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Item 1. Financial Statements

2025-05-12 compared with 2024-11-14 · 150 added, 189 removed, 445 unchanged (43% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets

8 unchanged sentences

Inventory, noncurrent

Investment in OC-BVI

Investment in affiliates

Intangible assets, net

Operating lease right-of-use assets

Long-term assets of discontinued operations

LIABILITIES AND EQUITY

13 unchanged sentences

Other liabilities

Deferred revenue

Total liabilities

19 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of revenue

5 unchanged sentences

Interest expense

Profit-sharing income from OC-BVI

Equity in the earnings of OC-BVI

Equity in the earnings of affiliates

Other income, net

4 unchanged sentences

Net income from continuing operations attributable to Consolidated Water Co.

Net income (loss) from discontinued operations

Net loss from discontinued operations

Net income attributable to Consolidated Water Co.

20 unchanged sentences

Issue of share capital

Buyback of preferred stock

Dividends declared

( 1,510,082 )

Stock-based compensation

Balance as of March 31, 2024

Issue of share capital

Conversion of preferred stock

Buyback of preferred stock

Dividends declared

( 1,507,710 )

Stock-based compensation

Balance as of June 30, 2024

Conversion of preferred stock

Buyback of preferred stock

Exercise of options

3 unchanged sentences

Stock-based compensation

Balance as of September 30, 2024

Balance as of March 31, 2025

preferred stock

2 unchanged sentences

Issue of share capital

Purchase of remaining non-controlling interest in PERC

( 3,667,305 )

( 2,440,027 )

Dividends declared

( 1,342,015 )

Stock-based compensation

Balance as of March 31, 2023

Issue of share capital

Buyback of preferred stock

Exercise of options

Dividends declared

2 unchanged sentences

Stock-based compensation

Balance as of June 30, 2023

Conversion of preferred stock

Exercise of options

Dividends declared

( 1,499,538 )

Stock-based compensation

Balance as of September 30, 2023

Balance as of March 31, 2024

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

2 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 )

Foreign currency transaction adjustment - discontinued operations

3 unchanged sentences

Provision for credit losses

Amortization of operating lease right-of-use assets

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

Equity in earnings of affiliates

Distribution of earnings from OC-BVI

5 unchanged sentences

Prepaid expenses and other assets

( 1,269,737 )

( 1,978,213 )

Accounts payable, accrued expenses and other current liabilities

( 3,908,157 )

Contract liabilities

3 unchanged sentences

Net cash used in operating activities - discontinued operations

( 1,432,041 )

Net cash provided by operating activities

2 unchanged sentences

( 1,599,481 )

( 4,123,770 )

Proceeds from asset dispositions

Proceeds from Mexican settlement agreement

Purchase of remaining non-controlling interest in PERC

( 2,440,027 )

Net cash provided by (used in) investing activities

Net cash used in investing activities

( 1,568,281 )

4 unchanged sentences

Dividends paid to preferred shareholders

Dividends paid to non-controlling interests

Buyback of redeemable preferred stock

4 unchanged sentences

( 1,557,565 )

Net increase (decrease) in cash and cash equivalents

( 2,118,784 )

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

3 unchanged sentences

Non-cash transactions:

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

Issuance of 57,384 and 44,783 , respectively, shares of common stock for services rendered

Conversion (on a one-to-one basis) of 2,486 and 0 , respectively, shares of redeemable preferred stock to common stock

Dividends declared but not paid

Issuance of 0 and 368,383 , respectively, shares of common stock for the purchase of non-controlling interest in PERC

Transfers from inventory to property, plant and equipment and construction in progress

Transfers from construction in progress to property, plant and equipment

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

Transfers from prepaid expenses to property, plant and equipment

Transfers from prepaid expenses to inventory

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

21 unchanged sentences

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

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.

7 unchanged sentences

Certain information and note disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted in these condensed consolidated financial statements pursuant to SEC rules and regulations, although the Company believes that the disclosures made herein are adequate to make the information not misleading.

condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Foreign currency:

The Company’s reporting currency is the United States dollar (“US$”).

The functional currency of the Company and its foreign operating subsidiaries (other than NSC, AdR, and CW-Cooperatief) is the currency for each respective country.

The functional currency of the Company and its foreign operating subsidiaries (other than NSC, AdR, and CW-Cooperatief) is the currency for each

respective country.

The functional currency for NSC, AdR, and CW-Cooperatief is the US$.

2 unchanged sentences

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

Net foreign currency gains arising from transactions and re-measurements were $ 24,807 and $ 22,077 for the three months ended September 30, 2024 and 2023, respectively, and $ 65,606 and $ 72,253 for the nine months ended September 30, 2024 and 2023, and are included in “Other income (expense) - Other” in the accompanying condensed consolidated statements of income.

Net foreign currency gains arising from transactions and re-measurements were $ 29,642 and $ 24,197 for the three months ended March 31, 2025 and 2024, respectively, and are included in “Other income (expense) - Other” in the accompanying condensed consolidated statements of income.

Cash and cash equivalents:

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

Cash and cash equivalents as of September 30, 2024 and December 31, 2023 include approximately $ 5.2 million and $ 5.1 million, respectively, of certificates of deposits with original maturities of three months or less.

Cash and cash equivalents as of March 31, 2025 and December 31, 2024 include approximately $ 5.3 million and $ 5.2 million, respectively, of certificates of deposits with original maturities of three months or less.

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

The equivalent United States dollar cash balances held in The Bahamas as of September 30, 2024 and December 31, 2023 were approximately $ 11.4 million and $ 3.0 million, respectively.

The equivalent United States dollar cash balances held in The Bahamas as of March 31, 2025 and December 31, 2024 were approximately $ 14.0 million and $ 7.7 million, respectively.

Goodwill and intangible assets:

20 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Retail revenue

3 unchanged sentences

Services revenue consists of the following:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Construction revenue

6 unchanged sentences

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

The Company recognizes revenue from retail 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.

2 unchanged sentences

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, 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.

All of PERC's customers are companies or governmental entities

located in the United States.

The Company provides operations and maintenance and consulting services to companies and governmental entities located in the state of Colorado through REC.

The Company 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.

The Company, through Aerex, is a custom and specialty manufacturer of systems and products applicable to commercial, municipal and industrial water production and treatment.

Substantially all of Aerex’s customers are U.S.

The Company generates construction, operations and maintenance, design and consulting revenue from PERC and DesalCo and generates manufacturing revenue from Aerex.

Kalaeloa Desalco has signed and is presently executing 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.

The Company generates construction, operations and maintenance, design and consulting revenue from PERC and DesalCo, generates construction revenue from Kalaeloa Desalco, and generates manufacturing revenue from Aerex.

The Company also generates operations and maintenance and consulting revenue from REC.

3 unchanged sentences

Under this input method, the Company records revenue and recognizes profit or loss as work on the contract progresses.

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 Company estimates total costs to be incurred and profit to be earned on each long-term, fixed price contract prior to the 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 comprised of estimated total contract costs.

4 unchanged sentences

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

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.

For the three months ended September 30, 2024 and 2023, the Company recognized $ 4,246,506 and $ 24,219,737 , respectively, of its services revenue from the transfer of goods or services to customers over time.

The remaining services revenue of $ 8,431,331 and $ 5,207,927 , respectively, was recognized from the transfer of goods or services to customers at a point in time.

For the nine months ended September 30, 2024 and 2023, the Company recognized $ 17,631,774 and $ 52,648,271 , respectively, of its services revenue from the transfer of goods or services to customers over time.

The remaining services revenue of $ 24,386,143 and $ 13,595,057 , respectively, was recognized from the transfer of goods or services to customers at a point in time.

For the three and nine months ended September 30, 2024 and 2023, the Company recognized all of its manufacturing revenue from the transfer of goods or services to customers over time.

For the three months ended March 31, 2025 and 2024, the Company recognized $ 2,180,261 and $ 9,397,093 , respectively, of its services revenue from the transfer of goods or services to customers over time.

The remaining services revenue of $ 7,898,007 and $ 8,020,518 , respectively, was recognized from the transfer of goods or services to customers when invoiced.

For the three months ended March 31, 2025 and 2024, the Company recognized all of its manufacturing revenue from the transfer of goods or services to customers over time.

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

September 30,

Revenue recognized to date on contracts in progress

4 unchanged sentences

( 2,884,129 )

( 4,656,411 )

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

September 30,

Contract assets

4 unchanged sentences

( 2,884,129 )

As of September 30, 2024, the Company had unsatisfied or partially unsatisfied performance obligations for contracts in progress representing approximately $ 154.6 million in aggregate transaction price for contracts with an original expected length of greater than one year .

( 4,656,411 )

As of March 31, 2025, the Company had unsatisfied or partially unsatisfied performance obligations for contracts in progress representing approximately $ 149.3 million in aggregate transaction price for contracts with an original expected length of greater than one year .

The Company expects to earn revenue as it satisfies its performance obligations under those contracts in the amount of approximately $ 18.6 million during the remainder of the year ending December 31, 2025 and approximately $ 130.7 million thereafter .

In addition, the Company recognized revenue of approximately $ 6.2 million in the nine months ended September 30, 2024, that was included in the contract liability balance as of December 31, 2023.

In addition, the Company recognized revenue of approximately $ 1.4 million for the three months ended March 31, 2025, that was included in the contract liability balance as of December 31, 2024.

Practical Expedients and Exemptions

3 unchanged sentences

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.

2 unchanged sentences

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

Consistent with prior periods, the Company records all non-direct general and administrative expenses in its retail 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 fees) 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 2024 did not separately disclose those expenses currently reported in the corporate segment, as such expenses were previously included in the retail segment.

The 2024 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.

Three Months Ended September 30, 2024

The Company’s income statements by segment are presented below.

Three Months Ended March 31, 2025

Manufacturing

1 unchanged sentence

General and administrative expenses

Gain on asset dispositions and impairments, net

Gain (loss) on asset dispositions and impairments, net

Income (loss) from operations

( 3,729,650 )

Interest income

Interest expense

Income (loss) from affiliates

Other income, net

Income before income taxes

Provision for income taxes

Net income from continuing operations

Income (loss) before income taxes

( 3,428,867 )

Provision (benefit) for income taxes

Net income (loss) from continuing operations

( 3,428,867 )

Income from continuing operations attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co.

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

( 3,428,867 )

Net loss from discontinued operations

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the three months ended September 30, 2024 for the retail, bulk, services and manufacturing segments were $ 638,465 , $ 726,503 , $ 247,330 and $ 65,775 , respectively.

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Manufacturing

2 unchanged sentences

Income (loss) from operations

( 3,337,634 )

Interest income

Interest expense

Income from affiliate

Other income, net

Income before income taxes

Provision for income taxes

Net income from continuing operations

Income attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co.

Income (loss) before income taxes

( 3,258,886 )

Provision (benefit) for income taxes

Net income (loss) from continuing operations

( 2,933,143 )

Income from continuing operations attributable to non-controlling interests

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

( 2,933,143 )

Net loss from discontinued operations

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the three months ended September 30, 2023 for the retail, bulk, services and manufacturing segments were $ 593,306 , $ 748,594 , $ 182,825 and $ 68,197 , respectively.

Nine Months Ended September 30, 2024

The Company’s cost of revenue consists of:

Three Months Ended March 31, 2025

Manufacturing

Cost of revenue

General and administrative expenses

Gain on asset dispositions and impairments, net

Income from operations

Other income, net

Income before income taxes

Provision for income taxes

Net income from continuing operations

Income from continuing operations attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co.

Net income from discontinued operations

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the nine months ended September 30, 2024 for the retail, bulk, services and manufacturing segments were $ 1,912,893 , $ 2,159,557 , $ 750,630 and $ 197,330 , respectively.

Nine Months Ended September 30, 2023

Subcontractor and other project costs

Employee costs

Retail license royalties

Three Months Ended March 31, 2024

Manufacturing

Cost of revenue

General and administrative expenses

Gain (loss) on asset dispositions and impairments, net

Income (loss) from operations

Other income, net

Income before income taxes

Provision for income taxes

Net income from continuing operations

Income from continuing operations attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co.

Net loss from discontinued operations

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the nine months ended September 30, 2023 for the retail, bulk, services and manufacturing segments were $ 1,813,280 , $ 2,316,923 , $ 528,258 and $ 204,320 , respectively.

As of September 30, 2024

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:

Three Months Ended March 31, 2025

Manufacturing

Employee costs

Professional fees

Depreciation and amortization

Three Months Ended March 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.

The Company’s segment assets are presented below.

As of March 31, 2025

Manufacturing

Cash and cash equivalents

Accounts receivable, net

8 unchanged sentences

Manufacturing

Cash and cash equivalents

Accounts receivable, net

11 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Net income from continuing operations attributable to Consolidated Water Co.

1 unchanged sentence

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

Income (loss) from discontinued operations

Loss from discontinued operations

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

8 unchanged sentences

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.

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.

In November 2015, the State of Baja California (the “State”) officially commenced the public tender for the Project, and in June 2016 a consortium comprised of NSC and two other parties was selected by the State as the winner of the tender process for the Project.

NSC subsequently formed AdR to pursue the completion of the Project.

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”).

1 unchanged sentence

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.

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

The APP Contract further required AdR to operate and maintain the plant and aqueduct for a period of 37 years starting from the commencement of operation of the first phase.

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

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.

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

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.

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

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”).

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

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

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

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.

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”).

In May 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.

5 unchanged sentences

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.

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

September 30,

Prepaid expenses and other current assets

1 unchanged sentence

Total liabilities of discontinued operations

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Loss from discontinued operations

( 1,496,840 )

Gain on sale of land and project documentation

Depreciation expense

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

The Company’s leases consist principally of leases for office and warehouse space.

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

6 unchanged sentences

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.

2 unchanged sentences

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

September 30,

Prepaid expenses and other current assets

9 unchanged sentences

The components of lease costs were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating lease costs

3 unchanged sentences

Supplemental cash flow information related to leases is as follows:

Nine Months Ended September 30,

Three Months Ended March 31,

Cash paid for amounts included in measurement of liabilities:

1 unchanged sentence

Operating cash outflows for operating leases - discontinued operations

Future lease payments relating to the Company’s operating lease liabilities from continuing operations as of September 30, 2024 were as follows:

Future lease payments relating to the Company’s operating lease liabilities from continuing operations as of March 31, 2025 were as follows:

Years ending December 31,

4 unchanged sentences

Noncurrent lease obligations

As of September 30, 2024 and December 31, 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.

As of March 31, 2025 and December 31, 2024, the carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued expenses, accrued compensation, dividends payable and other current liabilities approximate their fair values due to the short-term maturities of these instruments.

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

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

As of September 30, 2024 and December 31, 2023, the Company does not have assets and liabilities measured at fair value to present in the fair value hierarchy.

As of March 31, 2025 and December 31, 2024, the Company does not have assets and liabilities measured at fair value to present in the fair value hierarchy.

Commitments and contingencies

The Company sells water through its Cayman Water retail operations under a license issued in July 1990 by the Cayman Islands government (the “1990 license”) that granted Cayman Water the exclusive right to provide potable water to customers within its licensed service area.

Although the 1990 license has not been expressly extended after January 2018, the Company continues to supply water under the terms of the 1990 license, as further discussed in the following paragraph.

Pursuant to the 1990 license, Cayman Water has the exclusive right to produce potable water and distribute it by pipeline to its licensed service area, which consists of two of the three most populated areas of Grand Cayman Island:

Seven Mile Beach and West Bay.

For the three months ended September 30, 2024 and 2023, the Company generated approximately 23 % and 14 %, respectively, of its consolidated revenue and 34 % and 23 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the nine months ended September 30, 2024 and 2023, the Company generated approximately 23 % and 18 %, respectively, of its consolidated revenue and 36 % and 29 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the three months ended March 31, 2025 and 2024, the Company generated approximately 28 % and 22 %, respectively, of its consolidated revenue and 46 % and 37 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

The 1990 license was originally scheduled to expire in July 2010 but was extended several times by the Cayman Islands government in order to provide the parties with additional time to negotiate the terms of a new license agreement.

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 continues 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”).

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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 was required to 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.

Negotiations between Cayman Water and OfReg on the new license recently recommenced.

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.

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

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $ 25.1 million and $ 26.9 million as of September 30, 2024 and December 31, 2023, respectively.

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $ 25.5 million and $ 28.4 million as of March 31, 2025 and December 31, 2024, respectively.

Approximately 78 % and 81 % of the accounts receivable balances were delinquent as of those dates, respectively.

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

When these delays occur, the Company holds discussions and meetings with representatives of the WSC and The Bahamas government, and as a result, payment schedules are developed for WSC’s delinquent accounts receivable.

When these delays occur, the Company holds discussions and meetings with representatives of the WSC and The Bahamas government.

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 a material allowance for credit losses for its accounts receivable from the WSC as of September 30, 2024.

CW-Bahamas held discussions with the WSC in March 2024 and with representatives of The Bahamas Government in April 2024 during which CW-Bahamas was informed that the Government intends to substantially reduce CW-Bahamas’ accounts receivable from the WSC before the end of 2024.

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 March 31, 2025.

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

Moody’s has maintained these ratings through the date of its most current report issued in April 2025.

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

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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.

The contracts to supply water to the WSC from its 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.

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

Fiscal, Regulation and Other Federal Policies

Significant changes in, and uncertainty with respect to, legislation, regulation, government policy and economic conditions could adversely affect the Company’s business.

Specific legislative and regulatory proposals that could have a material impact on the Company include, but are not limited to, modifications to international trade policy (such as tariffs);

public company reporting requirements;

and environmental regulation.

The Company cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the U.S.

and other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation.

Accordingly, it is difficult to predict how such actions may impact the Company’s business, or the business or habits of its customers.

The Company’s business operations, as well as the businesses of its customers on which it is substantially dependent, are located in countries at risk for escalating trade disputes, including the U.S.

Any resulting trade wars could have a significant adverse effect on world trade and could adversely impact the Company’s consolidated financial condition, results of operations and cash flows.

Impact of recent accounting standards

Adoption of new accounting standards:

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):

Improvements to Reportable Segment Disclosures .

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.

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

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Early adoption is permitted.

The adoption of ASU 2023-09 did not have a material impact on the Company’s consolidated 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.

The Company is currently evaluating the impact of this guidance.

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 evaluating the impact of this guidance.

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-Q

Item 1. Financial Statements