Consolidated Water Co. Ltd.

Previous wording

We sell water through our 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. 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 March 31, 2026 and 2025, we generated approximately 29% and 28%, respectively, of our consolidated revenue and 45% and 46%, respectively, of our consolidated gross profit from the retail water operations conducted under the 1990 license.

Current wording

Prior to the License Date (as defined below), we sold water 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. For the three months ended June 30, 2026 and 2025, the Company generated approximately 26% and 26%, respectively, of its consolidated revenue and 44% and 38%, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 License. For the six months ended June 30, 2026 and 2025, the Company generated approximately 27% and 27%, respectively, of its consolidated revenue and 45% and 42%, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 License.

Previous wording

The 1990 license was originally scheduled to expire in July 2010 but was extended several times by the Cayman Islands government to provide the parties with additional time to negotiate the terms of a new license agreement. The most recent express extension of the license expired on January 31, 2018. From that date until February 18, 2025, we continued to operate under the terms of the 1990 license, treating such terms as operative notwithstanding the expiration of the express extension. We continued to pay a royalty of 7.5% of the revenue we collect as required under the 1990 license.

Current wording

The 1990 License was originally scheduled to expire in July 2010 but was extended several times by the Cayman Islands government 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, and from that date until February 18, 2025, Cayman Water continued to operate under the terms of the 1990 License, treating such terms as operative notwithstanding the expiration of the express extension.

Previous wording

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 operations 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 from OfReg is negotiated and enacted. Negotiations between Cayman Water and OfReg for the new license remain on-going.

Current wording

On February 18, 2025, Cayman Water received a concession from the Cayman Islands government that authorized and maintained the terms of the 1990 License until a new license was negotiated and enacted.

Previous wording

In October 2016, the Government of the Cayman Islands passed legislation which created a new utilities regulation and competition office (“OfReg”) and in April 2017 passed supplemental legislation which transferred responsibility for economic regulation of the water utility sector and the negotiations with us for a new retail license to OfReg.

Current wording

In 2016, the Cayman Islands government passed legislation creating the Utility Regulation and Competition Office (“OfReg”), which is an independent and accountable regulatory body charged with protecting the rights of consumers, encouraging affordable utility services and promoting competition. Supplemental legislation passed in April 2017 transferred responsibility for the economic regulation of the water utility sector, including the negotiations with the Company for a new retail license, to OfReg. We began negotiations with OfReg in 2017, which negotiations continued until the issuance of the License (as defined below).

Previous wording

We have been informed during our 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 we have historically generated from our retail license. We are presently unable to determine what impact the resolution of our retail license negotiations will have on our consolidated financial condition, results of operations, or cash flows but such resolution could result in a material reduction (or the loss) of the operating income and cash flows we have historically generated from our retail operations and could require us to record impairment losses to reduce the carrying values of our retail segment assets. Such impairment losses could have a material adverse impact on ourconsolidated financial condition and results of operations.

Current wording

We have previously disclosed that OfReg and its predecessor informed us during the negotiations that the Cayman Islands government sought to restructure the terms of the license in a manner that could significantly reduce the operating income and cash flows we have historically generated from the 1990 License.

Previous wording

Including discontinued operations, net income attributable to Consolidated Water Co. Ltd. stockholders for 2026 was $3,777,429 ($0.23 per share on a fully diluted basis), as compared to net income of $4,791,029 ($0.30 per share on a fully diluted basis) for 2025. Our net losses from discontinued operations for 2026 and 2025 were ($43,042) and ($133,081), respectively. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for a discussion of our discontinued operations.

Current wording

Including discontinued operations, net income attributable to Consolidated Water Co. Ltd. stockholders for 2026 was $3,931,746 ($0.24 per share on a fully diluted basis), as compared to net income of $5,096,205 ($0.32 per share on a fully diluted basis) for 2025. Our net losses from discontinued operations for 2026 and 2025 were ($105,574) and ($82,556), respectively. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for a discussion of our discontinued operations.

Previous wording

Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders for 2026 was $3,820,471 ($0.24 per share on a fully diluted basis), as compared to net income from continuing operations of $4,924,110 ($0.31 per share on a fully diluted basis) for 2025.

Current wording

Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders for 2026 was $4,037,320 ($0.25 per share on a fully diluted basis), as compared to net income from continuing operations of $5,178,761 ($0.32 per share on a fully diluted basis) for 2025.

Previous wording

Revenue for 2026 decreased to $29,973,700 from $33,715,385 in 2025 as a result of revenue decreases in the manufacturing and retail segments, which were partially offset by revenue increases in the bulk and services segments. Gross profit for 2026 was $10,916,013 (36% of total revenue) as compared to $12,306,287 (37% of total revenue) for 2025. For further discussion of revenue and gross profit see the “Results by Segment” discussion and analysis that follows.

Current wording

Revenue for 2026 decreased to $32,870,362 from $33,591,079 in 2025 as a result of a revenue decrease in the manufacturing segment, which was partially offset by revenue increases in the retail, bulk and services segments. Gross profit for 2026 was $10,963,389 (33% of total revenue) as compared to $12,831,985 (38% of total revenue) for 2025. For further discussion of revenue and gross profit see the “Results by Segment” discussion and analysis that follows.

Previous wording

General and administrative (“G&A”) expenses on a consolidated basis decreased to $7,419,068 for 2026 as compared to $7,723,959 for 2025. An increase in employee costs of approximately $211,000 from 2025 to 2026 was more than offset by a decrease in professional fees and reductions in various other expenses.

Current wording

General and administrative (“G&A”) expenses on a consolidated basis decreased to $7,243,022 for 2026 as compared to $7,580,238 for 2025. The decrease was primarily due to a decrease in employee costs of approximately $206,000 from 2025 to 2026, as well as slight decreases in various other expenses.

Previous wording

The bulk segment contributed $2,604,560 and $2,481,546 to our income from operations for 2026 and 2025, respectively.

Current wording

The bulk segment contributed $2,871,669 and $2,141,159 to our income from operations for 2026 and 2025, respectively.

Previous wording

Bulk segment G&A expenses also remained relatively consistent at $404,223 for 2026 as compared to $346,081 for 2025.

Current wording

Bulk segment G&A expenses also remained relatively consistent at $340,147 for 2026 as compared to $394,750 for 2025.

Previous wording

In June 2023, we (through our subsidiary Kalaeloa Desalco) executed a contract with the Honolulu Board of Water Supply (“BWS”) to construct and operate a 1.7 million gallons per day seawater reverse osmosis desalination plant in Oahu, Hawaii, and since that time we have been engaged in the design and development phase for construction of the plant. We have achieved major project milestones under this phase of the project, (i) including successful pilot plant testing, (ii) receipt of confirmation from BWS that we are able to produce water that is a “reasonable match” to the quality of BWS’s current water supply and that we are able to produce water that causes “no detrimental impact” to the BWS water system or their customers’ assets, and (iii) completion of the plant design.

Current wording

In June 2023, we (through our subsidiary Kalaeloa Desalco) executed a contract with the Honolulu Board of Water Supply (“BWS”) to construct and operate a 1.7 million gallons per day seawater reverse osmosis desalination plant in Oahu, Hawaii, and since that time we have been engaged in the design and development phase for construction of the plant. We have achieved major project milestones under this phase of the project, including (i) successful pilot plant testing, (ii) receipt of confirmation from BWS that we are able to produce water that is a “reasonable match” to the quality of BWS’s current water supply and that we are able to produce water that causes “no detrimental impact” to the BWS water system or their customers’ assets, and (iii) completion of the plant design.

Previous wording

At the time of the filing of this Quarterly Report on Form 10-Q, Kalaeloa Desalco is continuing to advance the permitting process, respond to regulatory inquiries and coordinate with the BWS to mitigate project schedule impacts. Kalaeloa Desalco also is evaluating potential adjustments to sequencing and procurement activities designed to reduce the effect of the delays on the overall project economics. Although we do not currently expect the permitting delays to result in a material adverse effect on our consolidated financial position, the deferral of construction activities has shifted anticipated revenue recognition and associated cash flows related to the Hawaii desalination plant project into future periods. We will continue to assess the impact of these developments on our estimates of total project costs, timing of performance obligations and variable consideration, and will update our disclosures as appropriate in future periodic or current reports.

Current wording

Although we do not currently expect the permitting delays to result in a material adverse effect on our consolidated financial position, the deferral of construction activities has shifted anticipated revenue recognition and associated cash flows related to the Hawaii desalination plant project into future periods. We will continue to assess the impact of these developments on our estimates of total project costs, timing of performance obligations and variable consideration, and will update our disclosures as appropriate in future periodic or current reports.

Previous wording

Manufacturing gross profit decreased to $148,141 (11% of manufacturing revenue) for 2026 as compared to $1,756,990 (30% of manufacturing revenue) for 2025 due to the decrease in revenue.

Current wording

Manufacturing gross profit decreased to $997,569 (37% of manufacturing revenue) for 2026 as compared to $2,042,489 (39% of manufacturing revenue) for 2025 due to the decrease in revenue.

Previous wording

Revenue generated by retail water operations decreased to $8,577,058 in 2026 from $9,411,342 in 2025 due to a 10.2% decrease in the volume of water sold. The decrease in the volume of water sold in 2026 as compared to 2025 is attributable to significantly greater rainfall on Grand Cayman in 2026, as 2025 rainfall was well below historical norms.

Current wording

Revenue generated by retail water operations decreased to $17,238,005 in 2026 from $18,049,368 in 2025 due to a 6.3% decrease in the volume of water sold. The decrease in the volume of water sold in 2026 as compared to 2025 is attributable to significantly greater rainfall on Grand Cayman in 2026, as 2025 rainfall was well below historical norms.

Previous wording

As a result of the revenue decrease, retail segment gross profit decreased in both total dollars and as a percentage of revenue to $4,934,901 (58% of retail revenue) for 2026 as compared to $5,705,279 (61% of retail revenue) for 2025.

Current wording

As a result of the decrease in revenue, retail segment gross profit decreased in total dollars and as a percentage of revenue to $9,789,878 (57% of retail revenue) for 2026 as compared to $10,567,547 (59% of retail revenue) for 2025.

Previous wording

Gross profit for the services segment increased to $2,824,188 (25% of services revenue) in 2026 from $2,016,391 (20% of services revenue) in 2025 due to the increase in O&M revenue.

Current wording

Gross profit for the services segment decreased to $4,723,215 (21% of services revenue) in 2026 from $5,407,710 (25% of services revenue) in 2025 due to the decrease in O&M revenue.

Previous wording

Manufacturing revenue decreased to $1,400,529 for 2026, as compared to $5,814,059 for 2025. The decrease in manufacturing revenue for 2026 resulted from a decrease in the total dollar amount of new purchase orders and, to a lesser extent, the timing of the receipt and the commencement of work on these new orders. We believe, based on current projections, that manufacturing revenue for the full 2026 fiscal year will be less than the manufacturing revenue generated for the 2025 fiscal year.

Current wording

Manufacturing revenue decreased to $4,090,311 for 2026, as compared to $11,044,094 for 2025. The decrease in manufacturing revenue for 2026 resulted from a decrease in the total dollar amount of new purchase orders. We believe, based on current projections, that manufacturing revenue for the full 2026 fiscal year will be less than the manufacturing revenue generated for the 2025 fiscal year.

Previous wording

G&A expenses for the manufacturing segment decreased to $485,908 for 2026 as compared to $664,078 for 2025 due primarily to a decrease in the provision for credit losses.

Current wording

G&A expenses for the manufacturing segment decreased to $1,004,980 for 2026 as compared to $1,194,630 for 2025 due primarily to a decrease in the provision for credit losses.

Previous wording

Property, plant and equipment, net, increased by approximately $1.6 million primarily due to a transfer from construction in progress upon the completion of one of the CW-Bahamas’ Cat Island plants.

Current wording

Property, plant and equipment, net, increased by approximately $4.3 million primarily due to a transfer from construction in progress upon the completion of the CW-Bahamas’ Cat Island plants.

Previous wording

Our projected liquidity requirements for the balance of 2026 include capital expenditures for our existing operations of approximately $8.6 million. We paid approximately $2.3 million for dividends in April 2026. Our liquidity requirements may also include future quarterly dividends, if such dividends are declared by our Board.

Current wording

Our projected liquidity requirements for the balance of 2026 include capital expenditures for our existing operations of approximately $4.8 million. We paid approximately $2.3 million for dividends in July 2026. Our liquidity requirements may also include future quarterly dividends, if such dividends are declared by our Board.

Previous wording

As of March 31, 2026, we had cash and cash equivalents of $126.3 million and working capital of $144.3 million.

Current wording

As of June 30, 2026, we had cash and cash equivalents of $132.6 million and working capital of $144.6 million.

Previous wording

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $23.9 million and $20.7 million as of March 31, 2026 and December 31, 2025, respectively. Approximately 75% and 71% of the accounts receivable balances were delinquent as of those dates, respectively. The delay in collecting these accounts receivable has adversely impacted the liquidity of this subsidiary.

Current wording

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $18.8 million and $20.7 million as of June 30, 2026 and December 31, 2025, respectively. Approximately 64% and 71% of the accounts receivable balances were delinquent as of those dates, respectively. The delay in collecting these accounts receivable has adversely impacted the liquidity of this subsidiary.

Previous wording

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 April 2025. Based upon our review of this Moody’s correspondence, we continue to believe that no material allowance for credit losses is required for CW-Bahamas’ accounts receivable from the WSC.

Current wording

In a report dated April 30, 2026, Moody’s Investor Services (“Moody’s”) upgraded The Bahamas’ long-term issuer and senior unsecured ratings to Ba3 from B1. Moody’s also raised The Bahamas’ local currency ceiling to Baa2 from Baa3

Previous wording

Discussion of Cash Flows for the Three Months Ended March 31, 2026

Current wording

Discussion of Cash Flows for the Six Months Ended June 30, 2026

Previous wording

Our cash and cash equivalents increased to $126,331,873 as of March 31, 2026 from $123,788,390 as of December 31, 2025.

Current wording

Our cash and cash equivalents increased to $132,629,006 as of June 30, 2026 from $123,788,390 as of December 31, 2025.

Previous wording

Net cash provided by our operating activities was $6,543,681. This net cash reflects the net income generated for the three months ended March 31, 2026 of $3,933,564 as adjusted for (i) various items included in the determination of net income that do not affect cash flows during the year; and (ii) changes in the other components of working capital. Significant adjustments included depreciation and amortization of $1,754,705, an increase in accounts receivable of $3,453,459, a decrease in prepaid expenses and other assets of $1,564,843, a decrease in contract assets of $1,996,967, and an increase in contract liabilities of $1,346,535.

Current wording

Net cash provided by our operating activities was $18,571,275. This net cash reflects the net income generated for the six months ended June 30, 2026 of $8,035,569 as adjusted for (i) various items included in the determination of net income that do not affect cash flows during the year; and (ii) changes in the other components of working capital. Significant adjustments included depreciation and amortization of $3,532,983, a decrease in accounts receivable of $4,173,373, a decrease in prepaid expenses and other assets of $890,957, and an increase in accounts payable, accrued expenses and other current liabilities of $1,409,231.

Previous wording

Net cash used in our investing activities was $1,682,253 primarily for additions to property, plant and equipment and construction in progress.

Current wording

Net cash used in our investing activities was $5,133,145 primarily for additions to property, plant and equipment and construction in progress.

Previous wording

Net cash used by our financing activities was $2,311,849, almost all of which related to the payment of dividends.

Current wording

Net cash used by our financing activities was $4,565,343, almost all of which related to the payment of dividends.

Previous wording

Our contracts to supply water to the WSC from our Blue Hills and Windsor plants require us to guarantee delivery of a minimum quantity of water per week. If the WSC requires the water andwe do not meet this minimum, we are 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 us under the contract. The Blue Hills contract expires in 2032 and requires us to deliver 63.0 million gallons of water each week. The Windsor contract expires in 2033 and requires us to deliver 16.8 million gallons of water each week. We have been in compliance with the performance guarantees under these contracts for all periods since the inception of the contracts.

Current wording

Our contracts to supply water to the WSC from our Blue Hills, Windsor and Cat Island plants require us to guarantee delivery of a minimum quantity of water per week. If the WSC requires the water andwe do not meet this minimum, we are 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 us under the contracts. The Blue Hills contract expires in 2032 and requires us to deliver 63.0 million gallons of water each week. The Windsor contract expires in 2033 and requires us to deliver 16.8 million gallons of water each week. We have been in compliance with the performance guarantees under these contracts for all periods since the inception of the contracts. The Cat Island contract expires in 2041 and requires the two plants located in Bennett’s Harbour and New Bight to deliver 504,000 gallons of water each week per plant.

Previous wording

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 amended ASU is effective on a prospective basis for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are currently evaluating the impact of this guidance on our financial statements.

Current wording

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. We are currently evaluating the impact of this guidance on our financial statements.

Previous wording

Under the terms of our bulk water sales agreements in The Cayman Islands, The Bahamas and the British Virgin Islands, our water rates are automatically adjusted for inflation on an annual basis. Therefore, the impact of inflation on our gross profit from these revenue sources, measured in consistent dollars, historically has not been material. However, while we have received annual inflation adjustments for the rates we charge under our bulk water agreements, we have not applied to increase the water rates for Cayman Water since January 2018 (despite the inflation that has occurred since that date) due to the delayed resolution of our negotiations with OfReg for a new retail license. While we believe that we are entitled to apply to OfReg for future rate adjustments under the terms of the February 18, 2025 concession agreement with the Cayman Islands government, the denial by OfReg of such application or approval of an increase that is less than the increase in our costs could adversely affect the profitability of our retail segment. Furthermore, our manufacturing segment has in the past been adversely impacted by significant increases in raw material costs and our manufacturing and services segments could suffer similar adverse impacts in the future.

Current wording

Under the terms of our bulk water sales agreements in the Cayman Islands, The Bahamas and the British Virgin Islands, our water rates are automatically adjusted for inflation on an annual basis. Therefore, the impact of inflation on our gross profit from these revenue sources, measured in consistent dollars, historically has not been material. We had not increased the water rates for Cayman Water since January 2018 (despite the inflation that has occurred since that date) due to the pendency of our negotiations with OfReg for a new retail license. Under the License issued by OfReg in June 2026 and effective as of the License Date of August 1, 2026, Cayman Water’s base rates are subject to annual adjustment beginning each July 1 following the License Date in accordance with the rate cap adjustment mechanism described in the License, subject to OfReg verification and approval requirements. Denial by OfReg of any requested rate adjustment, or approval of an adjustment that is less than the increase in our costs, could adversely affect the profitability of our retail segment. Furthermore, our manufacturing segment has in the past been adversely impacted by significant increases in raw material costs, and our manufacturing and services segments could suffer similar adverse impacts in the future.