Back to GetFilings.com

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)

Commission File Number: 0-25248

CONSOLIDATED WATER CO. LTD.

Registrant’s Telephone number, including area code: (345) 945-4277

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]      No [   ]

As at August 2, 2002, there were 3,981,464 of the registrant’s ordinary shares of common stock, with CI$ 1.00 par value, outstanding.

Table of Contents

EXCHANGE RATES

Unless otherwise indicated, all dollar amounts are in United States Dollars and references to “$”, “U.S.”, or “U.S. $” are to United States Dollars.

The official fixed exchange rate for conversion of CI$ into U.S.$, as determined by the Cayman Islands Monetary Authority, has been fixed since April 1974 at U.S. $1.20 per CI$1.00.

The official fixed exchange rate for conversion of BZE$ into U.S.$, as determined by the Central Bank of Belize, has been fixed since 1976 at U.S.$ 0.50 per BZE$ 1.00.

The official fixed exchange rate for conversion of BAH$ into U.S.$, as determined by the Central Bank of The Bahamas, has been fixed since 1973 at U.S. $1.00 per BAH $1.00.

Table of Contents

TABLE OF CONTENTS

Forward-Looking Statements

This Form 10-Q for Consolidated Water Co. Ltd. (the “Company”) includes statements that may constitute “forward-looking” statements, usually containing the words “believe,” “estimate,” “project,” “intend,” “expect” or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company’s products and services in the marketplace, changes in its relationship with the governments of the jurisdictions in which it operates, the ability to successfully secure contracts for water projects in other countries, the ability to develop and operate such projects profitably, and other risks detailed in the Company’s other periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this Form 10-Q.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED WATER CO. LTD.

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

1

Table of Contents

CONSOLIDATED WATER CO. LTD.

(Expressed in United States Dollars)

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

2

Table of Contents

CONSOLIDATED WATER CO. LTD.

(Expressed in United States Dollars)

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

3

Table of Contents

CONSOLIDATED WATER CO. LTD.

The accompanying financial statements should be read in conjunction with the 2001 Annual Report for the Company on Form 10-K. The interim condensed consolidated financial statements are unaudited, but in the opinion of management, reflect all adjustments necessary for a fair presentation of results for such periods. All adjustments are of a normal recurring nature.

1. Principal Activity and Status

Consolidated Water Co. Ltd. (the “Company”) and its wholly-owned subsidiaries (together the “Group”) use reverse osmosis technology to produce fresh water from seawater. The Group processes and supplies water to its customers in Grand Cayman, Cayman Islands; Ambergris Caye, Belize; and South Bimini, Bahamas. The Company’s exclusive license in Grand Cayman allows it to process and supply water in certain areas of Grand Cayman for a period of twenty years from July 11, 1990 in addition to having a right of first refusal on the extension or renewal thereof. The Group also has a contract with Belize Water Services Ltd. (“BWSL”) of Belize, formally known as Water and Sewerage Authority of Belize, to supply water to BWSL in Ambergris Caye expiring in 2011. At the expiry of the contract, BWSL may at its option extend the term of the agreement or purchase the plant outright. In addition, on July 11, 2001 the Company commenced supplying water under a ten year agreement to South Bimini International Ltd., a Bahamian company that owns and operates resort properties on South Bimini Island, Bahamas. The base price of water supplied by the Group, and adjustments thereto, are determined by the terms of the license and contracts, which provides for adjustments based upon the movement in the government price indices specified in the license and contracts respectively, as well as monthly adjustments for changes in the cost of energy.

2. Purchase of Assets

On February 1, 2002, the Company acquired the reverse osmosis plant that was previously owned and operated by Cayman Hotel and Golf Inc., a company which owns and operates the Hyatt Hotel and Britannia Golf Course and developed the Britannia condominiums and villas. The acquisition has been accounted for by the purchase method. The total purchase price of $1,500,000 was paid in cash. The fair value of assets acquired was $1,500,000 which comprised solely of property, plant and equipment representing the reverse osmosis plant.

3. Segment Information

Under FAS 131 `Disclosure about Segments of an Enterprise and Related Information’ the supply of water to Cayman Islands, Belize and Bahamas are considered by management as separate business segments. The basis of measurement of segment information is the same as that adopted for the condensed financial statements.

4

Table of Contents

CONSOLIDATED WATER CO. LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Segment Information (Continued)

As at June 30 and for the three months then ended

As at June 30 and for the six months then ended

5

Table of Contents

CONSOLIDATED WATER CO. LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4. Contingencies

The license that the Company has with the government of the Cayman Islands (the “Government”) requires it to obtain approval from the Government for an issuance or transfer of shares which (a) exceeds 5% of the issued shares of our company, or (b) would, upon registration, result in any shareholder owning more than 5% of the issued share capital of the Company.

By letter dated May 3, 2002, the Government of the Cayman Islands advised the Company that the 5% ownership and transfer restrictions imposed in the Licence will be removed.

Under the provisions of the Land Holding Companies Share Transfer Tax Law of the Cayman Islands, tax is payable on the transfer of shares in the Company. Prior to becoming quoted on Nasdaq, the Company paid this tax on private share transfers. The Company has never paid tax on transfers of its publicly traded shares. Management believes that the likelihood that Government will seek to collect this tax on transfers of the Company’s publicly traded shares is remote. Management, therefore, has not provided for a share transfer tax liability in these financial statements.

5. Impact of Recent Accounting Pronouncements

During the three months ended June 30, 2002, the Financial Accounting Standards Board issued two standards. A summary of these standards is given below:

Statement of Financial Accounting Standard No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB No. 14, and Technical Corrections” (FAS 145) rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and amends FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers and amends FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. It requires that gains and losses from extinguishments of debt should be classified as extraor