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Purchase of interest in Aerex Industries, Inc. | 6 Months Ended
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Jun. 30, 2016
Business Combinations [Abstract] |
Business Combination Disclosure [Text Block] | 3. Purchase of interest in Aerex Industries, Inc. On February 11, 2016 (the “Closing Date”), the Company, through its wholly-owned subsidiary, CW-Holdings, entered into a stock purchase agreement (the “Purchase Agreement”) with Aerex and Thomas Donnick, Jr. (“Donnick”), Aerex’s sole shareholder prior to the Closing Date. Pursuant to the terms of the Purchase Agreement, CW-Holdings purchased a 51% ownership interest in Aerex for an aggregate purchase price of approximately $7.7 million in cash. After giving effect to the transactions contemplated by the Purchase Agreement, CW-Holdings owns 51% of the outstanding capital stock of Aerex and Donnick owns 49% of the outstanding capital stock of Aerex. CW-Holdings also acquired from Donnick an option to compel Donnick to sell, and granted to Donnick an option to require CW-Holdings to purchase, Donnick’s 49% ownership interest in Aerex at a price based upon the fair market value of Aerex at the time of the exercise of the option. The options are exercisable on or after the third anniversary of the Closing Date. In connection with the Purchase Agreement, the Company guaranteed the obligations of CW-Holdings with respect to the option granted to Donnick to require CW-Holdings to purchase Donnick’s 49% ownership interest in Aerex. Aerex is an original equipment manufacturer and service provider of a wide range of products and services applicable to municipal water treatment and industrial water and wastewater treatment. Its products include membrane separation equipment, filtration equipment, piping systems, vessels and custom fabricated components. Aerex also offers engineering, design, consulting, inspection, training and equipment maintenance services to its customers. Aerex is an American Society of Mechanical Engineers (ASME) code accredited manufacturer and maintains the ASME U and S and the National Board NB and R Certificates of Authorization. Its corporate offices and manufacturing facilities are located in Fort Pierce, Florida. In connection with the Purchase Agreement, CW-Holdings, Aerex and Donnick entered into a shareholders agreement pursuant to which CW-Holdings and Donnick agreed to certain rights and obligations with respect to the governance of Aerex. Immediately following the acquisition, Donnick and the Company loaned $490,000 and $510,000, respectively, to Aerex. These loans have a maturity date of August 10, 2016 and bear interest at 1% per annum. The purchase price for Aerex is summarized as follows:
|  | February 11, 2016 |
Cash consideration |  |  |  |
Purchase price (excluding working capital) |  | $ | 7,140,000 |
Working capital adjustment |  |  | 605,179 |
Cash acquired |  |  | (2,326) |
Total cash consideration |  | $ | 7,742,853 |
The following table summarizes the estimated fair values of the assets and liabilities assumed at the acquisition date:
|  | February 11, 2016 |
Financial assets |  | $ | 456,664 |
Inventory |  |  | 70,487 |
Costs and estimated earnings in excess of billings |  |  | 784,465 |
Property, plant and equipment |  |  | 2,159,401 |
Identifiable intangible assets |  |  | 5,900,000 |
Deferred tax liability |  |  | (2,451,298) |
Accounts payable and accrued liabilities |  |  | (116,893) |
Net liability arising from put/call options |  |  | (383,000) |
Total identifiable net assets |  |  | 6,419,826 |
Non-controlling interest in Aerex |  |  | (6,712,184) |
Goodwill |  |  | 8,035,211 |
|  | $ | 7,742,853 |
The identifiable intangible assets consist of the following items with amortization calculated using a straight line method over the useful life of the asset:
|  | February 11, 2016 |  |  | Useful life |
Non-compete agreement |  | $ | 400,000 |  |  | 5 years |
Trade name |  |  | 1,400,000 |  |  | 15 years |
Certifications/programs |  |  | 2,000,000 |  |  | 3 years |
Customer backlog |  |  | 100,000 |  |  | 1 year |
Customer relationships |  |  | 2,000,000 |  |  | 4 years |
|  | $ | 5,900,000 |  |  |  |
The results of operations of Aerex are included in the services segment of Company’s consolidated financial statements from the date of acquisition. The total revenue and net income (loss) included for Aerex in the Company’s consolidated results of operations for the three months ended June 30, 2016 were approximately $1.3 million and ($258,000), respectively. The total revenue and net income (loss) included for Aerex in the Company’s consolidated results of operations for the period February 11, 2016 to June 30, 2016, were approximately $1.9 million and ($319,000), respectively. General and administrative expenses incurred by the Company for the Aerex acquisition for the three and six months ended June 30, 2016 were approximately $60,000 and $144,000, respectively. The following pro forma financial information presents the results of operations of the Company for the six months ended June 30, 2016 and 2015, as if the acquisition of Aerex had taken place on January 1, 2015. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which would have actually occurred had the transaction taken place on January 1, 2015, or of future results of operations:
|  | Six Months Ended June 30, |
|  | 2016 |  | 2015 |
Revenues |  | $ | 29,939,124 |  | $ | 42,766,119 |
Cost of revenues |  |  | 16,931,414 |  |  | 27,098,193 |
Gross profit |  |  | 13,007,710 |  |  | 15,667,926 |
General and administrative expenses |  |  | 9,711,477 |  |  | 8,377,414 |
Income from operations |  |  | 3,296,233 |  |  | 7,290,512 |
Other income (expense), net |  |  | 809,898 |  |  | (187,688) |
Income before income taxes |  |  | 4,106,131 |  |  | 7,102,824 |
Provision for (benefit from) income taxes |  |  | (316,575) |  |  | 995,394 |
Net income |  |  | 4,422,706 |  |  | 6,107,430 |
Income attributable to non-controlling interests |  |  | 190,245 |  |  | 1,205,308 |
Net income attributable to Consolidated Water Co. Ltd. stockholders |  | $ | 4,232,461 |  | $ | 4,902,122 |
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders |  | $ | 0.29 |  | $ | 0.33 |
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders |  | $ | 0.28 |  | $ | 0.33 |
Weighted average number of common shares used in the determination of: |  |  |  |  |  |  |
Basic earnings per share |  |  | 14,787,716 |  |  | 14,727,455 |
Diluted earnings per share |  |  | 14,863,791 |  |  | 14,780,269 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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