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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transaction period from  to
 Commission File Number: 0-25248
 CONSOLIDATED WATER CO. LTD.
  CAYMAN ISLANDS
    
    N/A(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)Regatta Office Park 
Windward Three, 4th Floor, West Bay Road 
P.O. Box 1114
Grand Cayman KY1-1102Cayman Islands
    
    N/A(Address of principal executive offices)
    
    (Zip Code)
 (345) 945-4277
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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TABLE OF CONTENTS
 Description

PagePART I
    
    FINANCIAL INFORMATION

4Item 1
    
    Financial Statements

4Condensed Consolidated Balance Sheets as of September 30, 2008 (Unaudited) and December 31, 2007

4Condensed Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2008 and 2007

5Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2008 and 2007

6Notes to Condensed Consolidated Financial Statements (Unaudited)

7Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations

14Item 3
    
    Quantitative and Qualitative Disclosures about Market Risk

27Item 4
    
    Controls and Procedures

27PART II
    
    OTHER INFORMATION

28Item 1
    
    Legal Proceedings

28Item 1A
    
    Risk Factors

28Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds

30Item 6
    
    Exhibits

30SIGNATURES

31EX-10.1EX-31.1EX-31.2EX-32.1EX-32.2
  2




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NOTE REGARDING CURRENCY AND EXCHANGE RATES
       3




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 CONSOLIDATED WATER CO. LTD.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    34,192,556
    
    
    $
    38,529,383Accounts receivable, net
    
    
    16,419,721
    
    
    
    9,828,529Inventory
    
    
    1,882,775
    
    
    
    1,381,225Prepaid expenses and other current assets
    
    
    2,391,155
    
    
    
    1,411,231Current portion of loans receivable
    
    
    817,568
    
    
    
    947,854Total current assets
    
    
    55,703,775
    
    
    
    52,098,222Property, plant and equipment, net
    
    
    58,995,549
    
    
    
    59,981,514Construction in progress
    
    
    6,132,728
    
    
    
    4,989,779Costs and estimated earnings in excess of billings  construction project
    
    
    4,127,930
    
    
    
    Inventory non-current
    
    
    2,574,385
    
    
    
    2,268,766Loans receivable
    
    
    1,738,345
    
    
    
    2,329,262Investment in and loan to affiliate
    
    
    15,291,226
    
    
    
    17,501,848Intangible assets, net
    
    
    2,302,433
    
    
    
    2,881,900Goodwill
    
    
    3,587,754
    
    
    
    3,587,754Other assets
    
    
    3,582,557
    
    
    
    3,691,839Total assets
    
    $
    154,036,682
    
    
    $
    149,330,884LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable and other current liabilities
    
    $
    7,346,692
    
    
    $
    4,996,728Dividends payable
    
    
    1,005,880
    
    
    
    60,719Current portion of long term debt
    
    
    1,438,694
    
    
    
    1,142,255Total current liabilities
    
    
    9,791,266
    
    
    
    6,199,702Long term debt
    
    
    21,213,101
    
    
    
    22,358,338Other liabilities
    
    
    447,801
    
    
    
    476,136Minority interest in subsidiary
    
    
    1,325,769
    
    
    
    1,392,254Total liabilities
    
    
    32,777,937
    
    
    
    30,426,430Stockholders equityControlling interests:Redeemable preferred stock, $0.60 par value. Authorized 200,000
shares; issued and outstanding 17,405 and 21,082 shares,
respectively
    
    
    10,444
    
    
    
    12,650Class A common stock, $0.60 par value. Authorized 24,655,000
shares; issued
and outstanding 14,524,134 and 14,507,486 shares,
respectively
    
    
    8,714,481
    
    
    
    8,704,492Class B common stock, $0.60 par value. Authorized 145,000 shares;
none issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    80,363,091
    
    
    
    79,771,093Retained earnings
    
    
    31,584,762
    
    
    
    29,853,720120,672,778
    
    
    
    118,341,955Non-controlling interests
    
    
    585,967
    
    
    
    562,499Total stockholders equity
    
    
    121,258,745
    
    
    
    118,904,454Total liabilities and stockholders equity
    
    $
    154,036,682
    
    
    $
    149,330,884
  4




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CONSOLIDATED WATER CO. LTD.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (UNAUDITED)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Retail water revenues
    
    $
    4,727,590
    
    
    $
    4,668,974
    
    
    $
    14,931,327
    
    
    $
    15,052,499Bulk water revenues
    
    
    7,125,533
    
    
    
    5,416,329
    
    
    
    20,229,266
    
    
    
    16,016,757Services revenues
    
    
    3,368,660
    
    
    
    1,834,160
    
    
    
    8,834,766
    
    
    
    5,549,198Total revenues
    
    
    15,221,783
    
    
    
    11,919,463
    
    
    
    43,995,359
    
    
    
    36,618,454Cost of retail revenues
    
    
    1,756,313
    
    
    
    1,785,123
    
    
    
    5,285,310
    
    
    
    5,535,055Cost of bulk revenues
    
    
    6,091,494
    
    
    
    4,590,947
    
    
    
    17,201,253
    
    
    
    13,032,456Cost of services revenues
    
    
    2,748,715
    
    
    
    1,223,118
    
    
    
    7,440,300
    
    
    
    3,943,017Total cost of revenues
    
    
    10,596,522
    
    
    
    7,599,188
    
    
    
    29,926,863
    
    
    
    22,510,528Gross profit
    
    
    4,625,261
    
    
    
    4,320,275
    
    
    
    14,068,496
    
    
    
    14,107,926General and administrative expenses
    
    
    2,128,654
    
    
    
    2,467,534
    
    
    
    6,754,902
    
    
    
    7,218,788Income from operations
    
    
    2,496,607
    
    
    
    1,852,741
    
    
    
    7,313,594
    
    
    
    6,889,138Other income (expense):Interest income
    
    
    326,880
    
    
    
    481,652
    
    
    
    1,097,120
    
    
    
    1,409,861Interest expense
    
    
    (436,077
    )
    
    
    (456,605
    )
    
    
    (1,325,184
    )
    
    
    (1,404,600
    )Profit sharing in income from affiliate
    
    
    
    
    
    
    325,171
    
    
    
    
    
    
    
    653,806Other income
    
    
    32,767
    
    
    
    26,774
    
    
    
    77,534
    
    
    
    117,655Equity in earnings (loss) of affiliate
    
    
    (639,546
    )
    
    
    474,407
    
    
    
    (1,772,570
    )
    
    
    1,361,077Other income (expense), net
    
    
    (715,976
    )
    
    
    851,399
    
    
    
    (1,923,100
    )
    
    
    2,137,799Income before non-controlling and minority interests
    
    
    1,780,631
    
    
    
    2,704,140
    
    
    
    5,390,494
    
    
    
    9,026,937Income (loss) attributable to non-controlling and
minority interests
    
    
    614
    
    
    
    194,976
    
    
    
    (43,019
    )
    
    
    308,755Net income
    
    $
    1,780,017
    
    
    $
    2,509,164
    
    
    $
    5,433,513
    
    
    $
    8,718,182Basic earnings per common share
    
    $
    0.12
    
    
    $
    0.17
    
    
    $
    0.37
    
    
    
    0.61Diluted earnings per common share
    
    $
    0.12
    
    
    $
    0.17
    
    
    $
    0.37
    
    
    
    0.60Dividends declared per common share
    
    $
    0.065
    
    
    $
    0.065
    
    
    $
    0.195
    
    
    
    0.195Weighted average number of common shares used in
the determination of:Basic earnings per share
    
    
    14,523,016
    
    
    
    14,495,546
    
    
    
    14,516,869
    
    
    
    14,370,522Diluted earnings per share
    
    
    14,543,485
    
    
    
    14,530,119
    
    
    
    14,538,785
    
    
    
    14,478,249
  5




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CONSOLIDATED WATER CO. LTD.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Nine Months Ended September 30,2008
    
    
    2007Net cash flows provided by operating activities
    
    $
    3,424,074
    
    
    $
    8,299,257Cash flows provided by (used in) investing activitiesPurchases of property, plant and equipment and construction in progress
    
    
    (5,144,540
    )
    
    
    (5,513,530
    )Distribution of income from affiliate
    
    
    
    
    
    
    189,375Collections on loans receivable
    
    
    1,096,202
    
    
    
    781,861Net cash used in investing activities
    
    
    (4,048,337
    )
    
    
    (4,542,294
    )Cash flows provided by (used in) financing activitiesDividends paid
    
    
    (2,757,307
    )
    
    
    (2,774,330
    )Proceeds from issuance of preferred stock
    
    
    
    
    
    
    10,519Proceeds from exercises of stock options
    
    
    
    
    
    
    3,535,042Principal repayments of long term debt
    
    
    (955,256
    )
    
    
    (992,968
    )Net cash used in financing activities
    
    
    (3,712,563
    )
    
    
    (221,737
    )Net (decrease) increase in cash and cash equivalents
    
    
    (4,336,827
    )
    
    
    3,535,226Cash and cash equivalents at beginning of period
    
    
    38,529,383
    
    
    
    37,310,699Cash and cash equivalents at end of period
    
    $
    34,192,556
    
    
    $
    40,845,925Interest paid in cash
    
    $
    1,185,303
    
    
    $
    1,439,245Non-cash investing and financing activitiesNote received for plant facility sold
    
    $
    
    
    
    $
    1,738,000Conversion of 5,451 (2007: 5,698) redeemable preferred shares into 5,451
(2007: 5,698) common shares
    
    $
    3,271
    
    
    $
    3,419Issuance of 11,197 (2007: 5,714) common shares to executive management for services
rendered
    
    $
    279,795
    
    
    $
    144,927Issuance of 1,774 (2007: 2,600) preferred shares for services rendered
    
    $
    30,158
    
    
    $
    47,856
  6




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CONSOLIDATED WATER CO. LTD.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 1. Basis of presentation
     2. Stock-based compensation
    Share-Based Payments
  7




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WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual Life
    
    
    IntrinsicOptions
    
    
    Exercise Price
    
    
    (Years)
    
    
    Value (1)Outstanding as of beginning of period
    
    
    21,465
    
    
    $
    19.50Granted
    
    
    104,584
    
    
    
    29.04Exercised
    
    
    
    
    
    
    Forfeited and expired
    
    
    (1,774
    )
    
    
    23.62Outstanding as of September 30, 2008
    
    
    124,275
    
    
    $
    27.42
    
    
    
    3.72
    
    
    $
    39,855Exercisable as of September 30, 2008
    
    
    6,160
    
    
    $
    10.55
    
    
    
    0.05
    
    
    $
    39,855
 
 (1)
    
    The intrinsic value of a stock option represents the amount by which the fair value of the
underlying stock, measured by reference to the closing price of the ordinary shares of $17.02
in the NASDAQ Global Select Market on September 30, 2008, exceeds the exercise price of the
option.   8




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3. Segment information
  Three Months Ended September 30, 2008Retail
    
    
    Bulk
    
    
    Services
    
    
    TotalRevenues
    
    $
    4,727,590
    
    
    $
    7,125,533
    
    
    $
    3,368,660
    
    
    $
    15,221,783Cost of revenues
    
    
    1,756,313
    
    
    
    6,091,494
    
    
    
    2,748,715
    
    
    
    10,596,522Gross profit
    
    
    2,971,277
    
    
    
    1,034,039
    
    
    
    619,945
    
    
    
    4,625,261General and administrative expenses
    
    
    1,704,207
    
    
    
    353,355
    
    
    
    71,092
    
    
    
    2,128,654Income from operations
    
    
    1,267,070
    
    
    
    680,684
    
    
    
    548,853
    
    
    
    2,496,607Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (715,976
    )Income before non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,780,631Income (loss) attributable to non-controlling and
minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    614Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,780,017
 Nine Months Ended September 30, 2008Retail
    
    
    Bulk
    
    
    Services
    
    
    TotalRevenues
    
    $
    14,931,327
    
    
    $
    20,229,266
    
    
    $
    8,834,766
    
    
    $
    43,995,359Cost of revenues
    
    
    5,285,310
    
    
    
    17,201,253
    
    
    
    7,440,300
    
    
    
    29,926,863Gross profit
    
    
    9,646,017
    
    
    
    3,028,013
    
    
    
    1,394,466
    
    
    
    14,068,496General and administrative expenses
    
    
    5,482,742
    
    
    
    1,054,660
    
    
    
    217,500
    
    
    
    6,754,902Income from operations
    
    
    4,163,275
    
    
    
    1,973,353
    
    
    
    1,176,966
    
    
    
    7,313,594Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,923,100
    )Income before non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,390,494Income (loss) attributable to non-controlling and
minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,019
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,433,513As of September 30, 2008:Property plant and equipment, net
    
    $
    22,830,904
    
    
    $
    34,296,185
    
    
    $
    1,868,460
    
    
    $
    58,995,549Construction in progress
    
    
    4,120,195
    
    
    
    2,012,533
    
    
    
    
    
    
    
    6,132,728Total assets
    
    
    85,233,947
    
    
    
    62,789,077
    
    
    
    6,013,658
    
    
    
    154,036,682
 9




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Three Months Ended September 30, 2007Retail
    
    
    Bulk
    
    
    Services
    
    
    TotalRevenues
    
    $
    4,668,974
    
    
    $
    5,416,329
    
    
    $
    1,834,160
    
    
    $
    11,919,463Cost of revenues
    
    
    1,785,123
    
    
    
    4,590,947
    
    
    
    1,223,118
    
    
    
    7,599,188Gross profit
    
    
    2,883,851
    
    
    
    825,382
    
    
    
    611,042
    
    
    
    4,320,275General and administrative expenses
    
    
    2,049,009
    
    
    
    336,501
    
    
    
    82,024
    
    
    
    2,467,534Income from operations
    
    
    834,842
    
    
    
    488,881
    
    
    
    529,018
    
    
    
    1,852,741Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    851,399Income before non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,704,140Income (loss) attributable to non-controlling and
minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,976Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,509,164
 Nine Months Ended September 30, 2007Retail
    
    
    Bulk
    
    
    Services
    
    
    TotalRevenues
    
    $
    15,052,499
    
    
    $
    16,016,757
    
    
    $
    5,549,198
    
    
    $
    36,618,454Cost of revenues
    
    
    5,535,055
    
    
    
    13,032,456
    
    
    
    3,943,017
    
    
    
    22,510,528Gross profit
    
    
    9,517,444
    
    
    
    2,984,301
    
    
    
    1,606,181
    
    
    
    14,107,926General and administrative expenses
    
    
    6,145,586
    
    
    
    919,991
    
    
    
    153,211
    
    
    
    7,218,788Income from operations
    
    
    3,371,858
    
    
    
    2,064,310
    
    
    
    1,452,970
    
    
    
    6,889,138Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,137,799Income before non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,026,937Income (loss) attributable to non-controlling and
minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    308,755Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,718,182As of September 30, 2007:Property plant and equipment, net
    
    $
    21,858,627
    
    
    $
    35,515,586
    
    
    $
    2,333,499
    
    
    $
    59,707,712Construction in progress
    
    
    3,637,027
    
    
    
    787,335
    
    
    
    
    
    
    
    4,424,362Total assets
    
    
    86,831,873
    
    
    
    53,394,081
    
    
    
    5,708,944
    
    
    
    145,934,898
 4. Earnings per share
  10




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    1,780,017
    
    
    $
    2,509,164
    
    
    $
    5,433,513
    
    
    $
    8,718,182Less:Dividends declared and earnings attributable to
preferred shares
    
    
    (1,175
    )
    
    
    (3,479
    )
    
    
    (4,613
    )
    
    
    (5,178
    )Net income available to holders of common
shares in the determination of basic and
diluted earnings per share
    
    $
    1,778,842
    
    
    $
    2,505,685
    
    
    $
    5,428,900
    
    
    $
    8,713,004Weighted average number of common shares used
in the determination of basic earnings per
common share
    
    
    14,523,016
    
    
    
    14,495,546
    
    
    
    14,516,869
    
    
    
    14,370,522Plus:Weighted average number of preferred shares
outstanding during the period
    
    
    18,320
    
    
    
    21,418
    
    
    
    19,714
    
    
    
    23,083Potential dilutive effect of unexercised options
    
    
    2,149
    
    
    
    13,155
    
    
    
    2,202
    
    
    
    84,644Weighted average number of common shares used
in the determination of diluted earnings per
common share
    
    
    14,543,485
    
    
    
    14,530,119
    
    
    
    14,538,785
    
    
    
    14,478,249
 5. Impact of recent accounting pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
  Noncontrolling Interests in Consolidated Financial
Statements .
 11




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Determination of the Useful Life of Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.
 Determining
Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities
 Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active
 6. Investment in and loan to affiliate
  September 30,
    
    
    December 31,2008
    
    
    2007Equity investment
    
    $
    12,791,226
    
    
    $
    14,626,848Loan receivable  plant construction
    
    
    2,500,000
    
    
    
    2,875,000$
    15,291,226
    
    
    $
    17,501,848
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Water revenues  accrual method
    
    $
    2,577,168
    
    
    $
    2,388,662
    
    
    $
    7,825,277
    
    
    $
    7,018,470Adjustment for cash method
(see discussion below)
    
    
    (2,541,875
    )
    
    
    
    
    
    
    (7,720,662
    )
    
    
    Adjusted water revenues
    
    
    35,293
    
    
    
    2,388,662
    
    
    
    104,615
    
    
    
    7,018,470Gross profit (loss)
    
    
    (1,072,123
    )
    
    
    1,641,872
    
    
    
    (3,028,817
    )
    
    
    4,942,150Income (loss) from operations
    
    
    (1,314,412
    )
    
    
    1,365,015
    
    
    
    (3,829,172
    )
    
    
    4,098,902Net income (loss)
    
    $
    (1,354,888
    )
    
    $
    1,088,120
    
    
    $
    (3,957,780
    )
    
    $
    3,179,970
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Baughers Bay plant dispute:
       13




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ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Cautionary Note Regarding Forward-Looking Statements
  14




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Critical Accounting Estimates
   
    
    the nature of these estimates or assumptions is material due to the levels of
subjectivity and judgment necessary to account for highly uncertain matters or the
susceptibility of such matters to change; and
    
    the impact of the estimates and assumptions on financial condition and results of
operations is material.
  Valuation of Equity Investment in Affiliate
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Goodwill and other intangible assets.
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Plant construction revenue and cost of plant construction revenue.
  RESULTS OF OPERATIONS
  Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
      17




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OC-BVI Contract Dispute
  Retail Segment:
     Bulk Segment:
    18




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Services Segment:
     Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
       19




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OC-BVI
Contract Dispute
  Retail Segment:
     Bulk Segment:
     20




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Services Segment:
     LIQUIDITY AND CAPITAL RESOURCES
 Overview
     21




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Cash Flows for the Nine Months Ended September 30, 2008
  Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Financial Position
      Borrowings Outstanding
  5.95% Secured Bonds
  22




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CW-Bahamas Series A Bonds
  CW-Bahamas Credit Facility
   Material Commitments, Expenditures and Contingencies
 OC-BVI Contract Dispute
     23




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Revenue
Recognition
 
    
    Persuasive evidence of an arrangement exists.
    
    Delivery has occurred or services have been rendered.
    
    The sellers price to the buyer is fixed and determinable; and
    
    Collectibility is reasonably assured.
  24




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CW-Bahamas Liquidity
  25




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CW-Bahamas Performance Bonds
  CW-Bermuda Financing
   Frank Sound Contract
  Impact of Hurricane Paloma
  Dividends
  26




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Dividend Reinvestment and Common Stock Purchase Plan
  Impact of Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  27




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
 Our business faces significant risks. These risks include those disclosed in Item 1A of our Annual
Report on Form 10-K for the fiscal year ended December 31, 2007 as supplemented by the additional
risk factors included below. If any of the events or circumstances described in the referenced
risks actually occur, our business, financial condition or results of operations could be
materially adversely affected and such events or circumstances could cause our actual results to
differ materially from the results contemplated by the forward-looking statements contained in this
report. These risks should be read in conjunction with the other information set forth in this
Quarterly Report as well as in our Annual Report on Form 10-K for the year ended December 31, 2007
and in our other periodic reports on Form 10-Q and Form 8-K .
 The British Virgin Islands government has asserted a purported right of ownership of our affiliate
OC-BVIs Baughers Bay plant. If this right is found to be enforceable and is exercised by the BVI
Government, OC-BVI will lose ownership of the Baughers Bay plant and OC-BVIs water supply
agreement with the BVI Government could be cancelled or renegotiated on less favorable terms.
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If OC-BVI does not obtain a contract with the BVI Government to sell water to be produced at its
Bar Bay plant, it may not be able to recover the cost of its investment in the plant, which could
adversely affect its operations and in turn decrease the value of our investment in OC-BVI.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 6. EXHIBITS
 ExhibitNumber
    
    Exhibit Description10.1
    
    Consolidated Water Co. Ltd. 2008 Equity Incentive Plan31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Chief Financial Officer
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SIGNATURES
  CONSOLIDATED WATER CO. LTD.By:
    /s/ Frederick W. McTaggartFrederick W. McTaggartChief Executive Officer (Principal Executive Officer)By:
    /s/ David W. SasnettDavid W. Sasnett ExecutiveVice President & Chief Financial
Officer (Principal Financial and Accounting Officer)  31