What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-05-03 · 202 added, 188 removed, 550 unchanged (41% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

PROPERTY, PLANT AND EQUIPMENT:

45 unchanged sentences

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

24,095,139 and 24,095,139 shares issued as of March 31, 2023 and December 31, 2022, respectively.

Treasury stock, 224,093 and 224,093 shares at March 31, 2023 and December 31, 2022, respectively.

24,477,252 and 24,095,139 shares issued as of June 30, 2023 and December 31, 2022, respectively.

Treasury stock, 306,735 and 224,093 shares at June 30, 2023 and December 31, 2022, respectively.

Paid in capital 47,101 44,157

3 unchanged sentences

See accompanying notes to the condensed consolidated financial statements

T a b l e o f C o n t e n t s

GLOBAL WATER RESOURCES, INC.

1 unchanged sentence

(in thousands, except share and per share amounts)

Three Months Ended March 31,

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

2023 2022 2023 2022

Water services $ 6,557 $ 5,682 $ 11,396 $ 10,030

11 unchanged sentences

Allowance for equity funds used during construction 216 — 515 —

Allowance for borrowed funds used during construction 128 121

Other - Net 525 552 948 1,626

1 unchanged sentence

INCOME BEFORE INCOME TAXES 2,470 1,957 5,801 3,189

INCOME TAX (EXPENSE) ( 865 ) ( 343 )

INCOME TAX BENEFIT (EXPENSE) ( 731 ) 150 ( 1,596 ) ( 193 )

NET INCOME $ 1,739 $ 2,107 $ 4,205 $ 2,996

6 unchanged sentences

See accompanying notes to the condensed consolidated financial statements

T a b l e o f C o n t e n t s

GLOBAL WATER RESOURCES, INC.

9 unchanged sentences

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

Dividend declared $ 0.07 per share

— — — — 433 ( 2,107 ) ( 1,674 )

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

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

Stock compensation — — — — 45 — 45

Net income — — — — — 2,107 2,107

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

BALANCE - December 31, 2022 24,095,139 239 ( 224,093 ) ( 2 ) 44,157 — 44,394

4 unchanged sentences

BALANCE - March 31, 2023 24,095,139 239 ( 224,093 ) ( 2 ) 44,456 688 45,381

Dividend declared $ 0.07 per share

— — — — ( 55 ) ( 1,739 ) ( 1,794 )

Issuance of Common Stock 230,000 1 — — 2,747 — 2,748

Treasury stock — — ( 82,642 ) — — — —

Stock option exercise 152,113 — — — — — —

Stock compensation — — — — ( 47 ) — ( 47 )

Net income — — — — — 1,739 1,739

BALANCE - June 30, 2023 24,477,252 $ 240 ( 306,735 ) $ ( 2 ) $ 47,101 $ 688 $ 48,027

See accompanying notes to the condensed consolidated financial statements

T a b l e o f C o n t e n t s

GLOBAL WATER RESOURCES, INC.

1 unchanged sentence

(Unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

6 unchanged sentences

(Gain) Loss on disposal of fixed assets ( 66 ) ( 5 )

Provision for doubtful accounts receivable 19 26

Provision for credit losses 35 32

Deferred income tax expense 1,090 301

9 unchanged sentences

Cash paid for acquisitions, net of cash acquired ( 6,246 ) ( 121 )

Other cash flows from investing activities — ( 24 )

Net cash used in investing activities ( 19,939 ) ( 14,783 )

2 unchanged sentences

Advances in aid of construction 420 1,789

Refunds of advances for construction — ( 91 )

Refunds of developer taxes ( 5 ) —

Proceeds from stock option exercise — 3

Payments for taxes related to net shares settlement of equity awards ( 357 ) —

Principal payments under finance lease ( 258 ) ( 28 )

Line of credit borrowings, net 6,765 —

Loan borrowings 253 —

Loan repayments — ( 233 )

Repayments of bond ( 1,917 ) ( 1,917 )

Proceeds from sale of stock 2,748 —

Net cash provided by (used in) financing activities 4,077 ( 3,820 )

4 unchanged sentences

Supplemental disclosure of cash flow information:

Three Months Ended March 31,

Six Months Ended June 30,

Cash and cash equivalents $ 2,007 $ 4,791

1 unchanged sentence

Total cash, cash equivalents, and restricted cash $ 4,355 $ 6,716

T a b l e o f C o n t e n t s

GLOBAL WATER RESOURCES, INC.

3 unchanged sentences

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

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 are unaudited.

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 are unaudited.

The December 31, 2022 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.

4 unchanged sentences

In the Company’s 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 months ended March 31, 2023 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 six months ended June 30, 2023 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”).

4 unchanged sentences

Arizona Corporation Commission (“ACC”) Rate Case

On June 27, 2023, seven of the Company’s 13 regulated utilities each filed a rate case application with the ACC for water rates based on a 2022 test year.

In addition to a rate increase, the Company requested, among other things, the consolidation of water rates for certain of its utilities, including Global Water-Mirabell Water Company, Inc.

(“Mirabell”), Global Water-Lyn Lee Water Company, Inc.

(“Lyn Lee”), Global Water-Francesca Water Company, Inc.

(“Francesca”), Global Water-Tortolita Water Company, Inc.

(“Tortolita”), Global Water-Rincon Water Company, Inc.

(“Rincon”), Global Water-Las Quintas Serenas Water Company, Inc.

(“Las Quintas Serenas”), and Global Water-Red Rock Water Company, Inc.

(“Red Rock”), each located in Pima County.

Of the Company’s utilities, these utilities filing rate applications make up approximately 3 % of the Company’s active service connections.

There can be no assurance that the ACC will approve the requested rate increase or any increase or the consolidation of water rates described above, and the ACC could take other actions as a result of the rate case.

Further, it is possible that the ACC may determine to decrease future rates.

There can also be no assurance as to the timing of when an approved rate increase (if any) would go into effect.

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

78644 relating to the Company's recent rate case.

78644 relating to the Company’s previous rate case.

Pursuant to Rate Decision No.

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;

(ii) acquisition premiums relating to the Company’s acquisitions of its Red Rock and Global Water-Turner Ranches Irrigation, Inc.

(“Turner Ranches”) utilities, which increase the rate base for such utilities and result in an increase in the annual collective revenue requirement ;

(iii) the Company’s ability to annually adjust rates to flow through certain changes in tax expense, primarily related to income taxes, without the necessity of a rate case proceeding;

1 unchanged sentence

Refer to Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” for additional information.

Private Placement Offering of Common Stock

On June 8, 2023, the Company entered into a securities purchase agreement for the issuance and sale by the Company of an aggregate of 230,000 shares of the Company’s common stock at a purchase price of $ 12.07 per share in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder.

The Company received gross proceeds of approximately $ 2.8 million from the offering.

One of the Company’s directors purchased an aggregate of 30,000 shares of common stock in the offering at the purchase price.

Public Offering of Common Stock

1 unchanged sentence

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.

Recent Acquisitions

On February 1, 2023, the Company acquired all of the equity of Farmers Water Co.

("Farmers"), an operator of a water utility with service area in Pima County, Arizona.

The acquisition added approximately 3,300 active water service connections and approximately 21.5 square miles service area in Sahuarita, Arizona and the surrounding unincorporated area of Pima County at the time of the acquisition.

T a b l e o f C o n t e n t s

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

Stipulated Condemnation of the Operations and Assets of Valencia Water Company, Inc.

3 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 $ 0.4 million and $ 1.1 million for the three months ended March 31, 2023 and 2022, respectively.

The Company received growth premiums of $ 0.5 million for both the three months ended June 30, 2023 and 2022 and $ 0.9 million and $ 1.6 million for the six months ended June 30, 2023 and 2022, respectively.

Significant Accounting Policies

4 unchanged sentences

A reconciliation of the denominator used in basic and diluted EPS calculations is shown in the following table:

(In thousands) March 31, 2023 March 31, 2022

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

(In thousands) 2023 2022 2023 2022

Basic weighted average common shares outstanding 23,958 22,687 23,915 22,668

10 unchanged sentences

Recently Adopted Accounting Standards

In June of 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which changed the impairment model for certain financial assets that have a contractual right to receive cash, including trade and loan receivables.

The new model required recognition based upon an estimation of expected credit losses rather than recognition of losses based on the probability of occurrence.

The Company is a Public Business Entities that is a Smaller Reporting Companies, and therefore ASU 2016-13 was effective for annual reporting periods beginning after December 15, 2022 .

The Company is a public business entity that qualifies as a smaller reporting company, and therefore ASU 2016-13 was effective for annual reporting periods beginning after December 15, 2022.

The Company adopted the standard utilizing the modified retrospective method for its trade receivables and unbilled revenue on January 1, 2023.

Based on the composition of the Company’s trade receivables and unbilled revenue, and expected future losses, the adoption of ASU 2016-13 is not expected to have a material impact on its consolidated financial statements.

Based on the composition of the Company’s trade receivables and unbilled revenue, and expected future losses, the adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements.

REGULATORY DECISION AND RELATED ACCOUNTING AND POLICY CHANGES

The Company's regulated utilities and certain other balances are subject to regulation by the ACC and meet the requirements for regulatory accounting found within ASC 980, Regulated Operations .

The Company’s regulated utilities and certain other balances are subject to regulation by the ACC and meet the requirements for regulatory accounting found within Accounting Standards Codification (“ASC 980”), Regulated Operations .

In accordance with ASC 980, rates charged to utility customers are intended to recover the costs of the provision of service plus a reasonable return in the same period.

Changes to the rates are made through formal rate applications with the ACC, which the Company has done for all of the operating utilities and which are described below.

T a b l e o f C o n t e n t s

On or after July 1, 2023, the water processing facility and part of the wastewater processing facility of the Southwest Plant was placed in service with the remaining parts of the plant to be placed in service once sufficient flows are established.

The Southwest Plant was substantially constructed prior to 2009 to process water, wastewater, and recycled water for the area southwest of the City of Maricopa.

Due to the unprecedented collapse of the housing market during the Great Recession, the nearly completed plant remained idle for well over a decade.

The total cost of the plant was approximately $ 38.4 million.

Also, on July 3, 2023, Global Water-Palo Verde Utilities Company, Inc.

(“Palo Verde”) and Global Water-Santa Cruz Water Company, Inc.

(“Santa Cruz”) filed an application with the ACC for approval of an accounting order to defer and record as a regulatory asset the depreciation expense recorded for the Southwest Plant, plus the carrying cost at the authorized rate of return set in Palo Verde’s and Santa Cruz’s most recent rate order, until the plant is considered for recovery in the utilities’ next rate case.

There can be no assurance, however, that the ACC will approve the application as submitted and the ACC could take other actions regarding the application.

On June 27, 2023, seven of the Company’s 13 regulated utilities each filed a rate case application with the ACC for water rates based on a 2022 test year.

In addition to a rate increase, the Company requested, among other things, the consolidation of water rates for certain of its utilities, including Mirabell, Lyn Lee, Francesca, Tortolita, Rincon, Las Quintas Serenas, and Red Rock, each located in Pima County.

Of the Company’s utilities, these utilities filing rate applications make up approximately 3 % of the Company’s active service connections.

Further, it is possible that the ACC may determine to decrease future rates.

There can also be no assurance as to the timing of when an approved rate increase (if any) would go into effect.

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

78644 relating to the Company's recent rate case.

78644 relating to the Company’s previous rate case.

Pursuant to Rate Decision No.

9 unchanged sentences

The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate.

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.

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.

On September 20, 2018, the ACC issued Rate Decision No.

21 unchanged sentences

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

T a b l e o f C o n t e n t s

• 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.

2 unchanged sentences

• Write-off of approximately $ 0.3 million in capitalized rate case costs.

Infrastructure Coordination and Financing Agreements

Infrastructure Coordination and Financing Agreements (“ICFAs”) are agreements with developers and homebuilders where the Company provides services to plan, coordinate, and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder.

2 unchanged sentences

Rate Decision No.

74364 requires a hook-up fee ("HUF") tariff to be established for all ICFAs that come due and are paid subsequent to December 31, 2013, which is a set amount per equivalent dwelling unit determined by the ACC based on the utility and meter size.

74364 requires a hook-up fee (“HUF”) tariff to be established for all ICFAs that come due and are paid subsequent to December 31, 2013, which is a set amount per equivalent dwelling unit determined by the ACC based on

the utility and meter size.

In addition, since ICFA funds are generally received in installments, Rate Decision No.

8 unchanged sentences

Regulatory Assets and Liabilities

Regulatory assets and liabilities are the result of operating in a regulated environment in which the ACC establish rates that are designed to permit the recovery of the cost of service and a return on investment The Company capitalizes and records regulatory assets for costs that would otherwise be charged to expense if it is probable that the incurred costs will be recovered in future rates.

The Company capitalizes and records regulatory assets for costs that would otherwise be charged to expense if it is probable that the incurred costs will be recovered in future rates.

Regulatory assets are amortized over the future periods that the costs are expected to be recovered.

1 unchanged sentence

If the Company determines that a portion of the regulatory assets is not recoverable in customer rates, the Company would be required to recognize the loss of the assets disallowed.

If costs expected to be incurred in the future are currently being recovered through rates, the Company records those expected future costs are regulatory liabilities.

If costs expected to be incurred in the future are currently being recovered through rates, the Company records those expected future costs as regulatory liabilities.

The Company’s regulatory assets and liabilities consist of the following (in thousands):

Recovery Period March 31, 2023 December 31, 2022

Recovery Period June 30, 2023 December 31, 2022

Regulatory Assets

10 unchanged sentences

Total regulatory liabilities $ 6,361 $ 6,371

T a b l e o f C o n t e n t s

(1) The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate.

1 unchanged sentence

(2) Rate Decision No.

78644, issued July 27, 2022, approved $ 500 K in rate case expenses to be recovered through a rate case expense surcharge over a two-year period.

Rate Decision No.

78319, issued on December 3, 2021, approved an acquisition premium of $ 452 K to be amortized over 25 years related to the acquisition of Global Water - Rincon Water Company, Inc ("Rincon").

Amortization will begin once the Company finalizes the next rate case and the acquisition premium is included in customer rates.

78743, issued on October 24, 2022, approved approximately $ 0.5 million in rate case expenses to be recovered through a rate case expense surcharge over a two-year period.

(3) Decision No.

78319, issued on December 3, 2021, approved an acquisition premium to be amortized over 25 years related to the acquisition of its Rincon Utility.

Amortization will begin once the Company receives a decision on the recently filed rate case and the acquisition premium is approved to be included in customer rates.

The acquisition premium balance as of June 30, 2023 was approximately $ 0.5 million.

Rate Decision No.

78644 approved acquisition premiums totaling $ 798 K related to the acquisitions of Global Water - Turner Ranches Irrigation, Inc.

and Global Water - Red Rock Utilities Company, Inc.

78644 approved acquisition premiums of approximately $ 0.8 million related to the acquisitions of its Turner Ranches and Red Rock utilities.

Amortization began in 2022 as the acquisition premiums were included in customer rates as approved in the decision.

(4) The Acquired ICFA liability relates to the offset of intangible assets related to ICFA contracts obtained in connection with the Santa Cruz, Palo Verde, and Sonoran acquisitions.

(4) The acquired ICFA regulatory liability relates to the offset of intangible assets related to ICFA contracts obtained in connection with the Santa Cruz, Palo Verde, and Sonoran Utility Services, LLC (“Sonoran”) acquisitions.

When ICFA funds are received, a portion of the funds reduce the acquired ICFA liability as a partial offset to the amortization expense recognition of the related intangible asset.

14 unchanged sentences

Unregulated revenues represent those revenues that are not subject to the ratemaking process of the ACC.

For the three months ended March 31, 2023 and March 31, 2022, unregulated revenues are limited to imputed revenues resulting from a portion of ICFA funds received.

For the three and six months ended June 30, 2023 and June 30, 2022, unregulated revenues primarily related to the revenues recognized on a portion of ICFA funds received.

ICFAs are agreements with developers and homebuilders where the Company provides services to plan, coordinate, and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder.

3 unchanged sentences

This obligation persists regardless of connection growth.

T a b l e o f C o n t e n t s

As these arrangements are with developers and not with the end water or wastewater customer, revenue recognition coincides with the completion of our performance obligations under the agreement with the developer and the regulated utilities ability to provide fitted capacity for water and wastewater service.

As these arrangements are with developers and not with the end water or wastewater customer, revenue recognition coincides with the completion of the Company’s performance obligations under the agreement with the developer and the regulated utilities’ ability to provide fitted capacity for water and wastewater service.

Fees for these services are typically a negotiated amount per equivalent dwelling unit for the for the land legally described in the agreement, or a portion thereof.

7 unchanged sentences

74364 prescribes that 70% of funds received must be recorded as a HUF liability, with the remaining 30% to be recorded as deferred revenue, until the HUF liability is fully funded.

The Company is responsible for assuring that the full HUF tariff, which is the set amount determined by the rate decision, is funded in the HUF liability, even if it results in recording less than 30% of the overall ICFA funds as deferred revenue.

The Company is responsible for assuring that the full HUF tariff, which is the set amount determined

by the rate decision, is funded in the HUF liability, even if it results in recording less than 30% of the overall ICFA funds as deferred revenue.

Refer to Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” for additional information on the accounting treatment of HUF.

1 unchanged sentence

The Company concluded that the goods and services provided under ICFA contracts constitute a single performance obligation.

ICFA revenue is recognized at a point in time when the regulated utilities have the necessary capacity in place within its infrastructure to provide water/wastewater services to the developer.

ICFA revenue is recognized at a point in time when the regulated utilities have the necessary capacity in place within their infrastructure to provide water/wastewater services to the developer.

The Company exercises judgment when estimating the number of equivalent dwelling units that the regulated utilities have capacity to serve.

As of March 31, 2023 and December 31, 2022, ICFA deferred revenue recorded on the consolidated balance sheet totaled $ 18.8 million and $ 21.0 million, respectively, which represents deferred revenue recorded for ICFA funds received on contracts.

For the three months ended March 31, 2023, ICFA revenue recognized totaled $ 2.3 million.

No ICFA revenue was recognized for the three months ended March 31, 2022.

As of June 30, 2023 and December 31, 2022, ICFA deferred revenue recorded on the consolidated balance sheet totaled $ 19.4 million and $ 21.0 million, respectively, which represents deferred revenue recorded for ICFA funds received on contracts.

For the six months ended June 30, 2023, ICFA revenue recognized totaled $ 2.3 million.

No ICFA revenue was recognized for the three months ended June 30, 2023 or the three and six months ended June 30, 2022.

Disaggregated Revenues

For the three months ended March 31, 2023 and 2022, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):

T a b l e o f C o n t e n t s

Three Months Ended March 31,

For the three and six months ended June 30, 2023 and 2022, 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,

2023 2022 2023 2022

REGULATED REVENUE

15 unchanged sentences

ICFA revenues — — 2,268 —

Rental revenues — 5 — 5

TOTAL UNREGULATED REVENUE — 5 2,268 5

2 unchanged sentences

The Company’s contract assets and liabilities consist of the following (in thousands):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

CONTRACT ASSETS

6 unchanged sentences

Deferred revenue - ICFA $ 19,380 $ 20,974

Refund liability - regulated (2)

Total contract liabilities $ 19,380 $ 20,974

(1) The increase in accounts receivable was primarily due to increased connections through organic growth and rate increases resulting from Rate Decision No.

Refer to Note 2— "Regulatory Decision and Related Accounting and Policy Changes" for further details.

(2) The decrease in refund liability related to tax reform is due to the phase-in approach approved in Rate Decision No.

Refer to Note 2— "Regulatory Decision and Related Accounting and Policy Changes" for further details.

T a b l e o f C o n t e n t s

Remaining Performance Obligations

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 $ 18.8 million and $ 21.0 million at March 31, 2023 and December 31, 2022, respectively.

Contracted revenue expected to be recognized in future periods was approximately $ 19.4 million and $ 21.0 million at June 30, 2023 and December 31, 2022, 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.

Due to the uncertainty of future events, the Company is unable to estimate when to expect recognition of deferred revenue - ICFA.

On January 1, 2021, the Company adopted ASC 842 using the modified retrospective method.

The Company elected the practical expedient package when scoping and identifying leases.

As such, the Company has not reassessed:

1) whether any expired or existing contracts are or contain leases;

2) the lease classification for any expired or existing leases;

and 3) the initial direct costs for any existing leases.

The Company notes that this practical expedient applies to all expired or existing contracts as of the effective date of the Company's adoption.

The Company elected this practical expedient package for all lessee and lessor arrangements.

The Company measures the lease liability at the present value of future lease payments, excluding variable payments based on usage or performance, and calculates the present value using implicit rates.

1 unchanged sentence

During the year ended December 31, 2022, the Company entered into nine new finance leases for vehicles with either 48 or 60 month terms, all of which include a purchase option.

January 10, 2022, the Company entered into a five-year finance lease for office equipment which expires on January 31, 2027.

In January 2022, the Company entered into a five-year finance lease for office equipment which expires on January 31, 2027.

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

2 unchanged sentences

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 $ 93,000 and $ 55,000 for the three months ended ended March 31, 2023 and 2022, respectively.

Rent expense arising from the operating leases totaled approximately $ 98,000 and $ 71,000 for the three months ended June 30, 2023 and 2022, respectively.

Rent expense arising from the operating leases totaled approximately $ 195,000 and $ 127,000 for the six months ended June 30, 2023 and 2022, respectively.

The right-of-use (“ROU”) asset recorded represents the Company’s right to use an underlying asset for the lease term and ROU lease liability represents the Company’s obligation to make lease payments arising from the lease.

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 March 31, 2023 and December 31, 2022 consist of the following (in thousands):

March 31, 2023 December 31, 2022

Finance Leases $ 388 $ 405

ROU assets at June 30, 2023 and December 31, 2022 consist of the following (in thousands):

June 30, 2023 December 31, 2022

Financing Lease $ 371 $ 405

Operating Lease 1,346 1,486

Total $ 1,717 $ 1,891

Lease liabilities at March 31, 2023 and December 31, 2022 consist of the following (in thousands):

March 31, 2023 December 31, 2022

Finance Leases $ 542 $ 597

Lease liabilities at June 30, 2023 and December 31, 2022 consist of the following (in thousands):

June 30, 2023 December 31, 2022

Financing Lease $ 493 $ 597

Operating Lease 1,424 1,524

Total $ 1,917 $ 2,121

T a b l e o f C o n t e n t s

At June 30, 2023, the remaining aggregate annual minimum lease payments are as follows (in thousands):

Finance Lease Obligations Operating Lease Obligations

2023 (remaining period) $ 105 $ 147

Thereafter — —

Subtotal 525 1,538

amount representing interest ( 32 ) ( 114 )

Total $ 493 $ 1,424

PROPERTY, PLANT AND EQUIPMENT

Depreciable property, plant, and equipment at March 31, 2023 and December 31, 2022 consist of the following (in thousands):

March 31, 2023 December 31, 2022

Depreciable property, plant, and equipment at June 30, 2023 and December 31, 2022 consist of the following (in thousands):

June 30, 2023 December 31, 2022

Equipment $ 58,098 $ 55,178

7 unchanged sentences

ACCOUNTS RECEIVABLE

Accounts receivable as of March 31, 2023 and December 31, 2022 consist of the following (in thousands):

March 31, 2023 December 31, 2022

Accounts receivable as of June 30, 2023 and December 31, 2022 consist of the following (in thousands):

June 30, 2023 December 31, 2022

Billed receivables $ 3,260 $ 2,303

Less allowance for doubtful accounts ( 182 ) ( 164 )

Less provision for credit losses ( 199 ) ( 164 )

Accounts receivable — net $ 3,061 $ 2,139

GOODWILL AND INTANGIBLE ASSETS

The goodwill balance was $ 10.9 million at March 31, 2023 and is related to the Turner, Red Rock, Mirabell, Francesca, Tortolita, Lyn Lee, Las Quintas Serenas, Rincon, Twin Hawks, and Farmers acquisitions.

The goodwill balance was $ 10.9 million at June 30, 2023 and is related to the Turner, Red Rock, Mirabell, Francesca, Tortolita, Lyn Lee, Las Quintas Serenas, Rincon, Twin Hawks, and Farmers acquisitions.

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).

The Farmers acquisition contributed $ 6.0 million to the change in the goodwill balance (refer to Note 15 - "Acquisitions" for additional information.

The Farmers acquisition contributed approximately $ 6.0 million to the change in the goodwill balance (refer to Note 15 - “Acquisitions” 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.

As of March 31, 2023 and December 31, 2022, the goodwill balance consisted of the following (in thousands):

Goodwill balance, December 31, 2022 $ 4,957

Acquisition activity 5,956

Adjustments subsequent to acquisition date 16

Goodwill balance, March 31, 2023 $ 10,929

As of June 30, 2023 and December 31, 2022, the goodwill balance consisted of the following (in thousands):

December 31, 2022 Balance Acquisition Activity Adjustments Subsequent to Acquisition Date June 30, 2023 Balance

Goodwill $ 4,957 $ 5,956 $ — $ 10,913

Intangible Assets

Goodwill at March 31, 2023 and December 31, 2022, consisted of the following (in thousands):

T a b l e o f C o n t e n t s

March 31, 2023 December 31, 2022

As of June 30, 2023 and December 31, 2022, intangible assets consisted of the following (in thousands):

June 30, 2023 December 31, 2022

Amount Accumulated

7 unchanged sentences

Organizational costs 87 87 87 87

1,771 1,771 1,764 1,764

Total indefinite lived intangible assets 1,771 1,771 1,764 1,764

DEFINITE LIVED INTANGIBLE ASSETS:

1 unchanged sentence

Sonoran contract rights 7,406 ( 2,224 ) 5,182 7,406 ( 2,224 ) 5,182

25,384 ( 17,009 ) 8,375 25,384 ( 17,009 ) 8,375

Total definite lived intangible assets 25,384 ( 17,009 ) 8,375 25,384 ( 17,009 ) 8,375

Total intangible assets $ 27,155 $ ( 17,009 ) $ 10,146 $ 27,148 $ ( 17,009 ) $ 10,139

5 unchanged sentences

The organizational costs represent fees paid to federal or state governments for the privilege of incorporation and expenditures incident to organizing the corporation and preparing it to conduct business.

Acquired ICFAs and contract rights related to the 2005 acquisition of Sonoran Utility Services, LLC assets are amortized when cash is received in proportion to the amount of total cash expected to be received under the underlying agreements.

Acquired ICFAs and contract rights related to the 2005 acquisition of Sonoran assets are amortized when cash is received in proportion to the amount of total cash expected to be received under the underlying agreements.

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

There was no amortization recorded for these balances for both the three months ended March 31, 2023 and 2022.

There was no amortization recorded for these balances for the three and six months ended June 30, 2023 and 2022.

TRANSACTIONS WITH RELATED PARTIES

The Company provides medical benefits to employees through its 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 $ 0.1 million for both the three months ended March 31, 2023 and 2022.

Refer to Note 1 — "Description of Business, 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.

Medical claims paid to the plan were approximately $ 0.2 million for both the three months ended June 30, 2023 and 2022.

Medical claims paid to the plan were approximately $ 0.3 million for both the six months ended June 30, 2023 and 2022.

Refer to Note 1 — “Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions” (specifically the “Public Offering of Common Stock” and “Private Placement Offering of Common Stock” sections) for additional information regarding other related party disclosures.

ACCRUED EXPENSES

Accrued expenses at March 31, 2023 and December 31, 2022 consist of the following (in thousands):

T a b l e o f C o n t e n t s

March 31, 2023 December 31, 2022

Deferred compensation $ 740 $ 818

Property taxes 1,834 1,195

Accrued expenses at June 30, 2023 and December 31, 2022 consist of the following (in thousands):

June 30, 2023 December 31, 2022

Accrued project liabilities $ 1,350 $ 1,585

Interest 1,722 483

Dividend payable 593 593

Asset retirement obligation 697 697

Accrued bonus 295 557

Property taxes 1,244 1,195

Asset retirement obligations 697 697

Customer prepayments 667 588

Accrued Bonus 642 557

Dividend payable 600 593

Deferred compensation 593 818

Interest 482 483

Other taxes 476 —

Accrued professional fees 358 60

Accrued sales taxes 206 152

Accrued payroll — —

7 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 March 31, 2023 and December 31, 2022 were as follows (in thousands):

March 31, 2023 December 31, 2022

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 were as follows (in thousands):

June 30, 2023 December 31, 2022

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

16 unchanged sentences

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

T a b l e o f C o n t e n t s

The outstanding balances and maturity dates for short-term (including the current portion of long-term debt) and long-term debt as of March 31, 2023 and December 31, 2022 are as follows (in thousands):

March 31, 2023 December 31, 2022

In addition, as part of the Farmers acquisition, the Company is required to pay the seller a growth premium equal to $ 1,000 (not in thousands) for each new account established in the service area, up to a total aggregate growth premium of $ 3.5 million.

The obligation period of the growth premium commences on the closing date of the acquisition and ends ten years after the first new account for residential purposes is established on land that is, at the time of the closing date of the acquisition, undeveloped or unplatted and owned by the seller within the service area or ten years after the date of closing if a new account (as previously described) has not been established.

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, 2023 and December 31, 2022 are as follows (in thousands):

June 30, 2023 December 31, 2022

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

6 unchanged sentences

Debt issuance costs — ( 449 ) — ( 472 )

Loan Payable 45 208 — —

Total debt $ 3,878 $ 103,259 $ 3,833 $ 104,945

Debt is measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 were as follows (in thousands):

March 31, 2023 December 31, 2022

Debt is measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 as follows (in thousands):

June 30, 2023 December 31, 2022

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

8 unchanged sentences

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 March 31, 2023 and December 31, 2022.

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.

4 unchanged sentences

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

As of March 31, 2023, the Company was in compliance with its financial debt covenants.

As of June 30, 2023, the Company was in compliance with its financial debt covenants.

Revolving Credit Line

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 London Interbank Offered Rate (LIBOR) plus 2.00 % and has no unused line fee.

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 credit line was extended from April 30, 2022 to April 30, 2024.

As of March 31, 2023 and December 31, 2022, the outstanding borrowings on this credit line were $ 3.5 million and $ 0 , respectively.

There were approximately $ 8,000 and $ 9,800 unamortized debt issuance costs as of March 31, 2023 and December 31, 2022, respectively.

T a b l e o f C o n t e n t s

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

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

On July 26, 2022, the Company and Northern Trust entered into a second amendment to the Northern Trust Loan Agreement, which, among other things, further extended the scheduled maturity date for the revolving line of credit from April 30, 2024 to July 1, 2024, increased the maximum principal amount available for borrowing from $ 10.0 million to $ 15.0 million, and replaced the LIBOR interest rate provisions with provisions based on the Secured Overnight Financing Rate (SOFR).

On June 28, 2023, the Company and Northern Trust entered into a third amendment to the Northern Trust Loan Agreement, which, among other things, (i) further amended the scheduled maturity date for the revolving line of credit from July 1, 2024 to July 1, 2025 and (ii) added a quarterly facility fee equal to 0.35 % of the average daily unused amount of the revolving line of credit.

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.

The Northern Trust Loan Agreement also contains a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25 .

The Northern Trust 1.25 .

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

As of March 31, 2023, 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 amendment (the "Second Modification Agreement") to the Northern Trust Loan Agreement, which, among other things, further extended the scheduled maturity date for the revolving line of credit from April 30, 2024 to July 1, 2024, increased the maximum principal amount available for borrowing from $ 10.0 million to $ 15.0 million, and replaced the LIBOR interest rate provisions with provisions based on the Secured Overnight Financing Rate (SOFR).

In 2020, Accounting Standards Update (ASU) 2020-04 was issued establishing ASC 848, Reference Rate Reform, and in 2021 ASU 2021-01 was issued, Reference Rate Reform (Topic 848):

Scope (collectively, ASC 848).

As of June 30, 2023, the Company was in compliance with its financial debt covenants.

As of June 30, 2023 and December 31, 2022, the outstanding borrowings on this credit line were $ 6.8 million and $ 0 , respectively.

There were approximately $ 6,000 and $ 9,812 unamortized debt issuance costs as of June 30, 2023 and December 31, 2022, respectively.

In 2020, ASU 2020-04 was issued establishing ASC 848, Reference Rate Reform, and in 2021 ASU 2021-01, Reference Rate Reform (Topic 848):

Scope was issued (collectively, “ASC 848”).

ASC 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASC 848 is optional and may be elected over time as reference rate reform activities occur.

In 2022, ASU 2022-06 was issued, Deferral of the Sunset Date of Topic 848 (ASU 2022-06), to defer the sunset date of ASC 848 to December 31, 2024.

In 2022, ASU 2022-06, Deferral of the Sunset Date of Topic 848 (ASU 2022-06) was issued to defer the sunset date of ASC 848 to December 31, 2024.

ASU 2022-06 is effective immediately for all companies.

The Company continues to evaluate the impact of ASC 848.

At March 31, 2023, the remaining aggregate annual maturities of debt and minimum lease payments under finance lease obligations are as follows (in thousands):

Debt Finance Lease

2024 $ 3,800 $ 144

2025 3,789 159

2026 3,789 135

2027 3,789 95

At June 30, 2023, the remaining aggregate annual maturities of debt obligations are as follows (in thousands):

2023 (remaining period) $ 1,917

Thereafter 89,854

2 unchanged sentences

Total $ 107,137

During the three months ended March 31, 2023, tax expense of $ 0.9 million was recorded on pre-tax income of $ 3.3 million for the three months ended March 31, 2023, and tax expense of $ 0.3 million was recorded on pre-tax income of $ 1.2 million for the three months ended March 31, 2022.

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 months ended March 31, 2023.

For the three months ended June 30, 2023, the Company recorded tax expense of $ 0.7 million calculated on pre-tax income of $ 2.5 million.

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

78622 (refer to Note 2 — “Regulatory Decision and Related Accounting and Policy Changes” for additional information) resulting in a net tax benefit of $ 0.2 million.

For the six months ended June 30, 2023, the Company recorded tax expense of $ 1.6 million calculated on pre-tax income of $ 5.8 million.

For the six months ended June 30, 2022, the tax expense of $ 0.2 million was calculated on pre-tax income of $ 3.2 million, which was partially offset by approximately $ 0.7 million from the reversal of the regulatory liability related to Rate Decision No.

78622 as described above.

DEFERRED COMPENSATION AWARDS

4 unchanged sentences

2017 stock option grant

T a b l e o f C o n t e n t s

In August 2017, GWRI’s Board of Directors granted stock options to acquire 465,000 shares of GWRI’s common stock to employees throughout the Company.

4 unchanged sentences

As of August 2021, these options were fully expensed.

As of March 31, 2023, 77,454 options have been exercised and 69,225 options have been forfeited with 318,321 options outstanding.

As of June 30, 2023, 127,454 options have been exercised and 64,625 options have been forfeited with 268,321 options outstanding.

2019 stock option grant

4 unchanged sentences

The Company will expense the $ 0.8 million fair value of the stock option grant ratably over the four-year vesting period.

Stock-based compensation expense of $ 0.04 million and $ 0.05 million was recorded for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, 27,217 options have been exercised and 23,782 options have been forfeited with 199,001 options outstanding.

A summary of stock option activity is as follows (in thousands, except option prices and years):

Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value

Options Outstanding at December 31, 2021 520 $ 10.12 6.6 $ 3,635.4

Options Vested at December 31, 2021 420 $ 9.84 6.2 $ 3,050.9

Exercised ( 2 ) $ 9.61

Forfeited — $ 11.26

Options Outstanding at December 31, 2022 518 $ 10.12 5.4 $ 1,638.4

Options Vested at December 31, 2022 468 $ 10.00 5.3 $ 1,537.6

Exercised ( 1 ) $ 11.26

Options Outstanding at March 31, 2023 517 $ 10.12 5.2 $ 1,198.1

Options Vested at March 31, 2023 468 $ 9.99 5.0 $ 1,139.7

Stock-based compensation expense of $ 29,000 and $ 45,000 was recorded for the three months ended June 30, 2023 and 2022, respectively, and $ 72,000 and $ 90,000 was recorded for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, 42,217 options have been exercised and 28,782 options have been forfeited with 179,001 options outstanding.

Phantom stock/Restricted stock units compensation

1 unchanged sentence

The units are credited quarterly using the closing price of the Company’s common stock on the applicable record date for the respective quarter.

The following table details total awards granted and the number of units outstanding as of March 31, 2023, along with the amounts paid to holders of the phantom stock units ("PSUs") and/or restricted stock units ("RSUs") for the years ended March 31, 2023 and 2022 (in thousands, except unit amounts):

Amounts Paid For the Three Months Ended March 31,

The following table details total awards granted and the number of units outstanding as of June 30, 2023, along with the amounts paid to holders of the phantom stock units (“PSUs”) and/or restricted stock units (“RSUs”) for the years ended June 30, 2023 and 2022 (in thousands, except unit amounts):

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

Grant Date Units Granted Units Outstanding 2023 2022 2023 2022

5 unchanged sentences

Total 134,702 47,515 $ 83 $ 97 $ 137 $ 210

T a b l e o f C o n t e n t s

(1) Pursuant to the Global Water Resources, Inc.

1 unchanged sentence

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 March 31, 2023 and amounts paid during the three months ended March 31, 2023 and 2022 (in thousands, except unit and per unit amounts):

Amounts Paid For the Three Months Ended March 31,

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, 2023 and amounts paid during the three and six months ended June 30, 2023 and 2022 (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,

Recipients Grant Date Units Granted Exercise Price Units Outstanding 2023 2022 2023 2022

1 unchanged sentence

Q1 2015 299,000 $ 4.26 45,500 — $ 165 $ 62

Key Executives (2)(4)

Q2 2015 300,000 $ 5.13 — — —

Members of Management (1)(3)

7 unchanged sentences

(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 March 31, 2023 and 2022, the Company recorded approximately $ 0.0 million and $ 0.1 million of compensation expense related to the PSUs/RSUs and SARs, respectively.

For the three months ended June 30, 2023 and 2022, the Company recorded approximately $ 0.1 million and $ 0.1 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 March 31, 2023 (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):

Based on GWRI’s closing share price on June 30, 2023 (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):

Restricted stock compensation

4 unchanged sentences

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 months ended March 31, 2023, no RSAs were issued.

The Company recorded approximately $ 0.3 million of compensation expense related to the grant and partial vesting of RSAs for the three months ended March 31, 2023.

During the three months ended March 31, 2022, no RSAs were issued.

The Company recorded approximately $ 0.3 million of compensation expense related to the grant and partial vesting of RSAs for the three months ended March 31, 2022.

The following table summarizes the RSA transactions for the three months ended March 31, 2023:

Number of RSAs Weighted Average Fair Value

Nonvested RSAs at the beginning of period 192,467 $ 14.88

Forfeited 1,067 14.13

Nonvested RSAs at the end of period 191,400 $ 14.88

T a b l e o f C o n t e n t s

During the three months ended June 30, 2023, no RSAs were issued.

For the three and six months ended June 30, 2023, the Company recorded approximately $ 0.3 million and $ 0.5 million of compensation expense related to the grant and partial vesting of RSAs, respectively.

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

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

SUPPLEMENTAL CASH FLOW INFORMATION

The following is supplemental cash flow information for the three months ended March 31, 2023 and 2022 (in thousands):

For the Three Months Ended March 31,

The following is supplemental cash flow information for the six months ended June 30, 2023 and 2022 (in thousands):

For the Six Months Ended June 30,

Supplemental cash flow information:

4 unchanged sentences

Acquisition of Farmers Water Company

On February 1, 2023, the Company acquired all of the equity of Farmers Water Co., an operator of a water utility with service area in Pima County, Arizona, for a total consideration of $ 7.6 million;

$ 6.2 million in cash plus a growth premium estimated at $ 1.4 million.

The acquisition added approximately 3,300 active water service connections and approximately 21.5 square miles of CC&N service area in Sahuarita, Arizona and the surrounding unincorporated area of Pima County.

On February 1, 2023, the Company acquired all of the equity of Farmers, an operator of a water utility with service area in Pima County, Arizona, for a total consideration of $ 7.6 million consisting of $ 6.2 million in cash plus a growth premium estimated at $ 1.4 million.

The acquisition added approximately 3,300 active water service connections and approximately 21.5 square miles of service area in Sahuarita, Arizona and the surrounding unincorporated area of Pima County.

The acquisition was accounted for as a business combination under ASC 805, “Business Combinations” and the purchase price was allocated to the acquired utility assets and liabilities based on the acquisition-date fair values.

5 unchanged sentences

Under the terms of the purchase agreement, the Company is obligated to pay the seller a growth premium equal to $ 1,000 for each new account established in the service area, up to a total aggregate growth premium of $ 3.5 million.

The obligation period of the growth premium commences on the closing date of the acquisition and ends ten years after the first new account for residential purposes is established on land that is, at the time of the closing date of the acquisition, undeveloped or un-platted and owned by the seller within the service area or ten years after the date of closing if a new account (as previously described) has not been established.

T a b l e o f C o n t e n t s

The obligation period of the growth premium commences on the closing date of the acquisition and ends (i) ten years after the first new account for residential purposes is established on land that is, at the time of the closing date of the acquisition, undeveloped or unplatted and owned by the seller within the service area or (ii) ten years after the date of closing if a new account (as described above) has not been established.

A preliminary purchase price allocation of the net assets acquired in the transaction is as follows (in thousands):

18 unchanged sentences

As a result, during the one-year measurement period from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Any adjustments subsequent to the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, will be recorded to the Company’s Condensed Consolidated Statements of Operations.

Any adjustments subsequent to the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, will be recorded in the Company’s Condensed Consolidated Statements of Operations.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

Under the terms of the purchase agreement, the Company is obligated to pay to the seller a growth premium equal to $ 750 for each new account established within three specified growth premium areas, commencing in each area on the date of the first meter installation and ending on the earlier of ten years after such first installation date or twenty years from the acquisition date.

As of March 31, 2023, no meters have been installed and no accounts have been established in any of the three growth premium areas.

As of June 30, 2023, no meters have been installed and no accounts have been established in any of the three growth premium areas.

Contingencies

1 unchanged sentence

Management is not aware of any legal proceeding of which the ultimate resolution could materially affect the Company’s financial position, results of operations, or cash flows.

T a b l e o f C o n t e n t s

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