What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-06 compared with 2024-08-07 · 228 added, 188 removed, 505 unchanged (45% of the section changed)

FINANCIAL STATEMENTS

Financial Statements (Unaudited)

GLOBAL WATER RESOURCES, INC.

1 unchanged sentence

(in thousands, except share and per share amounts)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

PROPERTY, PLANT AND EQUIPMENT:

45 unchanged sentences

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

24,561,035 and 24,492,918 shares issued as of June 30, 2024 and December 31, 2023, respectively.

Treasury stock, 343,625 and 317,677 shares at June 30, 2024 and December 31, 2023, respectively.

24,565,955 and 24,492,918 shares issued as of September 30, 2024 and December 31, 2023, respectively.

Treasury stock, 344,329 and 317,677 shares at September 30, 2024 and December 31, 2023, respectively.

Paid in capital 46,795 47,585

2 unchanged sentences

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 402,917 $ 361,095

See accompanying notes to the condensed consolidated financial statements

See accompanying notes to the condensed consolidated financial statements (unaudited)

GLOBAL WATER RESOURCES, INC.

1 unchanged sentence

(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,

2024 2023 2024 2023

Water services $ 6,668 $ 6,557 $ 11,894 $ 11,396

Wastewater and recycled water services 6,842 6,443 13,226 12,464

Water service

$ 7,493 $ 7,520 $ 19,387 $ 18,916

Wastewater and recycled water service

6,828 6,494 20,054 18,958

Unregulated revenues — 518 — 2,786

11 unchanged sentences

Other, net 1,028 678 2,358 1,619

Total other expense ( 469 ) ( 540 ) ( 795 ) ( 986 )

Total other income (expense) 2 ( 315 ) ( 793 ) ( 1,301 )

INCOME BEFORE INCOME TAXES 3,986 3,522 7,255 9,323

7 unchanged sentences

Diluted 24,302,521 24,231,801 24,301,974 24,144,384

See accompanying notes to the condensed consolidated financial statements

See accompanying notes to the condensed consolidated financial statements (unaudited)

GLOBAL WATER RESOURCES, INC.

5 unchanged sentences

— — — — ( 1,128 ) ( 691 ) ( 1,819 )

Stock compensation — — — — 299 — 299

Stock option exercise 5,277 — ( 4,405 ) — 198 — 198

Net income — — — — — 691 691

2 unchanged sentences

— — — — — ( 1,821 ) ( 1,821 )

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

Stock option exercise 152,113 — ( 82,642 ) — — — —

Stock compensation 62,840 — ( 21,543 ) — 16 — 16

1 unchanged sentence

BALANCE - June 30, 2024 24,561,035 240 ( 343,625 ) ( 2 ) 46,671 706 47,615

BALANCE - December 31, 2023 24,492,918 240 ( 317,677 ) ( 2 ) 47,585 797 48,620

Dividend declared $ 0.08 per share

1 unchanged sentence

Stock option exercise — — ( 704 ) — — — —

Stock compensation 4,920 — — — 124 — 124

Net income — — — — — 2,925 2,925

BALANCE - September 30, 2024 24,565,955 $ 240 ( 344,329 ) $ ( 2 ) $ 46,795 $ 1,808 $ 48,841

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

Dividend declared $ 0.07 per share

— — — — — ( 1,778 ) ( 1,778 )

Stock compensation — — — — 299 — 299

Net income — — — — — 2,466 2,466

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

1 unchanged sentence

— — — — ( 55 ) ( 1,739 ) ( 1,794 )

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

Stock option exercise 152,113 — ( 82,642 ) — — — —

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

1 unchanged sentence

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

Dividend declared $ 0.07 per share

— — — — — ( 1,801 ) ( 1,801 )

Stock option exercise 1,000 — — — 9 — 9

Stock compensation — — — — 211 — 211

Net income — — — — — 2,634 2,634

BALANCE - September 30, 2023 24,478,252 $ 240 ( 306,735 ) $ ( 2 ) $ 47,321 $ 1,521 $ 49,080

See accompanying notes to the condensed consolidated financial statements (unaudited)

GLOBAL WATER RESOURCES, INC.

1 unchanged sentence

(Unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Allowance for equity funds used during construction ( 682 ) ( 778 )

Provision for credit losses 35 35

Amortization of deferred debt issuance costs and discounts 41 22

Gain on disposal of fixed assets ( 17 ) ( 66 )

Right of use amortization 298 240

Other adjustments 6 23

Changes in assets and liabilities

11 unchanged sentences

Dividends paid ( 5,462 ) ( 5,372 )

Advances in aid of construction 2,215 420

Advances and contributions in aid of construction 10,455 8,370

Refunds of advances for construction ( 1,256 ) ( 1,076 )

Payments for taxes related to net shares settlement of equity awards ( 268 ) ( 367 )

Principal payments under finance leases ( 183 ) ( 388 )

( 110 ) ( 258 )

Repayments of notes payable ( 1,952 ) ( 1,917 )

2 unchanged sentences

Loan borrowings 22,137 242

Loan repayments ( 23 ) —

Debt issuance costs paid ( 418 ) —

Proceeds from sale of stock — 2,748

Refunds of developer taxes — ( 5 )

Other financing activities ( 48 ) 10

Net cash provided by financing activities 20,690 2,265

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 14,933 ( 3,207 )

INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 17,315 103

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period 4,763 7,562

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period $ 22,078 $ 7,665

See accompanying notes to the condensed consolidated financial statements

See accompanying notes to the condensed consolidated financial statements (unaudited)

Supplemental disclosure of cash flow information:

Six Months Ended June 30,

Nine Months Ended

September 30,

Cash and cash equivalents $ 18,145 $ 5,289

5 unchanged sentences

Basis of Presentation and Principles of Consolidation

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

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 are unaudited.

The December 31, 2023 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.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

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

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 are unaudited.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) have been condensed or omitted.

2 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 and six months ended June 30, 2024 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, 2024 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”).

6 unchanged sentences

(“GW-Ocotillo”), formerly Global Water - 2024 Acquisition A, Inc.

and a wholly owned subsidiary of the Company, entered into an asset purchase agreement with the City of Tucson, pursuant to which GW-Ocotillo will acquire seven public water systems from the City of Tucson serving approximately 2,200 water service connections in an all-cash transaction for a purchase price of $ 8.4 million.

The public water systems are located in and around Pima County.

The transaction remains subject to customary closing conditions and approval by the Arizona Corporation Commission (“ACC”).

and a wholly owned subsidiary of the Company, entered into an asset purchase agreement with the City of Tucson, pursuant to which GW-Ocotillo will acquire seven isolated public water systems from the City of Tucson serving approximately 2,200 water service connections in an all-cash transaction for a purchase price of $ 8.4 million.

The isolated public water systems are located in and around Pima County.

The Company expects to complete the acquisition in the first quarter of 2025, subject to customary closing conditions and approval by the Arizona Corporation Commission (“ACC”).

The estimated rate base of the seven water systems is approximately $ 7.8 million.

Other Deferred Liability

In September 2023, the Company received $ 6.7 million in contributions from the City of Maricopa to facilitate the construction of infrastructure in certain areas, which is included in other noncurrent liabilities on the Company’s condensed consolidated balance sheets.

As the infrastructure is constructed and placed into service, the corresponding amount will be transferred from the liability into advances in aid of construction during the applicable refund period.

Private Placement Offering of 6.91 % Senior Secured Notes

On October 26, 2023, the Company entered into a note purchase agreement for the issuance of an aggregate principal amount of $ 20 million of 6.91 % Senior Secured Notes due on January 3, 2034.

Pursuant to the terms of the note purchase agreement, the Company issued the notes on January 3, 2024.

Private Placement Offering of Common Stock

9 unchanged sentences

Terms of the condemnation were agreed upon through a settlement agreement and stipulated final judgment of condemnation wherein the City of Buckeye acquired all the operations and assets of Valencia and assumed operation of the utility upon close.

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 $ 1.3 million for the three and six months ended June 30, 2024, respectively.

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

the agreement.

The Company received growth premiums of $ 0.9 million and $ 2.2 million for the three and nine months ended September 30, 2024, respectively.

The Company received growth premiums of $ 0.7 million and $ 1.6 million for the three and nine months ended September 30, 2023, respectively.

An aggregate of $ 12.9 million in growth premiums have been received to date.

The growth premiums are included in “Other, net” on the Company’s condensed consolidated financial statements of operations.

The growth premiums are included in “Other, net” on the Company’s condensed consolidated statements of operations (unaudited).

Significant Accounting Policies

4 unchanged sentences

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

11 unchanged sentences

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing operating performance.

In consideration of ASC 280— Segment Reporting the Company notes it is not organized around specific products and services, geographic regions, or regulatory environments.

The Company is not organized around specific products and services, geographic regions, or regulatory environments.

The Company currently operates in one geographic region within the State of Arizona, wherein each operating utility operates within the same regulatory environment.

While the Company reports its revenue, disaggregated by service type, on the face of its condensed consolidated financial statements of operations, the Company does not manage the business based on any performance measure at the individual

revenue stream level.

While the Company reports its revenue, disaggregated by service type, on the face of its condensed consolidated statements of operations (unaudited), the Company does not manage the business based on any performance measure at the individual revenue stream level.

The Company does not have any customers that contribute more than 10% to the Company’s revenues or revenue streams.

Additionally, the Company notes that the CODM uses consolidated financial information to evaluate the Company’s performance, which is the same basis on which he communicates the Company’s results and performance to the Board of Directors.

Additionally, the CODM uses consolidated financial information to evaluate the Company’s performance, which is the same basis on which he communicates the Company’s results and performance to the Board of Directors.

It is upon this consolidated basis from which he bases all significant decisions regarding the allocation of the Company’s resources on a consolidated level.

Based on the information described above and in accordance with the applicable literature, management has concluded that the Company is currently organized and operated as one operating and reportable segment.

Governmental Funding & Assistance

Occasionally, the Company participates in various U.S.

federal, state and local programs under which governmental funding is received to offset certain specified costs of the Company associated with water conservation efforts, the provision of utility service or facilities in designated locations (such as unserved or underserved rural areas), and the replacement and upgrading of outdated equipment with advanced metering infrastructure.

In certain instances, our receipt of awarded governmental funds may be conditioned on the Company meeting specified progress and inspection milestones during construction of associated utility infrastructure projects.

Certain programs are subject to audits of compliance with

program commitments and, subject to the outcomes of those assessments, the Company may be required to reimburse the government entity for cash previously received, or, in some cases, pay a penalty.

The Company evaluates each program and establishes a liability under the principles of Accounting Standards Codification (“ASC”) 450 if it is probable support payments will be recaptured or a penalty will be imposed.

In April 2024, the Company’s Global Water - Rincon Water Company, Inc.

(“GW-Rincon”) utility entered into a loan agreement with the Water Infrastructure Finance Authority of Arizona (“WIFA”) to improve the utility’s infrastructure, including enhancements to the fluoride treatment system and other projects.

A portion of the loan is forgivable, which the Company accounts for as a contribution in aid of construction (“CIAC”).

Refer to Note 9 - “Debt,” for additional information.

In December 2023, the Company’s GW-Farmers utility was awarded a $ 1.6 million grant from WIFA to replace manual read meters with advanced metering infrastructure (“AMI”) smart meters.

Disbursement of the award occurs through one or more reimbursement requests submitted by the Company for costs incurred and activities performed between July 6, 2022 and June 30.

Award payments are accounted for as CIAC.

For the nine months ended September 30, 2024, the Company received $ 0.8 million in award disbursements.

The Company received no award disbursements in 2023.

Recent Accounting Pronouncements

Future Adoption of Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

5 unchanged sentences

Early adoption is permitted.

The Company is assessing the timing and impact that adopting this new standard will have on its consolidated financial statements.

The Company will implement and provide the required annual disclosures beginning in its Annual Report on Form 10-K for the year ended December 31, 2024.

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 Accounting Standards Codification (“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 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.

4 unchanged sentences

The application requests, among other things, a revenue increase of approximately $ 1.3 million phased-in over two steps and recovery of the acquisition premium related to the Farmers Water Co.

On July 25 , 2024, ACC Utilities Division Staff found the application administratively complete and estimates their testimony regarding the application will be file d on or about December 9 , 2024.

There can be no assurance that the ACC will approve the requested rate increase or the requested recovery of the acquisition premium, 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.

On July 25 , 2024, ACC Utilities Division Staff found the application administratively complete and estimates its testimony regarding the application will be file d on or about December 9 , 2024.

Acquisition of Seven Systems from City of Tucson

On May 10, 2024, GW-Ocotillo filed an Application at the ACC for approval to acquire seven isolated systems from the City of Tucson.

On June 10, 2024, ACC Utilities Division Staff found the application administratively complete.

On May 10, 2024, GW-Ocotillo filed an application with the ACC for approval to acquire seven isolated public water systems from the City of Tucson.

On June 10, 2024, ACC Utilities Division Staff found the application administratively complete and estimates its testimony regarding the application will be filed on or about November 5, 2024.

The Company expects to complete the acquisition in the first quarter of 2025, subject to customary closing conditions and approval by the ACC.

2025 Santa Cruz and Palo Verde Rate Case

5 unchanged sentences

Southwest Plant Accounting Order and Bill Credit

On July 3, 2023, the Company’s GW-Palo Verde and GW-Santa Cruz utilities 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 Company’s Southwest Plant, plus the carrying cost at the authorized rate of return set in GW-Palo Verde’s and GW-Santa

Cruz’s most recent rate order, until the plant is considered for recovery in the next GW-Palo Verde and GW-Santa Cruz rate case.

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

The Southwest Plant was substantially constructed prior to 2009 to provide water, wastewater, and recycled water service 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.

20 unchanged sentences

The subsequent four increases will be effective on January 1 of each subsequent year, with the majority of the revenue increase phased in by January 1, 2025.

To the extent that the number of active service connections has increased and continues to increase from 2022 levels, the additional revenues may be greater than the amounts set forth.

On the other hand, if active connections decrease or the Company experiences declining usage per customer, the Company may not realize all of the anticipated revenues.

The ACC also approved:

(i) the consolidation of water rates to one single rate for these utilities;

(i) the consolidation of water rates to one single rate for the seven utilities;

(ii) acquisition premiums relating to the Company’s acquisitions of its Global Water-Mirabell Water Company, Inc.

2 unchanged sentences

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

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

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

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

(“GW-Las Quintas Serenas”) utilities, each located in Pima County, which increase the rate base for such utilities and result in an increase in the annual collective revenue requirement;

19 unchanged sentences

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

Recovery Period June 30, 2024 December 31, 2023

Recovery Period September 30, 2024 December 31, 2023

Regulatory Assets

Acquisition premiums (1)

25 or 50 years

$ 2,616 $ 1,269

Income taxes recoverable through future rates (2)

2 unchanged sentences

2 years 104 221

Acquisition premiums (3)

25 or 50 years

Other regulatory assets 45 4

1 unchanged sentence

Regulatory Liabilities

Income taxes payable through future rates (1)

Acquired ICFAs (4)

$ 4,708 $ 4,896

Income taxes payable through future rates (2)

Depreciation adjustment (5)

Total regulatory liabilities $ 5,863 $ 6,076

(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.

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.

(1) Decision No.

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.

79383, issued on June 20, 2024, approved approximately $ 0.1 million in rate case expenses to be recovered through a rate case expense surcharge over a period of up to a two-years .

(3) Decision No.

78319, issued on December 3, 2021, approved an acquisition premium related to the acquisition of the Company’s GW-Rincon utility.

79383 was issued on June 20, 2024 allowing the Company to begin amortization of the acquisition premium through customer rates over 50 years.

The acquisition premium balance as of June 30, 2024 was approximately $ 0.6 million.

78644, issued on July 27, 2022, approved acquisition premiums related to the acquisitions of the Company’s GW-Turner Ranches and GW-Red Rock utilities.

Amortization began in 2022 as the acquisition premiums were included in customer rates as approved in the decision and will continue over a 25 -year period.

The acquisition premium balance as of June 30, 2024 was approximately $ 0.7 million.

79383 approved acquisition premiums related to the acquisition of the Company’s GW-Francesca, GW-Las Quintas Serenas, GW-Lyn Lee, GW-Mirabell, and GW-Tortolita utilities.

The acquisition premium balance relating to the Company’s GW-Rincon utility as of September 30, 2024 was approximately $ 0.6 million.

79383, issued on June 20, 2024, allowed the Company to begin amortization of the acquisition premium through customer rates over 50 years.

79383 also approved acquisition premiums related to the acquisition of the Company’s GW-Francesca, GW-Las Quintas Serenas, GW-Lyn Lee, GW-Mirabell, and GW-Tortolita utilities.

The acquisition premiums will be amortized through customer rates over 50 years as approved in the decision.

The acquisition premium balance as of June 30, 2024 was approximately $ 1.3 million.

The acquisition premium balance relating to these utilities as of September 30, 2024 was approximately $ 1.3 million.

78644, issued on July 27, 2022, approved acquisition premiums related to the acquisitions of the Company’s GW-Turner Ranches and Global Water – Red Rock Water Company, Inc.

(“GW-Red Rock”) utilities.

Amortization began in 2022 as the acquisition premiums were included in customer rates as approved in the decision and will continue over a 25 -year period.

The acquisition premium balance relating to these utilities as of September 30, 2024 was approximately $ 0.7 million.

(2) 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.

(3) Decision No.

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 period of up to two years .

79383 also approved approximately $ 0.1 million in rate case expenses to be recovered through a rate case expense surcharge over a period of up to a two-years .

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

5 unchanged sentences

Regulated Revenue

The Company’s operating revenues are primarily attributable to regulated services based upon tariff rates approved by the ACC.

The Company’s operating revenues are primarily attributable to regulated water, wastewater, and recycled water service based upon tariff rates approved by the ACC.

Regulated service revenues consist of amounts billed to customers based on approved fixed monthly fees and consumption fees, as well as unbilled revenues estimated from the last meter reading date to the end of the accounting period utilizing historical customer data recorded as accrued revenue.

4 unchanged sentences

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

The Company satisfies its performance obligation to provide water, wastewater, and recycled water services over time as the services are rendered.

Regulated services may be terminated by the customers at will, and, as a result, no separate financing component is recognized for the Company’s collections from customers, which generally require payment within 15 days of billing.

The Company satisfies its performance obligation to provide water, wastewater, and recycled water service over time as the service is rendered.

Regulated water and wastewater service may be terminated by the customers at will, and, as a result, no separate financing component is recognized for the Company’s collections from customers, which generally require payment within 15 days of billing.

The Company applies judgment, based principally on historical payment experience, in estimating its customers’ ability to pay.

3 unchanged sentences

Unregulated revenues are primarily related to the revenues recognized on a portion of ICFA funds received.

ICFAs are agreements with developers and homebuilders where the Company, which owns the operating utilities, 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.

Services provided within these agreements include coordination of construction services for water and wastewater treatment facilities as well as financing, arranging, and coordinating the provision of utility services.

ICFAs are agreements with developers and homebuilders where the Company, which owns the operating utilities, provides service 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.

Service provided within these agreements include coordination of construction service for water and wastewater treatment facilities as well as financing, arranging, and coordinating the provision of utility service.

In return, the developers and homebuilders pay the Company an agreed-upon amount per dwelling unit for the land legally described in the agreement, or a portion thereof.

1 unchanged sentence

This obligation persists regardless of connection growth.

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

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

Payments are generally due in installments, with a portion due upon signing of the agreement, a portion due upon completion of certain milestones, and the final payment due upon final plat approval or sale of the subdivision.

3 unchanged sentences

Payments for ICFAs are usually received in advance.

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.

Also pursuant to Decision No.

4 unchanged sentences

74364 prohibits the Company from entering into any new ICFAs.

The Company accounts for the portion of ICFA funds allocated to the HUF liability as a contribution in aid of construction (“CIAC”).

The Company accounts for the portion of ICFA funds allocated to the HUF liability as a CIAC.

However, in accordance with the ACC directives, the CIAC is not deducted from rate base until the HUF funds are expended for utility plant.

3 unchanged sentences

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

The Company believes that services provided within these agreements are not distinct in the context of the contract because they are highly interdependent with its regulated utilities’ ability to provide fitted capacity for water and wastewater services.

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

The Company believes that service provided within these agreements is not distinct in the context of the contract because it is highly interdependent with its regulated utilities’ ability to provide fitted capacity for water and wastewater service.

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

December 31, 2023 Balance Payments Allocated to Deferred Revenue

Revenue Recognized

June 30, 2024 Balance

September 30, 2024 Balance

Deferred Revenue - ICFA

1 unchanged sentence

Disaggregated Revenues

For the three and six months ended June 30, 2024 and 2023, 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, 2024 and 2023, 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,

2024 2023 2024 2023

REGULATED REVENUE

Water Services

Water Service

Residential $ 5,034 $ 4,900 $ 14,003 $ 13,261

4 unchanged sentences

Total water revenues 7,493 7,520 19,387 18,916

Wastewater and recycled water services

Wastewater and recycled water service

Residential 5,796 5,630 17,607 16,725

6 unchanged sentences

ICFA revenues — 518 — 2,786

TOTAL UNREGULATED REVENUE — — — 2,268

TOTAL REVENUE $ 14,321 $ 14,532 $ 39,441 $ 40,660

1 unchanged sentence

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

CONTRACT ASSETS

Accounts receivable

Water services $ 1,689 $ 1,588

Wastewater and recycled water services 1,292 1,379

Water service

$ 2,125 $ 1,588

Wastewater and recycled water service

Total contract assets

5 unchanged sentences

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 $ 20.0 million and $ 19.7 million as of June 30, 2024 and December 31, 2023, 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.

1 unchanged sentence

Accounts Receivable and Allowance for Credit Losses

Accounts receivable as of June 30, 2024 and December 31, 2023 consist of the following (in thousands):

June 30, 2024 December 31, 2023

Accounts receivable as of September 30, 2024 and December 31, 2023 consist of the following (in thousands):

September 30, 2024 December 31, 2023

Billed receivables $ 3,422 $ 2,967

1 unchanged sentence

Accounts receivable, net $ 3,271 $ 2,845

The following table summarizes the allowance for credit loss activity for the six months ended June 30, 2024 and the twelve months ended December 31, 2023 (in thousands).

June 30, 2024 December 31, 2023

The following table summarizes the allowance for credit loss activity for the nine months ended September 30, 2024 and the year ended December 31, 2023 (in thousands):

September 30, 2024 December 31, 2023

Beginning of Period $ ( 122 ) $ ( 164 )

4 unchanged sentences

PROPERTY, PLANT AND EQUIPMENT

Depreciable property, plant and equipment as of June 30, 2024 and December 31, 2023 consist of the following (in thousands):

June 30, 2024 December 31, 2023

Depreciable property, plant and equipment as of September 30, 2024 and December 31, 2023 consist of the following (in thousands):

September 30, 2024 December 31, 2023

Equipment $ 61,519 $ 60,536

7 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

The goodwill balance was $ 9.5 million as of June 30, 2024 and is related to the GW-Turner Ranches, GW-Red Rock, GW-Mirabell, GW-Francesca, GW-Tortolita, GW-Lyn Lee, GW-Las Quintas Serenas, GW-Rincon, Twin Hawks Utility, Inc., and GW-Farmers acquisitions.

The goodwill balance was $ 9.5 million as of September 30, 2024 and is related to our historical acquisitions.

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.

2 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, the goodwill balance consisted of the following (in thousands):

December 31, 2023 Balance Acquisition Activity Adjustments Subsequent to Acquisition Date June 30, 2024 Balance

As of September 30, 2024 and December 31, 2023, the goodwill balance consisted of the following (in thousands):

December 31, 2023 Balance Acquisition Activity Adjustments Subsequent to Acquisition Date September 30, 2024 Balance

Goodwill $ 10,820 $ — $ ( 1,334 ) $ 9,486

Intangible Assets

As of June 30, 2024 and December 31, 2023, intangible assets consisted of the following (in thousands):

June 30, 2024 December 31, 2023

As of September 30, 2024 and December 31, 2023, intangible assets consisted of the following (in thousands):

September 30, 2024 December 31, 2023

Amount Accumulated

13 unchanged sentences

Total intangible assets $ 27,232 $ ( 18,659 ) $ 8,573 $ 27,231 $ ( 18,390 ) $ 8,841

A Certificate of Convenience & Necessity (“CC&N”) is a permit issued by the ACC allowing a public service corporation to serve a specified area, and preventing other public service corporations from offering the same services within the specified area.

The CP Water CC&N intangible asset was acquired through the acquisition of CP Water Company in 2006.

The CP Water Company (“CP Water”) CC&N intangible asset was acquired through the acquisition of CP Water in 2006.

This CC&N permit has no outstanding conditions that would require renewal.

Franchise contract rights and organizational costs relate to the 2018 acquisition of GW-Red Rock and the 2023 acquisition of GW-Farmers.

Franchise contract rights are agreements with Pima and Pinal counties for GW-Red Rock and Pima county for GW-Farmers that allow the Company to place infrastructure in public right-of-way and permits expected to be renewable indefinitely.

indefinitely.

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.

1 unchanged sentence

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 $ 0.3 million of amortization recorded for these balances during the three and six months ended June 30, 2024.

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

There was zero and $ 0.3 million of amortization recorded for these balances during the three and nine months ended September 30, 2024, respectively.

There was $ 1.4 million of amortization recorded for these balances during the three and nine months ended September 30, 2023.

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 $ 0.3 million for the three months ended June 30, 2024 and $ 0.2 million for the three months ended June 30, 2023.

Medical claims paid to the plan were approximately $ 0.5 million for the six months ended June 30, 2024 and $ 0.3 million for the six months ended June 30, 2023.

Medical claims paid to the plan were approximately $ 0.3 million for both the three months ended September 30, 2024 and 2023.

Medical claims paid to the plan were approximately $ 0.8 million for the nine months ended September 30, 2024 and $ 0.6 million for the nine months ended September 30, 2023.

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

ACCRUED EXPENSES

Accrued expenses as of June 30, 2024 and December 31, 2023 consist of the following (in thousands):

June 30, 2024 December 31, 2023

Property taxes $ 1,292 $ 1,242

Accrued expenses as of September 30, 2024 and December 31, 2023 consist of the following (in thousands):

September 30, 2024 December 31, 2023

Accrued project liabilities $ 2,310 $ 1,001

Interest 2,003 480

Accrued bonus 981 602

Customer prepayments 693 883

Property taxes 678 1,242

Dividend payable 606 606

Accrued project liabilities 565 1,001

Accrued purchase orders 583 200

Customer prepayments 577 883

Accrued payroll 328 67

Accrued sales taxes 238 179

Deferred compensation 228 239

Accrued electric 213 109

Other accrued liabilities 968 1,521

1 unchanged sentence

Fair Value of Financial Instruments

FASB ASC 820, Fair Value Measurement , establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs).

ASC 820, Fair Value Measurement , establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs).

The hierarchy consists of three levels, as follows:

2 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, 2024 and December 31, 2023 were as follows (in thousands):

June 30, 2024 December 31, 2023

Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 were as follows (in thousands):

September 30, 2024 December 31, 2023

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

Asset/Liability Type:

HUF funds - restricted cash

$ 2,986 $ — $ — $ 2,986 $ 822 $ — $ — $ 822

Certificate of deposit - restricted

947 — — 947 — 854 — 854

Demand deposit

1 — — 1 1 — — 1

Certificate of Deposit - Restricted (1)

$ 3,934 $ — $ — $ 3,934 $ 823 $ 854 $ — $ 1,677

1 unchanged sentence

$ — $ — $ 1,946 $ 1,946 $ — $ — $ 2,113 $ 2,113

Total $ 1,548 $ — $ 2,078 $ 3,626 $ 823 $ 854 $ 2,113 $ 3,790

(1) HUF Funds - restricted cash and Certificate of Deposit - Restricted are presented on the Restricted cash line item of the Company’s condensed consolidated balance sheets and are valued at amortized cost, which approximates fair value.

(2) Demand Deposit is presented on the Cash and cash equivalents line item of the Company’s condensed consolidated balance sheets and is valued at amortized cost, which approximates fair value.

(3) As part of the GW-Red Rock acquisition, the Company is required to pay to the seller a growth premium equal to $ 750 (not in thousands) 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.

The fair value of the acquisition liability was calculated using a discounted cash flow technique which utilized unobservable inputs developed using the Company’s estimates and assumptions.

$ — $ — $ 1,946 $ 1,946 $ — $ — $ 2,113 $ 2,113

HUF Funds - restricted cash and Certificate of deposit - restricted are presented on the Restricted cash line item of the Company’s condensed consolidated balance sheets (unaudited) and are valued at amortized cost, which approximates fair value.

Demand Deposit is presented on the Cash and cash equivalents line item of the Company’s condensed consolidated balance sheets (unaudited) and is valued at amortized cost, which approximates fair value.

As part of the GW-Red Rock acquisition, the Company is required to pay to the seller a growth premium equal to $ 750 (not in thousands) for each new account established within 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.

The fair value of the contingent consideration was calculated using a discounted cash flow technique which utilized unobservable inputs developed using the Company’s estimates and assumptions.

Significant inputs used in the fair value calculation are as follows:

2 unchanged sentences

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 previously described) has not been established.

The fair value of the acquisition liability was calculated using a discounted cash flow technique which utilized unobservable inputs developed using the Company’s estimates and assumptions.

The fair value of the contingent consideration was calculated using a discounted cash flow technique which utilized unobservable inputs developed using the Company’s estimates and assumptions.

Significant inputs used in the fair value calculation are as follows:

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, 2024 and December 31, 2023 are as follows (in thousands):

June 30, 2024 December 31, 2023

Contingent consideration is included within acquisition liabilities on the condensed consolidated balance sheets (unaudited).

Refer to Note 13 — “Commitments and Contingencies” for additional information about contingent consideration.

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, 2024 and December 31, 2023 are as follows (in thousands):

September 30, 2024 December 31, 2023

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

5 unchanged sentences

6.91 % Senior Secured Notes, maturing January 2034 (“6.91% Notes”)

4.911 % WIFA Note, maturing April 2044 (“4.911% WIFA Note”)

3,882 121,066 3,833 101,583

2 unchanged sentences

Total debt $ 3,931 $ 120,427 $ 3,880 $ 101,341

Debt is measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 as follows (in thousands):

June 30, 2024 December 31, 2023

Debt is measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 as follows (in thousands):

September 30, 2024 December 31, 2023

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

2 unchanged sentences

(1) The fair value of debt was estimated based on interest rates considered available for instruments of similar terms and remaining maturities.

On April 30, 2024, the Company’s GW-Rincon utility entered into a loan agreement with WIFA for a principal amount of $ 2.4 million to improve the utility’s infrastructure, of which $ 0.7 million is forgivable.

The loan is due on April 1, 2044 and bears an interest rate of 4.911 %.

Funding occurs through one or more draw requests submitted by the Company and the subsequent disbursement of principal by WIFA.

As of September 30, 2024, the Company has received approximately $ 2.1 million in disbursements under this agreement.

On October 26, 2023, the Company entered into a note purchase agreement for the issuance of an aggregate principal amount of $ 20 million of 6.91 % Senior Secured Notes due on January 3, 2034 (the “ 6.91 % Notes”).

1 unchanged sentence

The 6.91 % Notes accrue interest at 6.91 % per annum from the date of issuance, payable semi-annually on January 3 and July 3 of each year, beginning on July 3, 2024, with a balloon payment due on January 3, 2034.

As of June 30, 2024, the Company was in compliance with its financial debt covenants relating to the Series A Notes, Series B Notes, and the 6.91 % Notes.

On April 30, 2024, the Company’s GW-Rincon utility entered into a loan agreement with the Water Infrastructure Finance Authority of Arizona (WIFA) for a principal amount of $ 2.4 million to improve the utility’s infrastructure, of which $ 0.7 million is forgivable.

The loan is due on April 1, 2044 and bears an interest rate of 4.911 %.

The loan is funded through one or more draw requests submitted by the Company and the subsequent disbursement of principal by WIFA.

As of June 30, 2024, the Company had received no disbursements of principal under this agreement.

As of September 30, 2024, the Company was in compliance with its financial debt covenants relating to the Series A Notes, Series B Notes, and the 6.91 % Notes.

Revolving Credit Line

6 unchanged sentences

On July 1, 2024, the Company and Northern Trust entered into a fifth amendment to the Northern Trust Loan Agreement, which further amended the scheduled maturity date for the revolving line of credit from July 1, 2025 to July 1, 2026.

As of June 30, 2024, the Company had no outstanding borrowings under this credit line.

As of September 30, 2024, the Company had no outstanding borrowings under this credit line.

As of December 31, 2023, the outstanding borrowings on this credit line were approximately $ 2.3 million.

There were approximately $ 12,000 and $ 25,000 unamortized debt issuance costs as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024, the Company was in compliance with its financial debt covenants under the Northern Trust Loan Agreement.

For the three months ended June 30, 2024, tax expense of $ 0.6 million was recorded on pre-tax income of $ 2.3 million, compared to tax expense of $ 0.7 million recorded on pre-tax income of $ 2.5 million for the three months ended June 30, 2023.

For the six months ended June 30, 2024, tax expense of $ 0.8 million was recorded on pre-tax income of $ 3.3 million, compared to tax expense of $ 1.6 million recorded on pre-tax income of $ 5.8 million for the six months ended June 30, 2023.

The income tax provision was computed 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 was 24.93 % and 25.25 % as of June 30, 2024 and 2023, respectively.

There were less than $ 0.1 million of unamortized debt issuance costs as of September 30, 2024 and December 31, 2023.

As of September 30, 2024, the Company was in compliance with its financial debt covenants under the Northern Trust Loan Agreement.

Refer to Note 11 - “Debt” in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding the Company’s outstanding debt.

Our interim effective tax rates reflect the estimated annual effective tax rates for 2024 and 2023 applied to year-to-date pretax income, adjusted for tax expense associated with certain discrete items.

The effective tax rates for the three months ended September 30, 2024 and 2023 were 26.6 % and 25.2 %, respectively.

The effective tax rates for the nine months ended September 30, 2024 and 2023 were 26.3 % and 26.6 %, respectively.

The increase in the effective tax rate for the three months ended September 30, 2024 compared to the prior year period was primarily attributable to the vesting of restricted stock awards and stock options in the prior year period.

The decrease in the effective tax rate for the nine months ended September 30, 2024 compared to the prior year period was primarily attributable to a decrease in non-deductible permanent differences.

DEFERRED COMPENSATION AWARDS

6 unchanged sentences

The options were granted with an exercise price of $ 9.40 , the market price of the Company’s common shares on the NASDAQ Global Market at the close of business on August 10, 2017.

The options vested over a four-year period, with 25 % having vested in August 2018, 25 % having vested in August 2019, 25 % having vested in August 2020, and 25 % having vested in August 2021.

The options have a 10 -year life.

The Company expensed the $ 1.1 million fair value of the stock option grant ratably over the four-year vesting period.

The options are fully vested and expire 10 years from the grant date.

As of August 2021, these options were fully expensed.

As of June 30, 2024, 125,750 options have been exercised and 70,425 options have been forfeited with 268,825 options outstanding.

As of September 30, 2024, 125,750 options have been exercised and 70,425 options have been forfeited with 268,825 options outstanding.

2019 stock option grant

1 unchanged sentence

The options were granted with an exercise price of $ 11.26 , the market price of the Company’s common shares on the NASDAQ Global Market at the close of business on August 13, 2019.

The options vested over a four-year period, with 25 % having vested in August 2020, 25 % having vested in August 2021, 25 % having vested in August 2022, and 25 % having vested in August 2023.

The options have a 10-year life.

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

The options are fully vested and expire 10 years from the grant date.

As of August 2023, these options were fully expensed.

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

As of June 30, 2024, 55,994 options have been exercised and 63,020 options have been forfeited with 130,986 options outstanding.

Stock-based compensation expense of $ 20,000 and $ 92,000 was recorded for the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, 55,994 options have been exercised and 63,770 options have been forfeited with 130,236 options outstanding.

Restricted stock units

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 June 30, 2024, along with the amounts paid to holders of the restricted stock units (“RSUs”) for the three and six months ended June 30, 2024 and 2023 (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, 2024, along with the amounts paid to holders of the restricted stock units (“RSUs”) for the three and nine months ended September 30, 2024 and 2023 (in thousands, except unit amounts):

Three Months Ended

September 30, Nine Months Ended

September 30,

Grant Date Units Granted Units Outstanding 2024 2023 2024 2023

4 unchanged sentences

Total 110,993 36,336 $ 81 $ 81 $ 251 $ 217

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

Based on GWRI’s closing share price on September 30, 2024 (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):

2024 (remaining period) $ 84

Stock appreciation rights

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, 2024 and amounts paid during the three and six months ended June 30, 2024 and 2023 (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 2024 2023 2024 2023

Members of Management (1)(2)

Q1 2015 299,000 $ 4.26 12,500 — — $ — $ 165

Members of Management (1)(3)

Q1 2018 33,000 $ 8.99 8,250 — — — —

Stock appreciation rights (“SARs”) were granted to certain members of management and are fully vested.

The following table details the grant date, units granted, exercise price, outstanding units as of September 30, 2024 and amounts paid during the three and nine months ended September 30, 2024 and 2023 (in thousands, except unit and per unit amounts):

Three Months Ended

September 30, Nine Months Ended

September 30,

Grant Date Units Granted Exercise Price

Units Outstanding 2024 2023 2024 2023

299,000 $ 4.26 12,500 $ — $ — $ — $ 165

33,000 $ 8.99 8,250 — — — —

Total 332,000 20,750 $ — $ — $ — $ 165

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

(1) The exercise price was determined to be the fair market value of one share of GWR Global Water Resources Corp.

1 unchanged sentence

(2) 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 both the three months ended June 30, 2024 and 2023, the Company recorded approximately $ 0.1 million of compensation expense related to the RSUs and SARs.

For the six months ended June 30, 2024 and 2023, the Company recorded approximately $ 0.2 million and $ 0.1 million, respectively, of compensation expense related to the RSUs and SARs.

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 28, 2024 (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):

2024 (remaining period) $ 164

Restricted stock awards

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.

No RSAs were granted during the three and six months ended June 30, 2024 or 2023.

The following table details the compensation expense related to the partial vesting of previously granted RSAs for the three and six months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30, For The Six Months Ended June 30,

During the three and nine months ended September 30, 2024, 9,537 RSAs were issued.

During the three and nine months ended September 30, 2023, 6,000 RSAs were issued.

The following table details the compensation expense related to the grant and partial vesting of previously granted RSAs for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

2 unchanged sentences

SUPPLEMENTAL CASH FLOW INFORMATION

The following is supplemental cash flow information for the six months ended June 30, 2024 and 2023 (in thousands):

For the Six Months Ended June 30,

The following is supplemental cash flow information for the nine months ended September 30, 2024 and 2023 (in thousands):

Nine Months Ended

September 30,

Supplemental cash flow information:

1 unchanged sentence

$ 3,114 $ 2,343

Cash paid for income taxes

Non-cash financing and investing activities:

Capital expenditures included in accounts payable and accrued liabilities 3,417 2,251

Utility Plant constructed by developers and conveyed 10,831 11,276

Business acquisition through issuance of contingent consideration payable — 1,330

4 unchanged sentences

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.

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 assumptions and estimates used in determining the acquisition liability related to the growth premium are consistent with previous acquisitions.

As of June 30, 2024, the remaining liability was $ 1.2 million.

Under the terms of the purchase agreement, the Company is obligated to pay the seller a growth premium for each new account established within the specified growth premium areas.

The estimated fair value of the remaining liability was $ 1.2 million and $ 1.3 million as of September 30, 2024 and December 31, 2023, respectively, and is included in Acquisition liabilities on the condensed consolidated balance sheets (unaudited).

On October 16, 2018, the Company completed the acquisition of GW-Red Rock, an operator of a water and a wastewater utility with service areas in the Pima and Pinal counties of Arizona.

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 June 30, 2024, no meters have been installed and no accounts have been established in any of the three growth premium areas.

As of June 30, 2024, the remaining liability was $ 0.8 million.

Under the terms of the purchase agreement, the Company is obligated to pay to the seller a growth premium for each new account established within specified growth premium areas.

During the three months ended September 30, 2024, the Company revised the fair value of the estimated liability of the contingent consideration based on modified building plans from the landowners in the growth premium areas, which resulted in a net $ 0.1 million gain on remeasurement, which is included in Other, net on the condensed consolidated statements of operations (unaudited) for the three and nine months ended September 30, 2024.

As of September 30, 2024, no meters have been installed and no accounts have been established in any of the specified growth premium areas.

The estimated fair value of the remaining liability was $ 0.7 million and $ 0.8 million as of September 30, 2024 and December 31, 2023, respectively, and is included in Acquisition liabilities on the condensed consolidated balance sheets (unaudited).

Refer to Note 8 — “Fair Value” for additional information about contingent consideration.

The Company has previously received certain ICFA advances related to its CP Water utility, which the Company is obligated to repay in the form of specified future ICFA fee reductions when those ICFA fees are due.

The liability was $ 0.9 million as of both September 30, 2024 and December 31, 2023 and is included in Acquisition liabilities on the condensed consolidated balance sheets (unaudited).

Contingencies

2 unchanged sentences

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