##### Table of Contents



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 1934For the quarterly period ended June 30, 2008ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For 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 KY1-1102
Cayman 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
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




---



##### 



TABLE OF CONTENTS
 Section
    
    
    
    Description
    
    PagePART I
    
    
    
    FINANCIAL INFORMATION
    
    
    4Item 1
    
    Financial Statements
    
    
    4Condensed Consolidated Balance Sheets as of June 30, 2008 (Unaudited) and December 31, 2007
    
    
    4Condensed Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 2008 and 2007
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 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
    
    
    15Item 3
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4
    
    Controls and Procedures
    
    
    27PART II
    
    
    
    OTHER INFORMATION
    
    
    28Item 1A
    
    Risk Factors
    
    
    28Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    29Item 6
    
    Exhibits
    
    
    30SIGNATURES
    
    
    
    
    31EX-10.1 2008 Equity Incentive PlanEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO




---



##### Table of Contents



NOTE REGARDING CURRENCY AND EXCHANGE RATES
       3




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    38,477,824
    
    
    $
    38,529,383Accounts receivable, net
    
    
    13,881,027
    
    
    
    9,828,529Inventory
    
    
    4,239,866
    
    
    
    3,649,991Prepaid expenses and other current assets
    
    
    1,264,401
    
    
    
    1,411,231Current portion of loans receivable
    
    
    860,996
    
    
    
    947,854Total current assets
    
    
    58,724,114
    
    
    
    54,366,988Property, plant and equipment, net
    
    
    58,814,977
    
    
    
    59,981,514Construction in progress
    
    
    5,845,711
    
    
    
    4,989,779Accounts receivable  construction project
    
    
    2,247,349
    
    
    
    Loans receivable
    
    
    1,936,382
    
    
    
    2,329,262Investment in and loan to affiliate
    
    
    15,902,012
    
    
    
    17,501,848Intangible assets, net
    
    
    2,487,570
    
    
    
    2,881,900Goodwill
    
    
    3,587,754
    
    
    
    3,587,754Other assets
    
    
    3,645,696
    
    
    
    3,691,839Total assets
    
    $
    153,191,565
    
    
    $
    149,330,884LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable and other current liabilities
    
    $
    7,126,825
    
    
    $
    4,996,728Dividends payable
    
    
    1,005,972
    
    
    
    60,719Current portion of long term debt
    
    
    1,299,133
    
    
    
    1,142,255Total current liabilities
    
    
    9,431,930
    
    
    
    6,199,702Long term debt
    
    
    21,640,792
    
    
    
    22,358,338Other liabilities
    
    
    464,893
    
    
    
    476,136Minority interest in subsidiary
    
    
    1,345,969
    
    
    
    1,392,254Total liabilities
    
    
    32,883,584
    
    
    
    30,426,430Stockholders equityControlling interests:Redeemable preferred stock, $0.60 par value. Authorized 200,000
shares;
issued and outstanding 21,396 and 21,082 shares, respectively
    
    
    12,839
    
    
    
    12,650Class A common stock, $0.60 par value. Authorized 24,655,000 shares;
issued and outstanding 14,519,888 and 14,507,486 shares,
respectively
    
    
    8,711,933
    
    
    
    8,704,492Class B common stock, $0.60 par value. Authorized 145,000 shares;
none issued or outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    80,268,632
    
    
    
    79,771,093Retained earnings
    
    
    30,749,426
    
    
    
    29,853,720119,742,830
    
    
    
    118,341,955Non-controlling interests
    
    
    565,151
    
    
    
    562,499Total stockholders equity
    
    
    120,307,981
    
    
    
    118,904,454Total liabilities and stockholders equity
    
    $
    153,191,565
    
    
    $
    149,330,884
  4




---



##### Table of Contents



CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Retail water revenues
    
    $
    5,256,669
    
    
    $
    5,279,316
    
    
    $
    10,267,180
    
    
    $
    10,383,525Bulk water revenues
    
    
    6,872,967
    
    
    
    5,372,907
    
    
    
    13,040,292
    
    
    
    10,600,429Services revenues
    
    
    3,908,212
    
    
    
    1,312,157
    
    
    
    5,466,107
    
    
    
    3,715,038Total revenues
    
    
    16,037,848
    
    
    
    11,964,380
    
    
    
    28,773,579
    
    
    
    24,698,992Cost of retail revenues
    
    
    1,810,441
    
    
    
    1,986,615
    
    
    
    3,554,611
    
    
    
    3,749,934Cost of bulk revenues
    
    
    5,944,863
    
    
    
    4,552,547
    
    
    
    11,084,147
    
    
    
    8,441,509Cost of services revenues
    
    
    3,375,369
    
    
    
    940,922
    
    
    
    4,691,585
    
    
    
    2,719,900Total cost of revenues
    
    
    11,130,673
    
    
    
    7,480,084
    
    
    
    19,330,343
    
    
    
    14,911,343Gross profit
    
    
    4,907,175
    
    
    
    4,484,296
    
    
    
    9,443,236
    
    
    
    9,787,649General and administrative expenses
    
    
    2,159,658
    
    
    
    2,412,076
    
    
    
    4,626,248
    
    
    
    4,751,259Income from operations
    
    
    2,747,517
    
    
    
    2,072,220
    
    
    
    4,816,988
    
    
    
    5,036,390Other income (expense):Interest income
    
    
    317,550
    
    
    
    479,405
    
    
    
    770,239
    
    
    
    928,209Interest expense
    
    
    (442,551
    )
    
    
    (467,067
    )
    
    
    (889,107
    )
    
    
    (947,995
    )Profit sharing in income of affiliate
    
    
    
    
    
    
    161,861
    
    
    
    
    
    
    
    328,634Other income
    
    
    24,912
    
    
    
    54,324
    
    
    
    44,767
    
    
    
    90,883Equity in earnings (loss) of affiliate
    
    
    (639,954
    )
    
    
    427,548
    
    
    
    (1,133,024
    )
    
    
    886,670Other income (expense), net
    
    
    (740,043
    )
    
    
    656,071
    
    
    
    (1,207,125
    )
    
    
    1,286,401Income before non-controlling and
minority interests
    
    
    2,007,474
    
    
    
    2,728,291
    
    
    
    3,609,863
    
    
    
    6,322,791Income (loss) attributable to
non-controlling and minority interests
    
    
    27,851
    
    
    
    106,754
    
    
    
    (43,632
    )
    
    
    113,780Net income
    
    $
    1,979,623
    
    
    $
    2,621,537
    
    
    $
    3,653,495
    
    
    $
    6,209,011Basic earnings per common share
    
    $
    0.14
    
    
    $
    0.18
    
    
    $
    0.25
    
    
    $
    0.43Diluted earnings per common share
    
    $
    0.14
    
    
    $
    0.18
    
    
    $
    0.25
    
    
    $
    0.43Dividends declared per common share
    
    $
    0.065
    
    
    $
    0.065
    
    
    $
    0.195
    
    
    $
    0.13Weighted average number of common shares
used in the determination of:Basic earnings per share
    
    
    14,519,625
    
    
    
    14,470,512
    
    
    
    14,513,761
    
    
    
    14,306,975Diluted earnings per share
    
    
    14,540,671
    
    
    
    14,517,021
    
    
    
    14,536,513
    
    
    
    14,451,664
  5




---



##### Table of Contents



CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six Months Ended June 30,2008
    
    
    2007Net cash flows provided by operating activities
    
    $
    4,872,895
    
    
    $
    4,545,763Cash flows provided by (used in) investing activitiesPurchases of property, plant and equipment and construction in progress
    
    
    (3,209,531
    )
    
    
    (3,820,846
    )Distribution of income from affiliate
    
    
    
    
    
    
    189,375Collections on loans receivable
    
    
    729,738
    
    
    
    419,595Net cash provided by (used in) investing activities
    
    
    (2,479,793
    )
    
    
    (3,211,876
    )Cash flows provided by (used in) financing activitiesDividends paid
    
    
    (1,812,536
    )
    
    
    (1,779,429
    )Proceeds from exercises of stock options
    
    
    
    
    
    
    3,379,136Principal repayments of long term debt
    
    
    (632,125
    )
    
    
    (688,369
    )Net cash provided by (used in) financing activities
    
    
    (2,444,661
    )
    
    
    911,338Net (decrease) increase in cash and cash equivalents
    
    
    (51,559
    )
    
    
    2,245,225Cash and cash equivalents at beginning of period
    
    
    38,529,383
    
    
    
    37,310,699Cash and cash equivalents at end of period
    
    $
    38,477,824
    
    
    $
    39,555,924Interest paid in cash
    
    $
    794,886
    
    
    $
    1,030,333Non-cash investing and financing activitiesNote received for plant facility sold
    
    $
    
    
    
    $
    1,654,255Conversion of 1,460 (2007: 5,698) redeemable preferred shares into
1,460 (2007: 5,698)
common shares
    
    $
    876
    
    
    $
    3,419Issuance of 10,942 (2007: 4,664) common shares to executive
management for services rendered
    
    $
    306,619
    
    
    $
    111,507
  6




---



##### Table of Contents



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




---



##### Table of Contents



Weighted AverageRemainingWeighted Average
    
    
    Contractual Life
    
    
    Aggregate IntrinsicOptions
    
    
    Exercise Price
    
    
    (Years)
    
    
    Value (1)Outstanding at beginning of period
    
    
    21,465
    
    
    $
    19.50Granted
    
    
    103,429
    
    
    
    29.17Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding as of June 30, 2008
    
    
    124,894
    
    
    $
    27.51
    
    
    3.90 years
    
    $
    51,914Exercisable as of June 30, 2008
    
    
    1,774
    
    
    $
    23.62
    
    
    0.04 years
    
    $
    
 
 (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 $19.80
in the NASDAQ Global Select Market on June 30, 2008, exceeds the exercise price of the option.   8




---



##### Table of Contents



3. Segment information
  Three Months Ended June 30, 2008Retail
    
    
    Bulk
    
    
    Services
    
    
    TotalRevenues
    
    $
    5,256,669
    
    
    $
    6,872,967
    
    
    $
    3,908,212
    
    
    $
    16,037,848Cost of revenues
    
    
    1,810,441
    
    
    
    5,944,863
    
    
    
    3,375,369
    
    
    
    11,130,673Gross profit
    
    
    3,446,228
    
    
    
    928,104
    
    
    
    532,843
    
    
    
    4,907,175General and administrative expenses
    
    
    1,740,196
    
    
    
    323,606
    
    
    
    95,856
    
    
    
    2,159,658Income from operations
    
    
    1,706,032
    
    
    
    604,498
    
    
    
    436,987
    
    
    
    2,747,517Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (740,043
    )Income before non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,007,474Income (loss) attributable to non-controlling and
minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,851Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,979,623
 Six Months Ended June 30, 2008Retail
    
    
    Bulk
    
    
    Services
    
    
    TotalRevenues
    
    $
    10,267,180
    
    
    $
    13,040,292
    
    
    $
    5,466,107
    
    
    $
    28,773,579Cost of revenues
    
    
    3,554,611
    
    
    
    11,084,147
    
    
    
    4,691,585
    
    
    
    19,330,343Gross profit
    
    
    6,712,569
    
    
    
    1,956,145
    
    
    
    774,522
    
    
    
    9,443,236General and administrative expenses
    
    
    3,780,047
    
    
    
    699,792
    
    
    
    146,409
    
    
    
    4,626,248Income from operations
    
    
    2,932,522
    
    
    
    1,256,353
    
    
    
    628,113
    
    
    
    4,816,988Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,207,125
    )Income before non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,609,863Income (loss) attributable to non-controlling and
minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,632
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,653,495As of June 30, 2008:Property plant and equipment, net
    
    $
    23,512,308
    
    
    $
    33,366,176
    
    
    $
    1,936,493
    
    
    $
    58,814,977Construction in progress
    
    
    3,261,747
    
    
    
    2,583,964
    
    
    
    
    
    
    
    5,845,711Total assets
    
    
    88,647,760
    
    
    
    59,009,069
    
    
    
    5,534,736
    
    
    
    153,191,565
 9




---



##### Table of Contents



3. Segment information (continued)
 Three Months Ended June 30, 2007Retail
    
    
    Bulk
    
    
    Services
    
    
    TotalRevenues
    
    $
    5,279,316
    
    
    $
    5,372,907
    
    
    $
    1,312,157
    
    
    $
    11,964,380Cost of revenues
    
    
    1,986,615
    
    
    
    4,552,547
    
    
    
    940,922
    
    
    
    7,480,084Gross profit
    
    
    3,292,701
    
    
    
    820,360
    
    
    
    371,235
    
    
    
    4,484,296General and administrative expenses
    
    
    2,136,984
    
    
    
    241,725
    
    
    
    33,367
    
    
    
    2,412,076Income from operations
    
    
    1,155,717
    
    
    
    578,635
    
    
    
    337,868
    
    
    
    2,072,220Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    656,071Income before non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,728,291Income (loss) attributable to non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,754Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,621,537
 Six Months Ended June 30, 2007Retail
    
    
    Bulk
    
    
    Services
    
    
    TotalRevenues
    
    $
    10,383,525
    
    
    $
    10,600,429
    
    
    $
    3,715,038
    
    
    $
    24,698,992Cost of revenues
    
    
    3,749,934
    
    
    
    8,441,509
    
    
    
    2,719,900
    
    
    
    14,911,343Gross profit
    
    
    6,633,591
    
    
    
    2,158,920
    
    
    
    995,138
    
    
    
    9,787,649General and administrative expenses
    
    
    4,096,579
    
    
    
    583,491
    
    
    
    71,189
    
    
    
    4,751,259Income from operations
    
    
    2,537,012
    
    
    
    1,575,429
    
    
    
    923,949
    
    
    
    5,036,390Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,286,401Income before non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,322,791Income (loss) attributable to non-controlling and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,780Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,209,011As of June 30, 2007:Property plant and equipment, net
    
    $
    22,005,797
    
    
    $
    36,155,240
    
    
    $
    2,407,561
    
    
    $
    60,568,598Construction in progress
    
    
    3,035,780
    
    
    
    198,610
    
    
    
    
    
    
    
    3,234,390Total assets
    
    
    85,452,027
    
    
    
    53,539,608
    
    
    
    5,362,555
    
    
    
    144,354,190
 10




---



##### Table of Contents



4. Earnings per share
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    1,979,623
    
    
    $
    2,621,537
    
    
    $
    3,653,495
    
    
    $
    6,209,011Less:Dividends declared and earnings attributable to
preferred shares
    
    
    (1,456
    )
    
    
    (1,528
    )
    
    
    (4,224
    )
    
    
    (3,214
    )Net income available to holders of common
shares in the determination of basic and
diluted earnings per share
    
    $
    1,978,167
    
    
    $
    2,620,009
    
    
    $
    3,649,271
    
    
    $
    6,205,797Weighted average number of common shares used
in the determination of basic earnings per
common share
    
    
    14,519,625
    
    
    
    14,470,512
    
    
    
    14,513,761
    
    
    
    14,306,975Plus:Weighted average number of preferred shares
outstanding during the period
    
    
    19,934
    
    
    
    23,390
    
    
    
    20,419
    
    
    
    23,930Potential dilutive effect of unexercised options
    
    
    1,112
    
    
    
    23,119
    
    
    
    2,333
    
    
    
    120,759Weighted average number of common shares used
in the determination of diluted earnings per
common share
    
    
    14,540,671
    
    
    
    14,517,021
    
    
    
    14,536,513
    
    
    
    14,451,664
 5. Impact of recent accounting pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 11




---



##### Table of Contents



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.
 6. Investment in and loan to affiliate
  June 30,
    
    
    December 31,2008
    
    
    2007Equity investment
    
    $
    13,402,012
    
    
    $
    14,626,848Loan receivable  plant construction
    
    
    2,500,000
    
    
    
    2,875,000$
    15,902,012
    
    
    $
    17,501,848
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Water revenues  accrual method
    
    $
    2,742,789
    
    
    $
    2,304,598
    
    
    $
    5,248,109
    
    
    $
    4,629,808Adjustment for cash method
    
    
    (2,708,595
    )
    
    
    
    
    
    
    (5,178,787
    )
    
    
    Total adjusted revenues
    
    
    34,194
    
    
    
    2,304,598
    
    
    
    69,322
    
    
    
    4,629,808Gross profit (loss)
    
    
    (1,072,153
    )
    
    
    1,601,113
    
    
    
    (1,956,694
    )
    
    
    3,300,278Income (loss) from operations
    
    
    (1,294,479
    )
    
    
    1,328,236
    
    
    
    (2,451,985
    )
    
    
    2,733,887Net income (loss)
    
    $
    (1,333,185
    )
    
    $
    1,016,605
    
    
    $
    (2,540,117
    )
    
    $
    2,091,850
  12




---



##### Table of Contents



Baughers Bay plant dispute:
       13




---



##### Table of Contents



14




---



##### Table of Contents



ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Cautionary Note Regarding Forward-Looking Statements
     Critical Accounting Policies
   
    
    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
 15




---



##### Table of Contents



Goodwill and other intangible assets.
 Plant
construction revenue and cost of plant construction revenue.
 16




---



##### Table of Contents



RESULTS OF OPERATIONS
  Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
 Consolidated Results
     OC-BVI Contract Dispute
 17




---



##### Table of Contents



Results by Segment
 Retail Segment:
     Bulk Segment:
     18




---



##### Table of Contents



Services Segment:
     Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
 Consolidated Results
     19




---



##### Table of Contents



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




---



##### Table of Contents



Services Segment:
     LIQUIDITY AND CAPITAL RESOURCES
 Overview
     21




---



##### Table of Contents



Cash Flows for the Six Months Ended June 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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



CW-Bahamas Liquidity
  25




---



##### Table of Contents



CW-Bahamas Performance Bonds
  CW-Bermuda Financing
   Frank Sound Contract
  26




---



##### Table of Contents



Dividends
     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




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 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.
   28




---



##### Table of Contents



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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Votes For
    
    
    Votes WithheldCarson K. Ebanks
    
    
    3,223,224
    
    
    
    2,477,134Richard L. Finlay
    
    
    5,254,840
    
    
    
    445,518Clarence B. Flowers, Jr.
    
    
    5,246,325
    
    
    
    454,033Frederick W. McTaggart
    
    
    5,257,323
    
    
    
    443,035Jeffrey M. Parker
    
    
    5,253,504
    
    
    
    446,854
    29




---



##### Table of Contents



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
 30




---



##### Table of Contents



SIGNATURES
  CONSOLIDATED WATER CO. LTD.By:
    /s/ Frederick W. McTaggartFrederick W. McTaggartChief Executive Officer
(Principal Executive Officer) By:
    /s/ David W. SasnettDavid W. SasnettExecutive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)  31