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Item 9A. Controls and Procedures

2025-03-17 compared with 2024-03-27 · 56 added, 24 removed, 169 unchanged (32% of the section changed)

3 unchanged sentences

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management recognizes that any

controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the possible controls and procedures.

Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.

Based upon that evaluation, our management, including our principal executive officer and principal financial officer, has concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Our management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the possible controls and procedures.

Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.

Based upon that evaluation, our management, including our principal executive officer and principal financial officer, has concluded that, as of the end of the period

covered by this report, the Company’s disclosure controls and procedures were not effective at the reasonable assurance level.

Internal Control Over Financial Reporting

Management’s Annual Report on Internal Control Over Financial Reporting

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Company management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by the Company’s Board of Directors, management and other personnel 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 in the United States of America and includes those policies and procedures that:

Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by the Company’s Board of Directors, management and other personnel 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 in the United States of America and includes those policies and procedures that:

● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

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

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013) .

Based on our assessment, management has concluded that, as of December 31, 2023, the Company’s internal control over financial reporting was effective at the reasonable assurance level.

A material weakness is a deficiency, or a 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.

Based on that assessment and due to the material weakness described in the following paragraphs, our management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2024.

Material Weaknesses in Internal Control and Plan for Remediation

It was determined that management’s information technology general control (“ITGC”) specific to change management was not sufficiently designed to monitor direct changes to databases within two accounting systems during the period January 1, 2024 through October 31, 2024.

Management completed the actions described in paragraphs that follow to remediate this ITGC deficiency.

Effective November 1, 2024, the deficiency was remediated.

However, certain business process controls (automated and manual) from January 1, 2024 through October 31, 2024 could have been adversely affected due to insufficient design of this ITGC, and therefore determined to be ineffective during this time period.

Furthermore, following the remediation date of November 1, 2024, management did not have a sufficient number of control occurrences with which to demonstrate operating effectiveness for certain annual and quarterly manual controls.

Due to the insufficient control occurrences available for testing operating effectiveness, management was unable to conclude on the effectiveness of these controls and therefore determined that these controls cannot be considered effective as of December 31, 2024.

Due to the number of manual controls that management was not able to consider effective as of December 31, 2024, management concluded that such deficiencies represent a material weakness in the

Company’s internal control over financial reporting and our internal control over financial reporting was not effective as of December 31, 2024.

The referenced deficiency did not result in any identified misstatements to the consolidated financial statements, and there were no changes to previously released financial results.

The deficiency described above created a reasonable possibility that a material misstatement to the consolidated financial statements may not be prevented or detected on a timely basis.

Our independent registered public accounting firm, Marcum LLP, who audited the consolidated financial statements included in this Annual Report on Form 10-K, issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Marcum LLP’s report appears on page 43 of this Annual Report on Form 10-K.

Based upon the results of management’s evaluation of the effectiveness of the Company’s internal control over financial reporting, the Company took the following actions, which were completed as of November 1, 2024, to remediate the ITGC material weakness discussed previously:

● Management purchased and implemented additional database monitoring and alerting software to monitor activities on key financial systems.

● Management purchased and implemented a Privileged Access Management application to manage, monitor, and limit direct data access to financial systems.

● Management increased the scope and frequency of reviews of changes to key financial system data.

● Management implemented additional management review procedures.

The material weakness arising from the lack of control occurrences for the annual and quarterly manual controls will not be considered fully remediated until the controls have operated for a sufficient period of time to allow management to conclude, through testing, that these controls are operating effectively.

We expect to complete the remediation process for this material weakness in 2025.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Except for the on-going remediation relating to the material weakness discussed previously, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

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Information required by this item with respect to our audit committee and our audit committee financial expert is contained in the Proxy Statement under the heading “Proposal 1 - Election of Directors - Committees of the Board of Directors - Audit Committee” and is incorporated by reference in this Annual Report.

To our knowledge, based solely on review of reports required by Section 16(a) of the Exchange Act and written representations from the certain reporting persons, we believe that during the fiscal year ended December 31, 2023, our officers, directors and significant shareholders have timely filed the appropriate form under Section 16(a) of the Exchange Act .

To our knowledge, based solely on the review of reports required by Section 16(a) of the Exchange Act and written representations from the certain reporting persons, we believe that during the fiscal year ended December 31, 2024, other than Wilmer F.

Pergande, who filed a Form 4 one day late for the sale of 3,500 shares, our officers, directors and significant shareholders have timely filed the appropriate form under Section 16(a) of the Exchange Act .

Information required by this item with respect to insider trading policies and procedures is contained in the Proxy Statement under the heading “Proposal 1 - Election of Directors - Governance of the Company - Insider Trading and Hedging Policy” and is incorporated by reference in this Annual Report.

The Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all of the Company’s Directors, Officers (including the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) and employees.

2 unchanged sentences

EXECUTIVE COMPENSATION

Information required by this item with respect to executive compensation and director compensation is contained in the Proxy Statement under the heading “Executive Compensation” and is incorporated by reference in this Annual Report.

Information required by this item with respect to executive compensation and director compensation is contained in the Proxy Statement under the headings “Compensation Discussion and Analysis” and “Additional Information Regarding Executive Compensation”, and is incorporated by reference in this Annual Report.

Information required by this item with respect to policies and practices on the timing of option grants in relation to the release of material non-public information and tabular disclosure, if any, regarding any options granted to named executive officers in the period beginning four business days before and ending one business day after the disclosure of material non-public information is contained in the Proxy Statement under the headings “Compensation Discussion and Analysis” and “Additional Information Regarding Executive Compensation”, and is incorporated by reference in this Annual Report.

Information required by this item with respect to compensation committee interlocks and insider participation is contained in the Proxy Statement under the heading “Additional Information Regarding Executive Compensation - Compensation Committee Interlocks and Insider Participation in Compensation Decisions” and is incorporated by reference in this Annual Report.

The compensation committee report required by this item is contained in the Proxy Statement under the heading “Compensation Discussion and Analysis - Compensation Committee Report” and is incorporated by reference in this Annual Report.

Information required by this item with respect to compensation policies and practices as they relate to the Company’s risk management is contained in the Proxy Statement under the heading “Compensation Discussion and Analysis” and is incorporated by reference in this Annual Report.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

1 unchanged sentence

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required by this item with respect to such contractual relationships and director independence is contained in the Proxy Statement under the headings “Executive Compensation - Transactions With Related Persons” and is incorporated by reference in this Annual Report.

Information required by this item with respect to such contractual relationships and director independence is contained in the Proxy Statement under the headings “Additional Information Regarding Executive Compensation - Transactions With Related Persons” and is incorporated by reference in this Annual Report.

PRINCIPAL ACCOUNTING FEES AND SERVICES

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(incorporated herein by reference to the exhibit filed as a part of our Form 20-F dated December 7, 1994, Commission File No.

Exhibit Description

Second Amendment to License Agreement dated February 14, 1991 between Cayman Water Company Limited and the Government of the Cayman Islands.

9 unchanged sentences

Amendment to License Agreement dated November 6, 2013 between the Government of the Cayman Islands and Cayman Water Company Limited (incorporated herein by reference to Exhibit 10.1.10 filed as a part of our Form 10-K for the fiscal year ended December 31, 2013, Commission File No.

Exhibit Description

Amendment to License Agreement dated June 30, 2014 between the Government of the Cayman Islands and Cayman Water Company Limited (incorporated herein by reference to Exhibit 10.1 to our Form 8-K filed July 14,2014, Commission File No.

2 unchanged sentences

Amendment to License Agreement dated April 11, 2016 between the Government of the Cayman Islands and Cayman Water Company Limited (incorporated by reference to Exhibit 10.1 filled as part of our Form 10-Q for the fiscal quarter ended June 30, 2016, Commission File No.

Grant of Concession dated February 18, 2025 Minister of Planning, Agriculture, Housing, Infrastructure, Transport & Development of the Cayman Islands in favor of Cayman Water Company Limited (incorporated herein by reference to Exhibit 10.1 to our Form 8-K filed February 25, 2025, Commission File No.

Water Supply Agreement dated December 18, 2000 between Consolidated Water Co.

1 unchanged sentence

(incorporated herein by reference to Exhibit 10.12 filed as a part of our Form 10-K for the fiscal year ended December 31, 2000, Commission File No.

Exhibit Description

Employment contract dated December 5, 2003 between Frederick McTaggart and Consolidated Water Co.

14 unchanged sentences

(incorporated by reference to Exhibit 10.1 filed as part of our Form 8-K filed September 13, 2022, Commission File No.

Exhibit Description

Specimen Service Agreement between Cayman Water Company Limited and consumers (incorporated herein by reference to the exhibit filed as part of our Registration Statement on Form F-1 dated March 26, 1996)

8 unchanged sentences

(incorporated herein by reference to Exhibit 10.52 filed as a part of our Form 10-K for the fiscal year ended December 31, 2001, Commission File No.

Exhibit Description

Form of Agreement for Desalinated Water Supply dated May 2005 among Water and Sewerage Corporation, Consolidated Water Co.

10 unchanged sentences

agreement for the purchase of 12 hectares of land dated May 16, 2013 (incorporated herein by reference to Exhibit 10.32.4 filed as a part of our Form 10-K for the fiscal year ended December 31, 2013, Commission File No.

Real Estate Purchase and Sale Agreement dated June 10, 2024 between N.S.C.

and Banco National de Obras y Servicios Publicos

Exhibit Description

Public-Private Partnership Contract dated August 22, 2016 among Aguas de Rosarito S.A.P.I.

5 unchanged sentences

Procurement of and Operating Agreement for a Sea Water Desalination Plant at Red Gate Water Works, Grand Cayman, Cayman Islands, using the Reverse Osmosis Process (2021), effective as of May 10, 2022, by and between The Water Authority of the Cayman Islands and Ocean Conversion (Cayman) Limited (incorporated herein by reference to Exhibit 10.1 filed as a part of our Form 10-Q filed November 14, 2022, File No.

Credit Agreement dated September 16, 2022 between Cayman Water Company Limited and Scotiabank & Trust (Cayman) Ltd.

(incorporated by reference to Exhibit 10.1 filed as part of our Form 8-K filed September 20, 2022, Commission File No.

Letter dated September 16, 2022 from Scotiabank & Trust (Cayman) Ltd.

to Cayman Water Company Limited.

(incorporated by reference to Exhibit 10.2 filed as part of our Form 8-K filed September 20, 2022, Commission File No.

Exhibit Description

Stock Purchase Agreement dated January 4, 2023 among Consolidated Water U.S.

9 unchanged sentences

Ramey (incorporated by reference to Exhibit 10.1 filed as part of our Form 8-K filed November 7, 2023, Commission File No.

Insider Trading and Disclosure of Non-Public Information Policy

Settlement Agreement dated May 28, 2024 among Consolidated Water Coöperatief, U.A.;

Aguas de Rosarito S.A.P.I.

the Government of Baja California;

and Banco Nacional de Obras y Servicios Públicos, S.N.C., as trustee under the trust agreement for Fondo Nacional de Infraestructura (incorporated by reference to Exhibit 10.1 filed as part of our Form 8-K filed June 4, 2024, Commission File No.

Employment contract dated August 23, 2010 between Brent Brodie and Consolidated Water Co.

First Amendment to Employment Contract dated March 4, 2022 between Brent Brodie and Consolidated Water Co.

Employment contract dated June 28, 2012 between Douglas R.

Vizzini and Consolidated Water Co.

Exhibit Description

Insider Trading and Disclosure of Non-Public Information Policy (incorporated herein by reference to Exhibit 19 filed as a part of our Form 10-K for the fiscal year ended December 31, 2023, Commission File No.

Subsidiaries of the Registrant

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Section 1350, Section 906 of the Sarbanes-Oxley Act of 2002

Incentive Compensation Recoupment Policy

Incentive Compensation Recoupment Policy (incorporated herein by reference to Exhibit 97 filed as a part of our Form 10-K for the fiscal year ended December 31, 2023, Commission File No.

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Exhibit Description

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** Filed herewith.

*** Indicates a management contract or compensatory plan, which is filed herewith.

† Portions of these Exhibits have been omitted pursuant to a request for confidential treatment.

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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 9A. Controls and Procedures