Consolidated Water(CWCO) - 2024 Q1 - Quarterly Report

FORM 10-Q This Form 10-Q details Consolidated Water Co. Ltd.'s financial performance, condition, and risks for Q1 2024 PART I - FINANCIAL INFORMATION This section presents unaudited condensed consolidated financial statements, management's discussion, market risk, and controls for Q1 2024 Item 1. Financial Statements This item provides unaudited condensed consolidated financial statements for Q1 2024, including balance sheets, income, equity, cash flows, and notes Condensed Consolidated Balance Sheets | Metric | March 31, 2024 ($) | December 31, 2023 ($) | | :----- | :------------- | :---------------- | | Total Assets | $223,166,183 | $218,437,592 | | Total Liabilities | $25,925,190 | $26,606,918 | | Total Equity | $197,240,993 | $191,830,674 | Condensed Consolidated Statements of Income | Metric | Three Months Ended March 31, 2024 ($) | Three Months Ended March 31, 2023 ($) | YoY Change (%) | | :----- | :-------------------------------- | :-------------------------------- | :--------- | | Revenue | $39,689,390 | $32,868,990 | +20.75% | | Gross Profit | $13,878,023 | $10,559,082 | +31.44% | | Income from Operations | $7,313,994 | $4,528,336 | +61.52% | | Net Income from Continuing Operations Attributable to Consolidated Water Co. Ltd. stockholders | $6,941,414 | $4,072,789 | +70.43% | | Net Income Attributable to Consolidated Water Co. Ltd. stockholders | $6,474,348 | $3,813,626 | +69.77% | | Basic EPS | $0.41 | $0.24 | +70.83% | | Diluted EPS | $0.40 | $0.24 | +66.67% | | Dividends Declared per Share | $0.095 | $0.085 | +11.76% | Condensed Consolidated Statements of Stockholders' Equity | Metric | Balance as of Dec 31, 2023 ($) | Net Income ($) | Dividends Declared ($) | Stock-based Compensation ($) | Balance as of Mar 31, 2024 ($) | | :----- | :------------------------- | :--------- | :----------------- | :----------------------- | :------------------------- | | Total Stockholders' Equity | $191,830,674 | $6,474,348 | ($1,510,082) | $279,875 | $197,240,993 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2024 ($) | Three Months Ended March 31, 2023 ($) | YoY Change (%) | | :----------------- | :-------------------------------- | :-------------------------------- | :--------- | | Net Cash Provided by Operating Activities | $5,950,002 | $5,346,545 | +11.20% | | Net Cash Used in Investing Activities | ($531,452) | ($3,805,879) | +86.03% (less outflow) | | Net Cash Used in Financing Activities | ($1,557,565) | ($1,334,114) | -16.75% (more outflow) | | Net Increase in Cash and Cash Equivalents | $3,860,985 | $206,552 | +1769.7% | | Cash and Cash Equivalents at End of Period | $46,177,641 | $51,104,268 | -9.64% | Notes to Condensed Consolidated Financial Statements These notes provide essential details for the condensed consolidated financial statements, including accounting policies, segment data, and contingencies 1. Principal activity - The Company supplies potable water, treats wastewater, and provides water-related products and services in the Cayman Islands, The Bahamas, the United States, and the British Virgin Islands[14] - In January 2023, CW-Holdings acquired the remaining 39% ownership interest in PERC for $2.4 million cash and 368,383 shares of common stock (approx. $5.36 million value), resulting in 100% ownership of PERC[15] - Effective October 1, 2023, the Company, through PERC, acquired REC for approximately $4.1 million, recording goodwill of $2,436,391 and intangible assets of $1,108,390[32] 2. Accounting policies - The Company's reporting currency is the US dollar, with functional currencies varying by subsidiary, and fixed exchange rates for Cayman Islands and Bahamian dollars to US$, while Mexican pesos and euros vary[18] - Goodwill and indefinite-lived intangible assets are not amortized but tested for impairment annually or upon triggering events; estimable-life intangible assets are amortized and reviewed periodically[19] - Revenue is recognized when control of goods or services is transferred to customers, reflecting the expected consideration[39] - Retail and bulk water sales, and certain services, use the "right to invoice" practical expedient, recognizing revenue at a point in time[41] - Construction and custom manufacturing contracts recognize revenue over time using the input method based on costs incurred[74] 3. Segment information - The Company has four reportable segments: retail, bulk, services, and manufacturing, each with distinct products, customer needs, and gross profit margins[79] - Non-direct general and administrative expenses are recorded in the retail segment[79] | Segment | Revenue (3M Ended Mar 31, 2024) ($) | Revenue (3M Ended Mar 31, 2023) ($) | YoY Change (%) | Income from Operations (3M Ended Mar 31, 2024) ($) | Income from Operations (3M Ended Mar 31, 2023) ($) | | :------ | :------------------------------ | :------------------------------ | :--------- | :--------------------------------------------- | :--------------------------------------------- | | Retail | $8,624,938 | $7,771,095 | +11.0% | $969,262 | $35,907 | | Bulk | $8,342,094 | $9,004,373 | -7.4% | $2,432,695 | $2,419,522 | | Services | $17,417,611 | $12,721,701 | +36.9% | $3,150,818 | $1,588,951 | | Manufacturing | $5,304,747 | $3,371,821 | +57.3% | $761,219 | $483,956 | | Total | $39,689,390 | $32,868,990 | +20.7% | $7,313,994 | $4,528,336 | | Segment Assets (As of March 31, 2024) ($) | Amount | | :------------------------------------ | :----- | | Retail | $58,080,386 | | Bulk | $66,445,312 | | Services | $60,231,126 | | Manufacturing | $16,740,204 | | Assets of discontinued operations | $21,669,155 | | Total Assets | $223,166,183 | 4. Earnings per share - Basic EPS is calculated by dividing net income (less preferred stock dividends) available to common stockholders by the weighted average number of common shares outstanding[105] - Diluted EPS includes the dilutive effect of stock options and unvested stock grants[105] | Metric | Three Months Ended March 31, 2024 ($) | Three Months Ended March 31, 2023 ($) | | :----- | :-------------------------------- | :-------------------------------- | | Net income from continuing operations available to common shares | $6,937,232 | $4,069,866 | | Net income available to common shares (basic) | $6,470,166 | $3,810,703 | | Basic EPS | $0.41 | $0.24 | | Diluted EPS | $0.40 | $0.24 | | Weighted average common shares (basic) | 15,828,929 | 15,723,595 | | Weighted average shares (diluted) | 15,984,548 | 15,888,028 | 5. Discontinued operations - Mexico project development - The Mexico project, a desalination plant in Baja California, was terminated by the State of Baja California in June 2020[87][160] - The Company is pursuing international arbitration against the United Mexican States for damages exceeding US$51 million plus MXN$137 million, alleging breach of international obligations under a treaty[90][111][129] | Metric | March 31, 2024 ($) | December 31, 2023 ($) | | :----- | :------------- | :---------------- | | Total assets of discontinued operations | $21,669,155 | $21,340,805 | | Total liabilities of discontinued operations | $453,081 | $364,665 | | Loss from discontinued operations (3M ended Mar 31) | $467,066 | $259,163 | 6. Leases - Leases primarily cover office and warehouse space; for terms over twelve months, assets and obligations are recorded at the present value of lease payments, discounted using the incremental borrowing rate[194] | Lease Metric | March 31, 2024 ($) | December 31, 2023 ($) | | :----------- | :------------- | :---------------- | | Operating lease right-of-use assets | $2,052,610 | $2,135,446 | | Total lease right-of-use assets | $2,080,396 | $2,245,987 | | Current maturities of operating leases | $381,423 | $456,865 | | Noncurrent operating leases | $1,735,851 | $1,827,302 | | Total lease liabilities | $2,117,274 | $2,284,167 | | Weighted average remaining lease term | 6.1 years | 6.1 years | | Weighted average discount rate | 5.71% | 5.67% | | Lease Cost (Three Months Ended March 31) ($) | 2024 | 2023 | | :--------------------------------------- | :--- | :--- | | Operating lease costs | $205,872 | $170,378 | | Short-term lease costs | $69,709 | $25,346 | | Lease costs - discontinued operations | $12,120 | $10,786 | | Total lease costs | $287,701 | $206,510 | 7. Fair value - Fair value is defined as the exit price in an orderly transaction, with inputs classified into a three-level hierarchy (Level 1: active market quotes, Level 2: observable inputs, Level 3: unobservable inputs)[180][198][199] - As of March 31, 2024, and December 31, 2023, the Company had no assets or liabilities measured at fair value to present in the fair value hierarchy[200] 8. Contingencies - Cayman Water's exclusive retail license, which expired in January 2018, is still under negotiation with OfReg, and a new agreement could significantly reduce operating income and cash flows, potentially requiring asset impairment[183][184][202][203] - CW-Bahamas faces ongoing delays in collecting accounts receivable from WSC, with approximately 79% ($25.6 million) delinquent as of March 31, 2024, impacting liquidity and potentially requiring a material allowance for credit losses[185][204][206][207] 9. Impact of recent accounting standards - The Company is evaluating ASU 2023-09 (Income Taxes), effective for annual periods after December 15, 2024, which requires disaggregated tax rate reconciliation and additional income tax paid information[209][250] - The Company is evaluating ASU 2023-07 (Segment Reporting), effective for annual periods after December 15, 2023 (interim periods after December 15, 2024), which mandates disclosures of significant reportable segment expenses and CODM information[224][275] 10. Subsequent events - The Company has evaluated subsequent events through the filing date of this report and found no significant events that would materially impact its condensed consolidated financial statements[225] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, condition, liquidity, and critical accounting policies for Q1 2024 Cautionary Note Regarding Forward-Looking Statements - The report contains forward-looking statements, which are not guarantees of future performance and are subject to assumptions, risks, and uncertainties[190][227] - Actual outcomes may differ materially due to factors including tourism, economic/political/social conditions in operating countries, relationships with government entities, regulatory matters (e.g., retail license renewal), and ability to enter new markets[191] Critical Accounting Policies and Estimates - Critical accounting policies relate to the valuations of goodwill, intangible assets, long-lived assets, and revenue recognition on construction and manufacturing contracts[192] - These policies involve material estimates and assumptions due to high subjectivity and susceptibility to change, which can significantly impact financial condition and results[166][213][228] - Goodwill and indefinite-lived intangible assets are tested for impairment annually or upon triggering events, while long-lived assets are reviewed for impairment when circumstances indicate carrying amounts may not be recoverable[168][149][150] Results of Operations This section details consolidated and segment-specific results for Q1 2024 versus 2023, focusing on revenue, gross profit, and income from operations Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 The company experienced significant increases in consolidated revenue and net income from continuing operations for Q1 2024, driven by segment growth Discontinued Operations – Mexico Project Development - The Mexico desalination plant project was discontinued in 2020 after the APP Contract was terminated by the State of Baja California[131][156][160] - The Company is seeking over US$51 million plus MXN$137 million in damages from the United Mexican States through international arbitration due to the contract termination[129][162] - Net losses from discontinued operations were ($467,066) for the three months ended March 31, 2024, compared to ($259,163) for the same period in 2023[131] Consolidated Results | Metric | Three Months Ended March 31, 2024 ($) | Three Months Ended March 31, 2023 ($) | YoY Change (%) | | :----- | :-------------------------------- | :-------------------------------- | :--------- | | Revenue | $39,689,390 | $32,868,990 | +20.75% | | Gross Profit | $13,878,023 (35% of revenue) | $10,559,082 (32% of revenue) | +31.44% | | Net Income Attributable to Stockholders (including discontinued operations) | $6,474,348 | $3,813,626 | +69.77% | | Diluted EPS (including discontinued operations) | $0.40 | $0.24 | +66.67% | | Net Income from Continuing Operations Attributable to Stockholders | $6,941,414 | $4,072,789 | +70.43% | | Diluted EPS (continuing operations) | $0.43 | $0.26 | +65.38% | - Consolidated General and Administrative (G&A) expenses increased to $6,564,029 in 2024 from $6,036,662 in 2023, primarily due to approximately $388,000 in G&A expenses from the REC acquisition[136] - Other income (expense), net, increased to $418,184 in 2024 from $157,059 in 2023, mainly due to a $132,500 increase in interest income from CW-Bahamas' delinquent accounts receivable and higher earnings on interest-earning assets[137] Results by Segment This section details the performance of the company's four segments—retail, bulk, services, and manufacturing—for Q1 2024 versus 2023 Retail Segment | Metric | Three Months Ended March 31, 2024 ($) | Three Months Ended March 31, 2023 ($) | YoY Change (%) | | :----- | :-------------------------------- | :-------------------------------- | :--------- | | Income from Operations | $969,262 | $35,907 | +2600% | | Revenue | $8,624,938 | $7,771,095 | +11.0% | | Gross Profit | $5,073,594 (59% of revenue) | $4,220,301 (54% of revenue) | +20.2% | - Revenue increase was driven by a 6% overall increase in water volume sold, a 2.8% increase in customer accounts, and significantly less rainfall on Grand Cayman[139] - Gross profit as a percentage of revenue increased due to higher water volume sold and a higher average rate charged for water, resulting from significantly lower sales to WAC (which pays a lower rate)[140] Bulk Segment | Metric | Three Months Ended March 31, 2024 ($) | Three Months Ended March 31, 2023 ($) | YoY Change (%) | | :----- | :-------------------------------- | :-------------------------------- | :--------- | | Income from Operations | $2,432,695 | $2,419,522 | +0.5% | | Revenue | $8,342,094 | $9,004,373 | -7.4% | | Gross Profit | $2,776,836 (33% of revenue) | $2,761,227 (31% of revenue) | +0.6% | - Revenue decrease was due to a 2% decrease in water volume sold and a decrease in the energy pass-through component of CW-Bahamas' rates[142] - Gross profit as a percentage of revenue increased due to a reduction in energy prices and lower operating expenses, particularly for chemicals[143] Services Segment | Metric | Three Months Ended March 31, 2024 ($) | Three Months Ended March 31, 2023 ($) | YoY Change (%) | | :----- | :-------------------------------- | :-------------------------------- | :--------- | | Income from Operations | $3,150,818 | $1,588,951 | +98.3% | | Revenue | $17,417,611 | $12,721,701 | +36.9% | | Gross Profit | $4,748,672 (27% of revenue) | $2,677,623 (21% of revenue) | +77.3% | - Operations and maintenance revenue increased to $7,099,354 in 2024 from $3,685,805 in 2023, with $1,818,039 of this increase attributed to the REC acquisition[123] - Gross profit as a percentage of revenue increased from 21% to 27% due to improved margins on both construction and operations and maintenance activities[124] Manufacturing Segment | Metric | Three Months Ended March 31, 2024 ($) | Three Months Ended March 31, 2023 ($) | YoY Change (%) | | :----- | :-------------------------------- | :-------------------------------- | :--------- | | Income from Operations | $761,219 | $483,956 | +57.3% | | Revenue | $5,304,747 | $3,371,821 | +57.3% | | Gross Profit | $1,278,921 (24% of revenue) | $899,931 (27% of revenue) | +42.1% | - The increase in manufacturing revenue for 2024 reflects increased production activity[214] - Gross profit as a percentage of revenue decreased from 27% to 24% due to a lower margin product mix[229] Financial Condition As of March 31, 2024, total assets increased, primarily driven by accounts receivable, offset by other decreases - Accounts receivable increased by approximately $3.5 million, primarily due to a $2.3 million increase in the services segment and a $2.2 million increase in Aerex accounts receivables, partially offset by a $1.3 million decrease in CW-Bahamas' accounts receivable[215] - Prepaid expenses and other current assets decreased by approximately $1.3 million, mainly due to reductions in prepaid insurance ($900,000) and prepaid taxes ($163,000)[216] - Property, plant and equipment, net, decreased by approximately $1.0 million due to scheduled depreciation of fixed assets[217] - Contract liabilities decreased by approximately $778,000, primarily due to a $724,000 decrease in billings related to Kalaeloa Desalco's contract[234] Liquidity and Capital Resources The company's liquidity is strong, with $46.2 million cash and $95.0 million working capital, despite WSC collection delays - As of March 31, 2024, the Company had cash and cash equivalents of $46.2 million and working capital of $95.0 million[236] - CW-Bahamas continues to experience delays in collecting accounts receivable from WSC, with $25.6 million (79%) delinquent as of March 31, 2024, impacting its liquidity and preventing dividend payments since August 2022[237][263] - The Bahamas Government intends to substantially reduce CW-Bahamas' accounts receivable from WSC over 2024, following discussions in March and April 2024[206][264] Liquidity Position - The Company is not presently aware of anything that would lead it to believe it will not have sufficient liquidity to meet its needs, except for the CW-Bahamas situation[219] - CW-Bahamas' accounts receivable from WSC amounted to $25.6 million as of March 31, 2024, with approximately 79% delinquent, impacting its liquidity[237] - Based on historical full payment of delinquent accounts, no material allowance for credit losses has been provided for CW-Bahamas' accounts receivable from WSC[220][238] Discussion of Cash Flows for the Three Months Ended March 31, 2024 - Net cash provided by operating activities was $5,950,002 for the three months ended March 31, 2024, reflecting net income adjusted for non-cash items and changes in working capital[223] - Net cash used in investing activities was $531,452, primarily for additions to property, plant, and equipment and construction in progress[266] - Net cash used in financing activities was $1,557,565, almost entirely related to dividend payments[267] Cash Flows from Operating Activities - Net cash provided by operating activities was $5,950,002, driven by net income of $6,643,416[223] - Significant adjustments included depreciation and amortization of $1,674,699, an increase in accounts receivable of $3,715,214, and an increase in contract assets of $1,787,438[223] - Offsetting factors included decreases in inventory of $1,746,438 and prepaid expenses and other assets of $1,275,345[223] Cash Flows from Investing Activities - Net cash used in investing activities was $531,452 for the three months ended March 31, 2024[266] - This outflow was primarily for additions to property, plant, and equipment and construction in progress[266] Cash Flows from Financing Activities - Net cash used in financing activities was $1,557,565 for the three months ended March 31, 2024[267] - This outflow was almost entirely related to the payment of dividends to common and preferred shareholders[267][58] Revolving Credit Facility - Cayman Water has a $10.0 million revolving credit facility with Scotiabank & Trust (Cayman) Ltd., maturing two years from the initial advance[267] - The facility bears interest at SOFR + 2.0% and is secured by Cayman Water's assets, with the Company guaranteeing repayment[242][268] - As of March 31, 2024, Cayman Water has not utilized any of its available borrowings under the Credit Facility[244] Material Commitments, Expenditures and Contingencies - The company faces material commitments and contingencies, including ongoing negotiations for the Cayman Water retail license, which could significantly impact operating income, and performance guarantees for water delivery contracts in The Bahamas[271][273] Cayman Water Retail License - Cayman Water operates under a 1990 exclusive retail license, which expired in January 2018 but continues to be operative, with ongoing negotiations for a new license with OfReg[245][270] - The Cayman Islands government seeks to restructure the license terms, which could significantly reduce historical operating income and cash flows from retail operations[271][272] - Retail water operations under this license generated approximately 22% of consolidated revenue and 37% of consolidated gross profit for the three months ended March 31, 2024[270] CW-Bahamas Performance Guarantees - CW-Bahamas' contracts with WSC require guaranteed weekly minimum water deliveries from its Blue Hills (63.0 million gallons) and Windsor (16.8 million gallons) plants[273] - If minimums are not met, CW-Bahamas must pay WSC the difference at the contract's per-gallon rate[273] - The Blue Hills contract expires in 2032, and the Windsor contract expires in 2033[273] Adoption of New Accounting Standards - The FASB issued ASU 2023-07, "Segment Reporting," updating disclosure requirements for significant reportable segment expenses and CODM information[224][275] - This ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024[224][275] - The Company is currently evaluating the impact of this guidance[224][275] Effect of Newly Issued but not yet Effective Accounting Standards - The FASB issued ASU 2023-09, "Income Taxes," requiring disaggregated information on effective tax rate reconciliation and income taxes paid[209][250] - This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted[209][250] - The Company is currently evaluating the impact of this guidance[209][250] Dividends - The Company has paid dividends to common and redeemable preferred stockholders since 1985[276] - Future dividend payments are subject to earnings, financial condition, cash flows, capital requirements, and Board discretion[276] - Dividends of $0.095 per share were paid on January 31, 2024, and April 30, 2024[251] Dividend Reinvestment and Common Stock Purchase Plan - The Company offers a Dividend Reinvestment and Common Stock Purchase Plan[277] - Shareholders can reinvest common stock dividends and make optional cash payments to purchase additional shares at prevailing market prices[277] Impact of Inflation - Water rates in the Cayman Islands, The Bahamas, and British Virgin Islands are automatically adjusted for inflation annually, historically mitigating its impact on gross profit[278] - The retail segment's profitability could be adversely affected by the lack of a rate increase in the Cayman Islands since January 2018, despite ongoing inflation[278] - Approximately 80% of the $150 million construction price for the Kalaeloa Desalco plant in Hawaii is subject to adjustment based on inflation indices[254] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company reported no material changes in its exposure to market risk from December 31, 2023, to March 31, 2024 - There have been no material changes in the Company's exposure to market risk from December 31, 2023, to March 31, 2024[255] Item 4. Controls and Procedures Management evaluated disclosure controls and procedures as effective for Q1 2024, with no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures - The principal executive officer and principal financial and accounting officer concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2024[256] Changes in Internal Control Over Financial Reporting - No changes in internal control over financial reporting were identified during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[281][306] PART II - OTHER INFORMATION This section covers non-financial information, including legal proceedings, significant risk factors, and a list of exhibits Item 1. Legal Proceedings The company is involved in ongoing legal proceedings related to the discontinued Mexico project, with uncertain outcomes potentially impacting financials - EWG initiated an ordinary mercantile claim against NSC and CW-Cooperatief, challenging transactions related to CW-Cooperatief's ownership interest in NSC[258][308] - EWG obtained precautionary measures to secure NSC's assets, but these have not been enforced as EWG has not posted the required bond[259][309][118] - NSC filed an amparo lawsuit against EWG's precautionary measures, which is ongoing, and the Federal District Court in Tijuana is attempting to summon EWG[284][310][311][313] Mexico Project litigation a) EWG request of precautionary measures%20EWG%20request%20of%20precautionary%20measures) - EWG requested precautionary measures in July 2023 to secure NSC's assets, prior to an alleged arbitration[283][309] - The Rosarito Court granted the measures, conditional on EWG posting a MXN$1,500,000 bond, which EWG has not done, preventing enforcement and formal arbitration summons for NSC[259][309][118] b) NSC amparo lawsuit%20NSC%20amparo%20lawsuit) - NSC filed an amparo suit against EWG's precautionary measures, obtaining a definitive injunction after submitting a guarantee to the court[284][310] - The Federal District Court in Tijuana has been unable to summon EWG due to an unknown address and is requesting information from various authorities[286][313] - NSC's request for free copies of documentary evidence was denied, leading to an appeal that is currently pending resolution by the Second Collegiate Circuit Court in Tijuana[287][314] Item 1A. Risk Factors This section outlines significant risks that could materially and adversely affect the company's business, financial condition, or operations Our exclusive license to provide water to retail customers in the Cayman Islands has not been expressly extended and we are presently unable to predict the outcome of our on-going negotiations relating to this license. - Cayman Water's exclusive retail license, which expired in January 2018, continues to be operative under its original terms while negotiations for a new license with OfReg are ongoing[290][317] - The Cayman Islands government seeks to restructure the license terms, which could significantly reduce historical operating income and cash flows from retail operations[291][319] - The resolution of these negotiations could result in a material reduction (or loss) of operating income and cash flows and may require impairment losses on retail segment assets[293] Periodically, our Bahamas subsidiary experiences substantial delays in the collection of its accounts receivable. As a result, our Bahamas subsidiary could have insufficient liquidity to continue operations, and our consolidated results of operations and cash flows could be materially adversely affected. - CW-Bahamas experiences substantial delays in collecting accounts receivable from WSC, with $25.6 million (79%) delinquent as of March 31, 2024, adversely impacting its liquidity[294][320][321] - Failure to collect sufficient delinquent receivables could lead to insufficient liquidity for CW-Bahamas, cessation of revenue recognition on water supply agreements, or a material allowance for credit losses[322] - Any of these events could have a material adverse impact on the Company's consolidated financial condition, results of operations, and cash flows[322] The cost estimates we prepare in connection with the construction and operation of our water plants, the water infrastructure we construct and sell to third parties, and our manufacturing contracts, are subject to inherent uncertainties. - The profitability of the Company's water plants, infrastructure construction, and manufacturing contracts is highly dependent on accurately estimating future construction, manufacturing, and operating costs, as most are fixed-price[295][323] - Significant increases in material, labor, or subcontractor costs after contract signing, or higher operating costs than estimated, could reduce gross profit[323] - Such cost overruns could have a material adverse impact on the Company's consolidated financial condition, results of operations, and cash flows[297][323] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the three months ended March 31, 2024 - No unregistered sales of equity securities occurred during the three months ended March 31, 2024[298] Item 5. Other Information No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024 - No directors or officers adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the quarter ended March 31, 2024[299] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL taxonomy documents | Number | Exhibit Description | | :----- | :------------------ | | 31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | | 31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | | 32.1 | Section 1350 Certification of Chief Executive Officer | | 32.2 | Section 1350 Certification of Chief Financial Officer | | 101.INS | XBRL Instance Document | | 101.SCH | XBRL Taxonomy Extension Schema | | 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | | 101.DEF | XBRL Taxonomy Extension Definition Document | | 101.LAB | XBRL Taxonomy Extension Label Linkbase | | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | | 104 | Cover Page Interactive Data File | SIGNATURES The report is duly signed by Consolidated Water Co. Ltd.'s CEO and CFO on May 15, 2024 - The report is signed by Frederick W. McTaggart, Chief Executive Officer, and David W. Sasnett, Executive Vice President & Chief Financial Officer[302][326] - The signing date is May 15, 2024[330]