023, 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.

2 unchanged sentences

Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability.

Unobservable inputs are inputs that reflect the Company’s

assumptions about the factors market participants would use in valuing the asset or liability.

The guidance establishes three levels of inputs that may be used to measure fair value:

19 unchanged sentences

The most recent express extension of the 1990 license expired on January 31, 2018.

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 the revenue that Cayman Water collects as required under the 1990 license.

From that date until February 18, 2025, the Company continued to operate under the terms of the 1990 license, providing water services to the level and quality specified in the 1990 license and in accordance with 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 continued to pay the 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”).

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 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.

1 unchanged sentence

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

The Company has been informed during its retail license negotiations, both by OfReg and its predecessor in these negotiations, that the Cayman Islands government seeks to restructure the terms of its license in a manner that could significantly reduce the operating income and cash flows the Company has historically generated from its retail license.

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

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

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

The Company is presently unable to determine what impact the resolution of its retail license negotiations will have on its consolidated financial condition or results of operations but such resolution could result in a material reduction (or the loss) of the operating income and cash flows the Company has historically generated from Cayman Water’s retail operations and could require the Company to record impairment losses to reduce the carrying values of its retail segment assets.

5 unchanged sentences

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

Based upon this payment history, CW-Bahamas has not provided for a material allowance for credit losses for its accounts receivable from the WSC as of December 31, 2023.

CW-Bahamas held discussions with the WSC in March 2024 during which the WSC stated that the Government intends to substantially reduce CW-Bahamas’ accounts receivable from the WSC over the course of 2024.

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.

Based upon this payment history, CW-Bahamas has not provided a material allowance for credit losses for its accounts receivable from the WSC as of December 31, 2024.

In a report dated October 6, 2022, Moody’s Investor Services (“Moody’s”) downgraded The Bahamas’ long-term issuer and senior unsecured ratings to B1 from Ba3.

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

Moody’s iterated these ratings in April and October 2023, noting that such ratings are “stable.”

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

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

3 unchanged sentences

Any of these events could have a material adverse impact on the Company’s consolidated financial condition, results of operations, and cash flows.

CW-Bahamas Performance Guarantees

The contracts to supply water to the WSC from the Blue Hills and Windsor plants require CW-Bahamas to guarantee delivery of a minimum quantity of water per week.

If the WSC requires the water and CW-Bahamas does not meet this minimum, CW-Bahamas is required to pay the WSC for the difference between the minimum and actual gallons delivered at a per gallon rate equal to the price per gallon that the WSC is currently paying CW-Bahamas under the contract.

The Blue Hills contract expires in 2032 and requires CW-Bahamas to deliver 63.0 million gallons of water each week.

The Windsor contract expires in 2033 and requires CW-Bahamas to deliver 16.8 million gallons of water each week.

Bahamas has been in compliance with the performance guarantees under these contracts for all periods since the inception of the contracts.

Related party transactions

The Company, through PERC, 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.

The Company, through PERC, purchases engineering and technology support services from various companies formerly affiliated with PERC, as a former 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.

3 unchanged sentences

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.

This lease was subsequently extended on an annual basis until August 31, 2025.

During the year ended December 31, 2022, the Company recognized approximately $ 97,000 of expense related to this lease.

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

The total amount of accounts payable outstanding to these companies as of December 31, 2022, was approximately $ 404,000 .

Supplemental disclosure of cash flow information

2 unchanged sentences

Income taxes paid in cash

Non-cash transactions:

Issuance of 5,904 , 13,309 and 9,295 , respectively, shares of redeemable preferred stock for services rendered

7 unchanged sentences

Purchase of equipment through issuance of long-term debt

Transfers from prepaid expenses to property, plant and equipment

Transfers from prepaid expenses to inventory

Impact of recent accounting standards

Adoption of new accounting standards:

Financial Accounting Standard Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments, and related amendments, introduces new guidance which makes substantive changes to the accounting for credit losses.

This guidance introduces the current expected credit losses (“CECL”) model which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures.

The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions, and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses.

The Company adopted this guidance as of January 1, 2023 using the modified retrospective approach.

The impact of this adoption was not material to the Company’s consolidated financial statements.

Effect of newly issued but not yet effective accounting standards:

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

1 unchanged sentence

This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact of this guidance.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an

explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

The adoption of ASU 2023-07 did not have a material impact on the Company’s financial position, results of operations or cash flows.

Effect of newly issued but not yet effective accounting standards:

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The ASU requires public companies to disclose, in the notes to financial statements, specific information about certain costs and expenses at each interim and annual reporting period.

The ASU is effective on a prospective basis for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

In January 2025, the FASB issued ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date.

The ASU amends the effective date of ASU 2024-03 to clarify that all business entities are required to adopt the guidance in annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

The Company is currently evaluation the impact of this guidance.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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Early adoption is permitted.

The Company is currently evaluating the impact of this guidance.

The adoption of ASU 2023-09 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Subsequent events

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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 8. Financial Statements and Supplementary Data