Investment in OC-BVI

12 Months Ended

Dec. 31, 2018

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments Disclosure [Text Block]

9. Investment in OC-BVI

The Company owns 50% of the outstanding voting common shares and a 43.53% equity interest in the profits of Ocean Conversion (BVI) Ltd. (“OC-BVI”). The Company also owns certain profit-sharing rights in OC-BVI that raise its effective interest in the profits of OC-BVI to approximately 45%. Pursuant to a management services agreement, OC-BVI pays the Company monthly fees for certain engineering and administrative services. OC-BVI’s sole customer is the Ministry of Communications and Works of the Government of the British Virgin Islands (the “Ministry”) to which it sells bulk water.

The Company’s equity investment in OC-BVI amounted to $2,584,987 and $2,783,882 as of December 31, 2018 and 2017, respectively.

Summarized financial information for OC-BVI is as follows:

	December 31,
	2018		2017
Current assets	$	2,286,179	$	2,835,614
Non-current assets		3,859,310		3,945,071
Total assets	$	6,145,489	$	6,780,685

	December 31,
	2018		2017
Current liabilities	$	132,005	$	218,753
Non-current liabilities		1,048,950		1,158,300
Total liabilities	$	1,180,955	$	1,377,053

	Year Ended December 31,
	2018		2017
Revenues	$	2,845,211	$	2,874,936
Cost of revenues		1,348,046		1,759,285
Gross profit		1,497,165		1,115,651
General and administrative expenses		707,034		1,163,547
Long-lived asset impairment and disposition losses		-		188,164
Income (loss) from operations		790,131		(236,060	)
Other income, net		3,393,271		587,859
Net income		4,183,402		351,799
Income attributable to non-controlling interests		52,275		58,202
Net income attributable to controlling interests	$	4,131,127	$	293,597

 A reconciliation of the beginning and ending balances for the investment in OC-BVI for the year ended December 31, 2018:

Balance as of December 31, 2017	$	2,783,882
Profit-sharing and equity from earnings of OC-BVI		2,452,355
Distributions received from OC-BVI		(2,651,250	)
Balance as of December 31, 2018	$	2,584,987

The Company recognized $1,798,280 and $127,802 in earnings from its equity investment in OC-BVI for the years ended December 31, 2018 and 2017, respectively. The Company recognized $654,075 and $46,575 in profit-sharing income from its profit-sharing agreement with OC-BVI for the years ended December 31, 2018 and 2017, respectively. 

For the years ended December 31, 2018 and 2017, the Company recognized approximately $1,811,372 and $469,347, respectively, in revenues from its management services agreement with OC-BVI. Amounts payable by OC-BVI to the Company were $46,746 and $123,807 as of December 31, 2018 and 2017, respectively. The Company's deferred revenues from OC-BVI, included in other current liabilities in the accompanying consolidated balance sheets, were $0 and $181,328 as of December 31, 2018 and 2017, respectively.

Resolution of Baughers Bay Litigation

Through March 2010, OC-BVI supplied water to the BVI government from a plant located at Baughers Bay, Tortola, under the terms of a water supply agreement dated May 1990 (the “1990 Agreement”) with an initial seven-year term that expired in May 1999. The 1990 Agreement provided that such agreement would automatically be extended for another seven-year term unless the BVI government provided notice, at least eight months prior to such expiration, of its decision to purchase the plant from OC-BVI at the agreed upon amount under the 1990 Agreement of approximately $1.42 million. In correspondence between the parties from late 1998 through early 2000, the BVI government indicated that it intended to purchase the plant but would be amenable to negotiating a new water supply agreement and that it considered the 1990 Agreement to be in force on a monthly basis until negotiations between the BVI government and OC-BVI were concluded. OC-BVI continued to supply water from the plant and expended approximately $4.7 million between 1995 and 2003 to significantly expand the production capacity of the plant beyond that contemplated in the 1990 Agreement.

In 2006, the BVI government took the position that the seven-year extension of the 1990 Agreement had been completed and that it was entitled to ownership of the Baughers Bay plant and during 2007, the BVI government initiated litigation seeking ownership of the Baughers Bay plant. OC-BVI counterclaimed that it was entitled to continued possession and operation of the Baughers Bay plant until the BVI government paid OC-BVI approximately $4.7 million, which OC-BVI believed represented the value of the Baughers Bay plant at its expanded production capacity.

As a result of the final ruling made by the Appellate Court on this litigation in 2009, the BVI Government was awarded ownership of the Baughers Bay plant but OC-BVI was awarded compensation for improvements made to the plant in the amount equal to the difference between (i) the value of the Baughers Bay plant at the date OC-BVI transferred possession of the plant to the BVI government and (ii) $1.42 million (the purchase price for the Baughers Bay plant under the 1990 Agreement).

On August 31, 2018, OC-BVI and the BVI government entered into a settlement agreement for the Baughers Bay plant with an agreed upon value for the plant of $4,432,834, which resulted in a net payment (i.e. after legal and other expenses) to OC-BVI in September 2018 of $4,271,409. Such amount is included in other income, net in OC-BVI’s 2018 consolidated results of operations.