What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-10 compared with 2022-08-10 · 147 added, 139 removed, 558 unchanged (34% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

PROPERTY, PLANT AND EQUIPMENT:

17 unchanged sentences

Restricted cash 975 806

Right-of -use asset - finance lease 1,749 —

Right-of -use asset 1,986 —

Other noncurrent assets 33 10

6 unchanged sentences

Customer and meter deposits 1,668 1,646

Long-term debt and capital leases — current portion 3,962 3,975

Long-term debt — current portion 3,833 3,975

Leases — current portion 612 —

Total current liabilities 19,756 16,932

NONCURRENT LIABILITIES:

Long-term debt and capital leases 106,981 108,933

Long-term debt 106,851 108,933

Long-term lease liabilities 1,729 —

Deferred revenue - ICFA 20,870 19,035

5 unchanged sentences

Other noncurrent liabilities 814 778

Right-of-use liability - finance lease 1,442 —

Total noncurrent liabilities 260,396 247,113

3 unchanged sentences

Common stock, $ 0.01 par value, 60,000,000 shares authorized;

22,939,811 and 22,832,013 shares issued as of June 30, 2022 and December 31, 2021, respectively.

Treasury stock, 223,202 and 182,445 shares at June 30, 2022 and December 31, 2021, respectively.

24,094,144 and 22,832,013 shares issued as of September 30, 2022 and December 31, 2021, respectively.

Treasury stock, 224,100 and 182,445 shares at September 30, 2022 and December 31, 2021, respectively.

Paid in capital 44,797 29,803

7 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

32 unchanged sentences

— — — — ( 1,650 ) — ( 1,650 )

Issuance of common stock — — — — — — —

Treasury stock — — ( 398 ) — — — —

11 unchanged sentences

BALANCE - June 30, 2021 22,748,143 $ 227 ( 127,708 ) $ ( 1 ) $ 30,955 $ ( 217 ) $ 30,964

BALANCE - December 31, 2021 22,832,013 $ 228 ( 182,445 ) $ ( 2 ) $ 29,803 $ — $ 30,029

Dividend declared $ 0.07 per share

1 unchanged sentence

Issuance of common stock — — ( 53,994 ) ( 1 ) — — ( 1 )

Treasury stock — — — — — — —

Stock option exercise 82,745 1 — — — — 1

1 unchanged sentence

Net income — — — — — 1,498 1,498

BALANCE - September 30, 2021 22,830,888 $ 228 ( 181,702 ) $ ( 2 ) $ 30,916 $ ( 217 ) $ 30,925

BALANCE - December 31, 2021 22,832,013 $ 228 ( 182,445 ) $ ( 2 ) $ 29,803 $ — $ 30,029

Dividend declared $ 0.07 per share

— — — — ( 781 ) ( 889 ) ( 1,670 )

Stock option exercise 250 — — — 3 — 3

Stock compensation — — — — 389 — 389

Net income — — — — — 889 889

BALANCE - March 31, 2022 22,832,263 $ 228 ( 182,445 ) $ ( 2 ) $ 29,414 $ — $ 29,640

1 unchanged sentence

— — — — 433 ( 2,107 ) ( 1,674 )

Issuance of common stock 107,548 — — — — — —

Treasury stock — — ( 40,756 ) — ( 257 ) — ( 257 )

Stock option exercise 107,548 — — — — — —

Treasury stock — — ( 40,756 ) — ( 257 ) — ( 257 )

Stock compensation — — — — 45 — 45

1 unchanged sentence

BALANCE - June 30, 2022 22,939,811 $ 228 ( 223,201 ) $ ( 2 ) $ 29,635 $ — $ 29,861

Dividend declared $ 0.07 per share

— — — — 537 ( 1,686 ) ( 1,149 )

Issuance of common stock 1,150,000 11 — — 14,862 — 14,873

Treasury stock — — ( 899 ) — ( 282 ) — ( 282 )

Stock compensation — — — — 45 — 45

Net income — — — — — 1,686 1,686

BALANCE - September 30, 2022 24,089,811 $ 239 ( 224,100 ) $ ( 2 ) $ 44,797 $ — $ 45,034

See accompanying notes to the condensed consolidated financial statements

3 unchanged sentences

(Unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

24 unchanged sentences

Proceeds from stock option exercise 3 4

Principal payments under capital lease ( 28 ) ( 67 )

Principal payments under finance lease — ( 108 )

Refunds of advances for construction ( 1,105 ) ( 968 )

1 unchanged sentence

Repayments of bond ( 1,917 ) —

Proceeds from sale of stock 14,892 —

Net cash (used) provided by financing activities 8,840 ( 2,657 )

3 unchanged sentences

See accompanying notes to the condensed consolidated financial statements

Table of Contents PART I—FINANCIAL INFORMATION

Supplemental disclosure of cash flow information:

June 30, 2022 June 30, 2021

September 30, 2022 September 30, 2021

Cash and cash equivalents $ 15,613 $ 21,241

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The condensed consolidated financial statements of Global Water Resources, Inc.

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 are unaudited.

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 are unaudited.

The December 31, 2021 condensed consolidated balance sheet data was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S.

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In our opinion, these financial statements include all normal and recurring adjustments necessary for the fair statement of the results for the interim period.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year, due to the seasonality of our business.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year, due to the seasonality of our business.

The Company prepares its financial statements in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC").

8 unchanged sentences

The City of Buckeye is obligated to pay the Company a growth premium equal to $ 3,000 for each new water meter installed within Valencia’s prior service areas in the City of Buckeye, for a 20 -year period ending December 31, 2034, subject to a maximum payout of $ 45.0 million over the term of the agreement.

The Company received growth premiums of $ 0.5 million and $ 0.2 million for the three months ended June 30, 2022 and 2021, respectively, and $ 1.6 million and $ 0.2 million for the six months ended June 30, 2022 and 2021, respectively.

The Company received growth premiums of $ 0.6 million and $ 0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $ 2.2 million and $ 0.9 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase was due to increased meter connections in the area over the prior year period.

Arizona Corporation Commission (the “ACC”) Tax Docket

The Company had a regulatory asset of $ 3.3 million and $ 2.3 million at June 30, 2022 and December 31, 2021, respectively, and regulatory liabilities of $ 0.8 million at June 30, 2022 and December 31, 2021, respectively, related to the Federal Tax Cuts and Jobs Act (the "TCJA") signed into law on December 22, 2017.

The Company had a regulatory asset of $ 3.2 million and $ 2.3 million at September 30, 2022 and December 31, 2021, respectively, and regulatory liabilities of $ 0 and $ 0.8 million at September 30, 2022 and December 31, 2021, respectively, related to the Federal Tax Cuts and Jobs Act (the "TCJA") signed into law on December 22, 2017.

Under Accounting Standards Codification ("ASC") 740, Income Taxes , the tax effects of changes in tax laws must be recognized in the period in which the law is enacted.

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For the Company’s regulated entities, substantially all of the change in deferred income taxes is recorded as an offset to either a regulatory asset or liability because the impact of changes in the rates are expected to be recovered from or refunded to customers.

Effective as of June 30, 2022, the Company reversed the regulatory liability balance of $ 0.8 million related to the TCJA due to Rate Decision No.

Refer to Note 2 - "Regulatory Decision and Related Accounting Policy and Changes."

On December 20, 2017, the ACC opened a docket to address the utility ratemaking implications of the TCJA.

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74364 enacted in February 2014.

In 2021, the final year of the phase-in, the aggregate annual reductions in

revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities was approximately $ 415,000 , $ 669,000 , $ 16,000 , and $ 5,000 , respectively.

In 2021, the final year of the phase-in, the aggregate annual reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities was approximately $ 415,000 , $ 669,000 , $ 16,000 , and $ 5,000 , respectively.

The ACC also approved a carrying cost of 4.25 % on regulatory liabilities resulting from the difference of the fully phased-in rates applied in 2021 versus the phased-in rates refunded in the years leading up to 2021 (i.e., 2018 through 2020).

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Following the ACC's request for a proposal, the Company made its proposal in filings on December 19, 2018 and July 1, 2019.

ACC Staff reviewed the Company's filing and requested that the Company defer tariff revisions until such revisions can be considered in the next rate case.

ACC Staff reviewed the Company's filing and requested that the Company defer tariff revisions until such revisions were to be considered in the next rate case.

ACC Staff also requested that the Company defer consideration of the regulatory assets and regulatory liabilities associated with 2018 EADIT amortization.

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Revolving Line of Credit

On April 30, 2020, the Company entered into an agreement with The Northern Trust Company, an Illinois banking corporation, for a two-year revolving line of credit initially up to $ 10.0 million with an initial maturity date of April 30, 2022.

On April 30, 2020, the Company entered into an agreement with The Northern Trust Company, an Illinois banking corporation (the "Northern Trust Loan Agreement"), for a two-year revolving line of credit initially up to $ 10.0 million with an initial maturity date of April 30, 2022.

This credit facility, which may be used to refinance existing indebtedness, to acquire assets to use in and/or expand the Company’s business, and for general corporate purposes, initially bore an interest rate equal to the London Interbank Offered Rate (LIBOR) plus 2.00 % and has no unused line fee.

This credit facility replaced the previous revolving line of credit with MidFirst Bank, which was terminated in April 2020.

As of June 30, 2022, we had no outstanding borrowings under this credit line.

On April 30, 2021, the Company and The Northern Trust Company entered into an amendment to the loan agreement pursuant to which, among other things, the maturity date for the revolving line of credit was extended to April 30, 2024.

As of September 30, 2022, we had no outstanding borrowings under this credit line.

On April 30, 2021, the Company and The Northern Trust Company entered into an amendment to the Northern Trust Loan Agreement pursuant to which, among other things, the maturity date for the revolving line of credit was extended to April 30, 2024.

On July 26, 2022, the Company and Northern Trust entered into the second amendment (the "Second Modification Agreement") to the Northern Trust Loan Agreement.

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The acquisition added an additional 18 connections and approximately 0.5 square miles of service area at the time of acquisition to the assets of Santa Cruz.

Definitive Agreement to Acquire Farmers Water Company

On April 14, 2022, the Company signed a definitive agreement to acquire Farmers Water Company, an operator of a water utility with service area in Pima County, Arizona, subject to customary closing conditions and ACC approval.

Definitive Agreement to Acquire Farmers Water Co.

On April 14, 2022, the Company signed a definitive agreement to acquire Farmers Water Co., an operator of a water utility with service area in Pima County, Arizona, subject to customary closing conditions and ACC approval.

The acquisition, if completed, is expected to add approximately 3,300 active water service connections, approximately $ 1.5 million in annual revenue, and 21.1 square miles Certificate of Convenience & Necessity ("CC&N") service area in Sahuarita, Arizona.

On October 3, 2022, the Company filed an application with the ACC in connection with the acquisition of Farmers Water Co.

The timing of the close of the acquisition is dependent upon regulatory approval and other closing conditions.

Public Offering of Common Stock

On August 1, 2022, the Company completed a public offering of 1,150,000 shares of common stock at a public offering price of $ 13.50 per share, which included 150,000 shares issued and sold to the underwriter following the exercise in full of its option to purchase additional shares of common stock.

The Company received net proceeds of approximately $ 14.9 million from the offering after deducting underwriting discounts and commissions and offering expenses paid by the Company.

Certain directors and/or their affiliates purchased an aggregate of the 652,000 shares of common stock at the public offering price.

Significant Accounting Policies

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Diluted earnings per share is based upon the weighted average number of common shares, including both outstanding shares and shares potentially issuable in connection with stock options and restricted stock awards granted.

As of June 30, 2022, the Company had 563,213 options outstanding to acquire an equivalent number of shares of GWRI common stock.

The 320,321 options outstanding from the 2017 option grant equated to 111,566 and 120,323 common share equivalents for the three and six months ended June 30, 2022, respectively, which were included within the calculation of diluted earnings per share for the three and six months ended June 30, 2022.

The remaining 242,892 options outstanding from the 2019 option grant equated to 37,726 and 44,869 common share equivalents for the three and six months ended June 30, 2022, respectively, which were included within the calculation of diluted earnings per share for the three and six months ended June 30, 2022.

As of June 30, 2022, there were 15,000 and 97,867 restricted stock awards outstanding from the 2020 grant and 2021 grant, respectively.

The 15,000 restricted stock awards outstanding from the 2020 grant equated to 31,439 and 43,091 common share equivalents for the three and six months ended June 30, 2022, respectively, which were included within the calculation of diluted earnings per share for the three and six months ended June 30, 2022.

The 97,867 restricted stock awards outstanding from the 2021 grant for the three and six months ended June 30, 2022 were not included within the dilutive earnings per share calculation, as to do so would be antidilutive.

As of June 30, 2021, the Company had 620,476 options outstanding to acquire an equivalent number of shares of GWRI common stock.

The 381,496 options outstanding from the 2017 option grant equated to 166,348 and 163,707 common share equivalents for the three and six months ended June 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and six months ended June 30, 2021.

The remaining 238,980 options outstanding from the 2019 option grant equated to 55,232 and 53,414 common share equivalents for the three and six months ended June 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and six months ended June 30, 2021.

As of June 30, 2021, there were 74,164 restricted stock awards outstanding from the 2020 grant.

The 74,164 restricted stock awards outstanding equated to 53,658 and 63,507 common share equivalents for the three and six months ended June 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and six months ended June 30, 2021.

As of June 30, 2021, there were 164,650 restricted stock awards outstanding from the 2021 grant, which were not included within the calculation of diluted earnings per share for the three and six months ended June 30, 2021, as to do so would be antidilutive.

As of September 30, 2022, the Company had 518,231 options outstanding to acquire an equivalent number of shares of GWRI common stock.

The 318,321 options outstanding from the 2017 option grant equated to 99,245 and 113,613 common share equivalents for the three and nine months ended September 30, 2022, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2022.

The remaining 199,910 options outstanding from the 2019 option grant equated to 21,490 and 30,023 common share equivalents for the three and nine months ended September 30, 2022, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2022.

As of September 30, 2022, there were 15,000 and 95,134 restricted stock awards outstanding from the 2020 grant and 2021 grant, respectively.

The 15,000 restricted stock awards outstanding from the 2020 grant equated to 7,690 and 30,980 common share equivalents for the three and nine months ended September 30, 2022, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2022.

The 95,134 restricted stock awards outstanding from the 2021 grant for the three and nine months ended September 30, 2022 were not included within the dilutive earnings per share calculation, as to do so would be antidilutive.

As of September 30, 2021, the Company had 537,731 options outstanding to acquire an equivalent number of shares of GWRI common stock.

The 320,321 options outstanding from the 2017 option grant equated to 171,669 and 167,320 common share equivalents for the three and nine months ended September 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2021.

The remaining 217,410 options outstanding from the 2019 option grant equated to 70,674 and 61,755 common share equivalents for the three and nine months ended September 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2021.

As of September 30, 2021, there were 74,164 restricted stock awards outstanding from the 2020 grant.

The 74,164 restricted stock awards outstanding equated to 42,362 and 56,777 common share equivalents for the three and nine months ended September 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2021.

As of September 30, 2021, there were 143,800 restricted stock awards outstanding from the 2021 grant and equated to 20,472 for the three months ended September 30, 2021.

The 143,800 restricted stock awards outstanding from grant 2021 were not included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2021, as to do so would be antidilutive.

Refer to Note 13 – “Deferred Compensation Awards” for additional information regarding the option and restricted stock grants.

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In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350) ("ASU 2018-15").

ASU 2018-15 amends ASC 350 to include in its scope implementation costs of a Cloud Computing Arrangement ("CCA") that is a service contract and clarifies that a

customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered a service contract.

ASU 2018-15 amends ASC 350 to include in its scope implementation costs of a Cloud Computing Arrangement ("CCA") that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered a service contract.

The Company implemented Topic 350 on January 1, 2021.

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In addition to a rate increase, the Company requested, among other things, the consolidation of water and/or wastewater rates for certain of its utilities, including its Red Rock, Santa Cruz, Palo Verde, Picacho Water, and Picacho Utilities located in Pinal County.

Of the Company’s utilities filing a rate case, these utilities make up approximately 96% of the Company's active service connections.

Of the Company’s utilities filing a rate case, these utilities made up approximately 96 % of the Company's active service connections at the time of the filing of the rate case application.

On July 27, 2022, the ACC issued Rate Decision No.

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January 1, 2024 $ 98,585 $ 2,231,861

The phase-in of additional revenues was determined using a 2019 test year.

To the extent that the number of active service connections has increased and continues to increase from 2019 levels, the additional revenues may be greater than the amounts set forth above.

2 unchanged sentences

(i) the consolidation of water and/or wastewater rates to create economies of scale that are beneficial to all customers when rates are consolidated.;

(ii) acquisition premiums relating to the Company’s acquisitions of its Red Rock and Turner Ranches utilities, which increase the rate base for such utilities and result in an increase in the annual collective revenue requirement included in the table above;

revenue requirement included in the table above;

(iii) the Company’s ability to annually adjust rates to flow through changes in property tax expense and/or changes in income tax expense, without the necessity of a rate case proceeding;

1 unchanged sentence

Finally, Rate Decision No.

78644 requires the Company to work with ACC staff and the Residential Utility Consumer Office to prepare a Private Letter Ruling request to the Internal Revenue Service (“IRS”) to clarify whether the failure to eliminate the deferred taxes attributable to assets condemned in a transaction governed by Section 1033 of the IRC would violate the normalization provisions of Section 168(i)(9) of the Code.

If the IRS accepts the request and issues its ruling, a copy must be provided to the ACC.

1 unchanged sentence

This may result in further action by the ACC, which we are unable to predict due to the uncertainties involved, that could have an adverse impact on our financial condition, results of operations and cash flows.

Certain accounting implications related to Rate Case Decision No.

Certain accounting implications related to Rate Decision No.

78644 were recognized and recorded as of June 30, 2022, and are as follows:

• Reclass Red Rock Water, Red Rock Wastewater, and Turner Ranches acquisition premiums of approximately $ 0.8 million from goodwill to regulatory assets to be included in rate base.

• Reclassification of Red Rock Water, Red Rock Wastewater, and Turner Ranches acquisition premiums of approximately $ 0.8 million in the aggregate from goodwill to regulatory assets to be included in rate base.

The premiums are to be amortized over 25 years.

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The Company will record 30 % of the funds received, up until the HUF liability is fully funded, as deferred revenue, which is to be recognized as revenue once the obligations specified within the ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred.

As of June 30, 2022 and December 31, 2021, ICFA deferred revenue recorded on the consolidated balance sheet totaled $ 20.9 million and $ 19.0 million, respectively, which represents deferred revenue recorded for ICFA funds received on contracts.

As of September 30, 2022 and December 31, 2021, ICFA deferred revenue recorded on the consolidated balance sheet totaled $ 20.9 million and $ 19.0 million, respectively, which represents deferred revenue recorded for ICFA funds received on contracts.

Intangible assets / Regulatory liability – Pursuant to Rate Decision No.

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The recognition of amortization expense will be partially offset by a corresponding reduction of the regulatory liability.

As of June 30, 2022, regulatory liability recorded on the consolidated balance sheet totaled $ 6.6 million, of which $ 5.9 million relates to the offset of intangible assets related to ICFA contracts obtained in connection with our Santa Cruz, Palo Verde, and Sonoran acquisitions, and the remaining $ 0.7 million relates to the TCJA rate reduction mandated by the ACC pursuant to Rate Decision No.

As of September 30, 2022, regulatory liability recorded on the consolidated balance sheet totaled $ 6.5 million, of which $ 5.9 million relates to the offset of intangible assets related to ICFA contracts obtained in connection with our Santa Cruz, Palo Verde, and Sonoran acquisitions, and the remaining $ 0.6 million relates to the TCJA rate reduction mandated by the ACC pursuant to Rate Decision No.

REVENUE RECOGNITION

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The unbilled revenue estimate is based upon the number of unbilled days that month and the average daily customer billing rate from the previous month (which fluctuates based upon customer usage).

The Company applies the invoice practical expedient and recognizes revenue from contracts with customers in the amount for which the Company has a right to invoice.

The Company applies the invoice practical expedient and recognizes

revenue from contracts with customers in the amount for which the Company has a right to invoice.

The Company has the right to invoice for the volume of consumption, service charge, and other authorized charges.

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Disaggregated Revenues

For the three and six months ended June 30, 2022 and 2021, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

For the three and nine months ended September 30, 2022 and 2021, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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UNREGULATED REVENUE

ICFA revenues — 692 — 692

Rental revenues — — 5 47

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Our contract assets and liabilities consist of the following (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

CONTRACT ASSETS

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Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

Contracted revenue expected to be recognized in future periods was approximately $ 20.9 million and $ 19.0 million at June 30, 2022 and December 31, 2021, respectively.

Contracted revenue expected to be recognized in future periods was approximately $ 20.9 million and $ 19.0 million at September 30, 2022 and December 31, 2021, respectively.

Deferred revenue - ICFA is recognized as revenue once the obligations specified within the applicable ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred.

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There is no purchase option in the lease agreement but the Company controls and obtains substantially all of the benefit from the identified asset.

The lease does not provide an implicit borrowing rate (“IBR”), and as such, we used an estimate IBR of 2.39 % which was based on The Treasury High Quality Market Corporate Bond Yield Curve.

The lease does not provide an implicit borrowing rate (“IBR”), and as such, we used an estimated IBR of 2.39 % which was derived from The Treasury High Quality Market Corporate Bond Yield Curve.

On September 28, 2021, the Company entered into a new five-year corporate office lease agreement with a commencement date of May 1, 2022.

2 unchanged sentences

Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Right-of-use assets at June 30, 2022 and December 31, 2021 consist of the following (in thousands):

June 30, 2022 December 31, 2021

Financing Lease $ 107 $ —

Right-of-use assets at September 30, 2022 and December 31, 2021 consist of the following (in thousands):

September 30, 2022 December 31, 2021

Finance Leases $ 422 $ —

Operating Lease 1,564 —

Total $ 1,986 $ —

Lease liabilities at June 30, 2022 and December 31, 2021 consist of the following (in thousands):

June 30, 2022 December 31, 2021

Financing Lease $ 88 $ —

Lease liabilities at September 30, 2022 and December 31, 2021 consist of the following (in thousands):

September 30, 2022 December 31, 2021

Finance Leases $ 1,055 $ 341

Operating Lease 1,286 —

1 unchanged sentence

PROPERTY, PLANT AND EQUIPMENT

Property, plant, and equipment at June 30, 2022 and December 31, 2021 consist of the following (in thousands):

June 30, 2022 December 31, 2021

Property, plant, and equipment at September 30, 2022 and December 31, 2021 consist of the following (in thousands):

September 30, 2022 December 31, 2021

Plant, equipment, and water and sewer lines $ 328,374 $ 311,041

5 unchanged sentences

ACCOUNTS RECEIVABLE

Accounts receivable as of June 30, 2022 and December 31, 2021 consist of the following (in thousands):

June 30, 2022 December 31, 2021

Accounts receivable as of September 30, 2022 and December 31, 2021 consist of the following (in thousands):

September 30, 2022 December 31, 2021

Billed receivables $ 2,488 $ 2,126

2 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

The goodwill balance decreased from $ 5.8 million at March 31, 2022 to $ 5.1 million at June 30, 2022.

The goodwill balance was $ 5.1 million at September 30, 2022.

The balance is related to the Turner, Red Rock, Mirabell, Francesca, Tortolita, Lyn Lee, Las Quintas Serenas, Rincon and Twin Hawks acquisitions.

June 30, 2022, the Company reclassed approximately $ 0.8 million to regulatory assets related to acquisition premiums approved in Rate Case Decision 78644 (refer to Note 2 - "Regulatory Decision and Related Accounting and Policy Changes" for additional information).

As of June 30, 2022, the Company reclassified approximately $ 0.8 million of goodwill to regulatory assets related to Red Rock Water, Red Rock Wastewater, and Turner Ranches acquisition premiums as a result of Rate Decision No.

78644 (refer to Note 2 - "Regulatory Decision and Related Accounting and Policy Changes" for additional information).

There were no indicators of impairment identified as a result of the Company's review of events and circumstances related to its goodwill subsequent to the acquisitions.

Intangible Assets

As of June 30, 2022 and December 31, 2021, intangible assets consisted of the following (in thousands):

June 30, 2022 December 31, 2021

As of September 30, 2022 and December 31, 2021, intangible assets consisted of the following (in thousands):

September 30, 2022 December 31, 2021

Amount Accumulated

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Due to the uncertainty of the timing of when cash will be received under ICFA agreements and contract rights, we cannot reliably estimate when the remaining intangible assets' amortization will be recorded.

Amortization in the amount of $ 0.1 million was recorded for both the three and six months ended June 30, 2022, compared to $ 0.5 million recorded for both the three and six months ended June 30, 2021 .

Amortization in the amount of $ 0.1 million was recorded for both the three and nine months ended September 30, 2022, compared to $ 0.1 million and $ 0.6 million recorded for the three and nine months ended September 30, 2021, respectively .

TRANSACTIONS WITH RELATED PARTIES

The Company provides medical benefits to our employees through our participation in a pooled plan sponsored by an affiliate of a significant shareholder and director of the Company.

Medical claims paid to the plan were approximately $ 0.2 million for both the three months ended June 30, 2022 and 2021.

Medical claims paid to the plan were approximately $ 0.3 million for both the six months ended June 30, 2022 and 2021.

Refer to Note 16 — "Subsequent Events — Public Offering of Common Stock" for additional information regarding other related party disclosures.

Medical claims paid to the plan were approximately $ 0.4 million and $ 0.2 million for the three months ended September 30, 2022 and 2021, respectively.

Medical claims paid to the plan were approximately $ 0.7 million and $ 0.5 million for the nine months ended September 30, 2022 and 2021, respectively.

Refer to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions — Public Offering of Common Stock" for additional information regarding other related party disclosures.

ACCRUED EXPENSES

Accrued expenses at June 30, 2022 and December 31, 2021 consist of the following (in thousands):

June 30, 2022 December 31, 2021

Accrued expenses at September 30, 2022 and December 31, 2021 consist of the following (in thousands):

September 30, 2022 December 31, 2021

Deferred compensation $ 680 $ 1,211

13 unchanged sentences

• Level 3 - Unobservable inputs developed using the Company's estimates and assumptions, which reflect those that the Company believes market participants would use.

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 were as follows (in thousands):

June 30, 2022 December 31, 2021

Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 were as follows (in thousands):

September 30, 2022 December 31, 2021

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

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year of the first meter installation, total new accounts per year, years to complete full build out, and discount rate.

The outstanding balances and maturity dates for short-term (including the current portion of long-term debt) and long-term debt as of June 30, 2022 and December 31, 2021 are as follows (in thousands):

June 30, 2022 December 31, 2021

The outstanding balances and maturity dates for short-term (including the current portion of long-term debt) and long-term debt as of September 30, 2022 and December 31, 2021 are as follows (in thousands):

September 30, 2022 December 31, 2021

Short-term Long-term Short-term Long-term

5 unchanged sentences

3,833 107,333 3,833 109,250

Capital lease obligations 129 141 142 199

Debt issuance costs — ( 482 ) — ( 516 )

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Series B carries a principal balance of $ 86.3 million and bears an interest rate of 4.58 % over a 20 -year term.

Series B is interest only for the first five years , with $ 1.9 million principal payments paid semiannually thereafter beginning December 2021.

The proceeds of the senior secured notes were primarily used to refinance the previously outstanding long-term tax exempt bonds, which were subject to an early redemption option at 103 %, plus accrued interest, as a result of our initial public offering in the United States.

As part of the refinancing of the long-term debt, the Company paid a prepayment penalty of $ 3.2 million and wrote off the remaining $ 2.2 million in capitalized loan fees related to the tax exempt bonds, which were recorded as additional interest expense in the second quarter of 2016.

Series B was interest only for the first five years , with $ 1.9 million principal payments paid semiannually thereafter beginning December 2021.

The senior secured notes are collateralized by a security interest in the Company’s equity interest in its subsidiaries, including all payments representing profits and qualifying distributions.

Debt issuance costs totaled $ 0.5 million as of both June 30, 2022 and December 31, 2021.

Debt issuance costs totaled $ 0.5 million as of both September 30, 2022 and December 31, 2021.

The senior secured notes require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00.

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The debt service ratio increases to 1.25 for any fiscal quarter during the period from and after June 30, 2024.

As of June 30, 2022, the Company was in compliance with its financial debt covenants.

As of September 30, 2022, the Company was in compliance with its financial debt covenants.

Revolving Line of Credit

3 unchanged sentences

On April 30, 2021, the Company and The Northern Trust Company entered into an amendment to the Northern Trust Loan Agreement pursuant to which, among other things, the maturity date for the Company's revolving line of credit was extended from April 30, 2022 to April 30, 2024.

As of June 30, 2022, the Company had no outstanding borrowings under this credit line.

There were $ 14,000 and $ 17,000 unamortized debt issuance costs as of June 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022, the Company had no outstanding borrowings under this credit line.

There were $ 12,000 and $ 17,000 unamortized debt issuance costs as of September 30, 2022 and December 31, 2021, respectively.

The Northern Trust Loan Agreement requires the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00.

1 unchanged sentence

However, for the quarter ending June 30, 2021 through the quarter ending March 31, 2024, the debt service ratio drops to 1.20 .

As of June 30, 2022, the Company was in compliance with its financial debt covenants.

On July 26, 2022, the Company and The Northern Trust Company entered into a second amendment to the loan agreement, which, among other things, further extended the maturity date for the revolving line of credit to July 1, 2024, increased the maximum principal amount available for borrowing to $ 15.0 million and replaced the LIBOR interest rate provisions.

Refer to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements " for additional information regarding the revolving credit line amendment.

At June 30, 2022, the remaining aggregate annual maturities of debt and minimum lease payments under capital lease obligations for the years ended December 31 are as follows (in thousands):

Debt Capital Lease

Remaining six months of 2022 $ 1,917 $ 66

As of September 30, 2022, the Company was in compliance with its financial debt covenants.

On July 26, 2022, the Company and The Northern Trust Company entered into the Second Modification Agreement, which, among other things, further extended the maturity date for the revolving line of credit to July 1, 2024, increased the maximum principal amount available for borrowing to $ 15.0 million and replaced the LIBOR interest rate provisions.

Refer to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements - Corporate Transactions - Revolving Line of Credit " for additional information regarding the Second Modification Agreement.

At September 30, 2022, the remaining aggregate annual maturities of debt and minimum lease payments under finance lease obligations for the years ended December 31 are as follows (in thousands):

Debt Finance Lease

Remaining three months of 2022 $ 1,917 $ 234

2023 3,833 485

1 unchanged sentence

2025 3,833 563

2026 3,833 593

Thereafter 93,917 22

2 unchanged sentences

Total $ 111,166 $ 2,341

During the three months ended June 30, 2022, the Company recorded a tax benefit of $ 0.2 million.

The tax expense calculated on pre-tax income of $ 2.0 million for the three months ended June 30, 2022 was $ 0.5 million, offset by approximately $ 0.7 million from the reversal of the regulatory liability related to Rate Decision No.

During the three months ended September 30, 2022, the Company recorded a tax expense of $ 0.6 million on pre-tax income of $ 2.3 million.

Tax expense of $ 0.3 million was recorded on pre-tax income of $ 1.8 million for the three months ended September 30, 2021.

During the nine months ended September 30, 2022, the Company recorded a tax expense of $ 0.8 million.

Refer to Note 2 — "Regulatory Decision and Related Accounting and Policy Changes" for additional information.

Tax expense of $ 0.6 million was recorded on pre-tax income of $ 2.6 million for the three months ended June 30, 2021.

During the six months ended June 30, 2022, the Company recorded a tax expense of $ 0.2 million.

The tax expense calculated on pre-tax income of $ 3.2 million for the six months ended June 30, 2022, was approximately $ 0.9 million, offset by approximately $ 0.7 million from the reversal of the regulatory liability.

Tax expense of $ 0.6 million was recorded on pre-tax income of $ 2.4 million for the six months ended June 30, 2021.

The tax expense calculated on pre-tax income of $ 5.5 million for the nine months ended September 30, 2022, was approximately $ 0.8 million, offset by approximately $ 0.7 million from the reversal of the regulatory liability.

Tax expense of $ 0.9 million was recorded on pre-tax income of $ 4.2 million for the nine months ended September 30, 2021.

The income tax provision was computed based on the Company’s estimated effective tax rate and forecasted income expected for the full year, including the impact of any unusual, infrequent, or non-recurring items.

The Company's effective tax rate decreased during the three and six months ended June 30, 2022 due to the exercise and vesting of stock-based compensation in 2021, resulting in windfall tax benefits.

The Company's effective tax rate decreased during the three and nine months ended September 30, 2022 due to the exercise and vesting of stock-based compensation in 2021, resulting in windfall tax benefits.

DEFERRED COMPENSATION AWARDS

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2017 stock option grant

Stock-based compensation expense of zero and $ 67 ,000 was recorded for the three months ended June 30, 2022 and 2021, respectively, and zero and $ 131 ,000 was recorded for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, there were 320,321 options outstanding and no options were exercised or forfeited during the three months ended June 30, 2022.

Stock-based compensation expense of $ 0.0 and $ 29 ,000 was recorded for the three months ended September 30, 2022 and 2021, respectively, and $ 0.0 and $ 160 ,000 was recorded for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, there were 318,321 options outstanding and 2,000 options were exercised with no forfeitures during the three months ended September 30, 2022.

2019 stock option grant

Stock-based compensation expense of $ 45 ,000 and $ 48 ,000 was recorded for the three months ended June 30, 2022 and 2021, respectively, and $ 90 ,000 and $ 95 ,000 was recorded for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, there were 242,892 options outstanding and no options were exercised or forfeited during the three months ended June 30, 2022.

Stock-based compensation expense of $ 45 ,000 and $ 23 ,000 was recorded for the three months ended September 30, 2022 and 2021, respectively, and $ 135 ,000 and $ 118 ,000 was recorded for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, there were 199,910 options outstanding and no options were exercised or forfeited during the three months ended September 30, 2022.

Phantom stock/Restricted stock units compensation

The following table details total awards granted and the number of units outstanding as of June 30, 2022 along with the amounts paid to holders of the phantom stock units ("PSUs") and/or restricted stock units ("RSUs") for the three and six months ended June 30, 2022 and 2021 (in thousands, except unit amounts):

Amounts Paid For the Three Months Ended June 30, Amounts Paid For the Six Months Ended June 30,

The following table details total awards granted and the number of units outstanding as of September 30, 2022 along with the amounts paid to holders of the phantom stock units ("PSUs") and/or restricted stock units ("RSUs") for the three and nine months ended September 30, 2022 and 2021 (in thousands, except unit amounts):

Amounts Paid For the Three Months Ended September 30, Amounts Paid For the Nine Months Ended September 30,

Grant Date Units Granted Units Outstanding 2022 2021 2022 2021

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Stock appreciation rights compensation

The following table details the recipients of the stock appreciation rights (“SARs”) awards, the grant date, units granted, exercise price, outstanding units as of June 30, 2022 and amounts paid during the three and six months ended June 30, 2022 and 2021 (in thousands, except unit and per unit amounts):

Amounts Paid For the Three Months Ended June 30, Amounts Paid For the Six Months Ended June 30,

The following table details the recipients of the stock appreciation rights (“SARs”) awards, the grant date, units granted, exercise price, outstanding units as of September 30, 2022 and amounts paid during the three and nine months ended September 30, 2022 and 2021 (in thousands, except unit and per unit amounts):

Amounts Paid For the Three Months Ended September 30, Amounts Paid For the Nine Months Ended September 30,

Recipients Grant Date Units Granted Exercise Price Units Outstanding 2022 2021 2022 2021

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Q1 2015 299,000 $ 4.26 65,500 — — 62 269

Key Executives (3)(4)

Q2 2015 300,000 $ 5.13 — — — — —

Members of Management (1)(3)

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Total 435,000 90,750 $ — $ 510 $ 62 $ 779

(1) The SARs vest ratably over 16 quarters from the grant date.

(1) The SARs vested ratably over 16 quarters from the grant date.

(2) The exercise price was determined to be the fair market value of one share of GWRC stock on the grant date of February 11, 2015.

(3) The SARs vest over 16 quarters, vesting 20 % per year for the first three years, with the remainder, 40 %, vesting in year four.

(4) The exercise price was determined to be the fair market value of one share of GWRC stock on the grant date of May 8, 2015.

(3) The exercise price was determined to be the fair market value of one share of GWRI stock on the grant date of August 10, 2017.

(4) The exercise price was determined to be the fair market value of one share of GWRI stock on the grant date of March 12, 2018.

For the three months ended June 30, 2022 and 2021, the Company recorded approximately $ 0.2 million of negative compensation expense and $ 0.4 million of compensation expense related to the PSUs/RSUs and SARs, respectively.

For the six months ended June 30, 2022 and 2021, the Company recorded approximately $ 0.1 million of negative compensation expense and $ 0.7 million of compensation expense related to the PSUs/RSUs and SARs, respectively.

For the three months ended September 30, 2022 and 2021, the Company recorded approximately $ 0.1 million of negative compensation expense and $ 0.4 million of compensation expense related to the PSUs/RSUs and SARs, respectively.

For the nine months ended September 30, 2022 and 2021, the Company recorded approximately $ 0.2 million of negative compensation expense and $ 1.1 million of compensation expense related to the PSUs/RSUs and SARs, respectively.

These are liability awards, so when the stock price decreases, cumulative compensation expense is reduced, which can lead to negative compensation in a given period.

Based on GWRI’s closing share price on June 30, 2022 (the last trading date of the quarter), deferred compensation expense to be recognized over future periods is estimated for the years ending December 31 as follows (in thousands):

Remaining six months of 2022 $ 163 $ —

Based on GWRI’s closing share price on September 30, 2022 (the last trading date of the quarter), deferred compensation expense to be recognized over future periods is estimated for the years ending December 31 as follows (in thousands):

PSUs/RSUs SARs

Remaining three months of 2022 $ 72 $ 3

Total $ 435 $ 27

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The Company assumes that forfeitures will be minimal and recognizes forfeitures as they occur, which results in a reduction in compensation expense.

During the three and six months ended June 30, 2022, no RSAs were issued.

For the three and six months ended June 30, 2022, the Company recorded approximately $ 0.3 million and $ 0.7 million of compensation expense related to the RSAs, respectively.

For the three and six months ended June 30, 2021, the Company recorded approximately $ 0.3 million and $ 0.5 million of compensation expense related to the grant and partial vesting of RSAs.

The following table summarizes the RSA transactions as of the three months ended June 30, 2022:

During the three and nine months ended September 30, 2022, no RSAs were granted.

For the three and nine months ended September 30, 2022, the Company recorded approximately $ 0.3 million and $ 0.9 million of compensation expense related to the partial vesting of RSAs, respectively.

For the three and nine months ended September 30, 2021, the Company recorded approximately $ 0.3 million and $ 0.8 million of compensation expense related to the grant and partial vesting of RSAs, respectively.

The following table summarizes the RSA transactions as of the three months ended September 30, 2022:

Number of RSAs Weighted Average Fair Value

1 unchanged sentence

Stock units vested and issued 2,333 14.40

Granted 83,500 14.02

Forfeited 2,500 —

1 unchanged sentence

SUPPLEMENTAL CASH FLOW INFORMATION

The following is supplemental cash flow information for the six months ended June 30, 2022 and 2021 (in thousands):

For the Six Months Ended June 30,

The following is supplemental cash flow information for the nine months ended September 30, 2022 and 2021 (in thousands):

For the Nine Months Ended September 30,

Supplemental cash flow information:

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As such, the Company's monthly rent expense increased to approximately $ 16,000 .

Rent expense arising from the operating leases totaled approximately $ 71 ,000 and $ 48 ,000 for the three months ended June 30, 2022 and 2021, respectively, and $ 127 ,000 and $ 93 ,000 for the six months ended June 30, 2022 and 2021, respectively.

We entered into a new five-year corporate office lease agreement with a commencement date of May 1, 2022.

In May 2022, the Company entered into a new five-year corporate office lease agreement with a commencement date of May 1, 2022.

The new monthly rent expense increased to $ 23,750 for each full calendar month commencing on May 1, 2022 through April 30, 2025 and will increase to $ 41,572 for each calendar month commencing on May 1, 2025 through April 30, 2027.

On March 1, 2022 we amended the terms of the lease to incorporate construction of tenant improvements.

Should we incur additional costs in excess of the landlord improvement allowance, we will have the option of paying the expenses at time of possession or amortized over the lease term as additional rent at three percent cost of funds.

On March 1, 2022, the Company amended the terms of the lease to incorporate construction of tenant improvements.

Should the Company incur additional costs in excess of the landlord improvement allowance, the Company will have the option of paying the expenses at time of possession or amortized over the lease term as additional rent at three percent cost of funds.

Rent expense arising from the operating leases totaled approximately $ 97,000 and $ 51,000 for the three months ended September 30, 2022 and 2021, respectively, and $ 223,000 and $ 144,000 for the nine months ended September 30, 2022 and 2021, respectively.

Contingencies

2 unchanged sentences

SUBSEQUENT EVENTS

The Company has evaluated subsequent events through August 10, 2022, which is the date the financial statements was available to be issued and also the filing date.

The Company has evaluated subsequent events through November 9, 2022, which is the date the financial statements was available to be issued and also the filing date.

There are no other subsequent events that require disclosure, except for the following:

Public Offering of Common Stock

On August 1, 2022, the Company completed a public offering of 1,150,000 shares of common stock at $ 13.50 per share, which includes 150,000 shares issued and sold to the underwriter following the exercise in full of its option to purchase additional shares of common stock.

The gross proceeds to the Company from the offering were approximately $ 15.5 million before deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

Certain directors and/or their affiliates purchased an aggregate of the 652,000 shares of common stock offered at the public offering price.

Rate Case Approval of Consolidation

On July 27, 2022, the ACC issued Rate Decision No.

78644 relating to the Company's recent rate case.

Pursuant to Rate Decision No.

78644, the ACC approved the consolidation of certain water utility companies and certain wastewater utility companies.

On November 9, 2022, the Arizona Corporation Commission verbally approved Global Water’s proposed acquisition of Farmers Water Co., a signed order is anticipated to be received by the end of the year.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements