UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-40677 PLUM ACQUISITION CORP. III (Exact name of registrant as specified in its charter) Cayman Islands 98-1581691 (State or other ju ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-40677 PLUM ACQUISITION CORP. III (Exact name of registrant as specified in its charter) Cayman Islands 98-1581691 (State or other ju ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-42391 Newbury Street II Acquisition Corp (Exact name of registrant as specified in its charter) | Cayman Islands | 98-1797287 | ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-42391 Newbury Street II Acquisition Corp (Exact name of registrant as specified in its charter) | Cayman Islands | 98-1797287 | ...

Unaudited Interim Condensed Consolidated Financial Statements [Interim Condensed Consolidated Statement of Financial Position](index=2&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) The Company's financial position as of June 30, 2025, shows a significant increase in total assets, primarily driven by a substantial rise in cash and cash equivalents and the recognition of a mining concession asset. Liabilities also increased, notably due to new long-term liabilities associated with the mining concession acquisition and environmental remediation provisions | Metric | June 30, 2025 ($) | December 31, 2024 ($) | Change ($) | % Change | | :-------------------------------- | :------------------ | :-------------------- | :--------- | :------- | | **ASSETS** | | | | | | Cash and cash equivalents | 70,581,382 | 38,930,957 | 31,650,425 | 81.30% | | Receivables and prepaid expenses | 982,435 | 683,655 | 298,780 | 43.70% | | Mining concession asset | 10,013,929 | – | 10,013,929 | N/A | | Property, plant and equipment | 1,562,263 | 680,062 | 882,201 | 129.73% | | Total assets | 86,112,562 | 42,556,391 | 43,556,171 | 102.35% | | **LIABILITIES** | | | | | | Account payables and accrued liabilities | 3,970,980 | 2,229,584 | 1,741,396 | 78.19% | | Provision for environmental remediation | 490,434 | – | 490,434 | N/A | | Warrants liability | – | 3,163,115 | (3,163,115) | -100.00% | | Current portion of lease liability | 469,542 | 82,795 | 386,747 | 467.15% | | Current portion of other long-term liabilities | 7,407,142 | – | 7,407,142 | N/A | | Other long-term liabilities | 2,116,353 | – | 2,116,353 | N/A | | Total liabilities | 15,164,818 | 5,548,226 | 9,618,522 | 173.37% | | **EQUITY** | | | | | | Share capital | 146,845,506 | 102,256,065 | 44,589,441 | 43.61% | | Contributed surplus | 31,907,541 | 17,110,478 | 14,797,063 | 86.48% | | Deficit | (107,805,303) | (82,358,377) | (25,446,926) | 30.90% | | Total equity | 70,947,744 | 37,008,166 | 33,939,578 | 91.71% | - The Company recognized a new Mining Concession Asset of **$10,013,929** as of June 30, 2025, which was zero at December 31, 2024. This is a significant addition to non-current assets[4](index=4&type=chunk) - Total liabilities increased by **173.37%** from $5,548,226 at December 31, 2024, to **$15,164,818** at June 30, 2025, primarily due to the recognition of a provision for environmental remediation and other long-term liabilities related to the mining concession acquisition[4](index=4&type=chunk) [Interim Condensed Consolidated Statement of Operations and Comprehensive Loss](index=3&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Operations%20and%20Comprehensive%20Loss) For the six months ended June 30, 2025, the Company reported a significantly higher net loss compared to the same period in 2024, primarily driven by increased exploration and evaluation expenses and a substantial revaluation loss on warrants liability. Finance income partially offset these losses | Metric | For the three months ended June 30, 2025 ($) | For the three months ended June 30, 2024 ($) | For the six months ended June 30, 2025 ($) | For the six months ended June 30, 2024 ($) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Exploration and evaluation expenses | (7,433,113) | (5,181,251) | (12,291,882) | (9,019,771) | | General and administration expenses | (2,236,131) | (1,222,105) | (4,134,425) | (2,425,283) | | Revaluation of warrants liability | – | 94,691 | (10,564,474) | 466,205 | | Foreign exchange gain (loss) | 531,002 | (282,152) | 633,141 | (461,787) | | Interest income | 701,763 | 295,166 | 1,079,543 | 512,552 | | Finance costs | (83,572) | (36,349) | (169,887) | (129,153) | | Net loss and comprehensive loss | (8,518,993) | (6,331,921) | (25,446,926) | (11,057,158) | | Basic and diluted loss per common share | (0.11) | (0.09) | (0.31) | (0.17) | - Net loss for the six months ended June 30, 2025, significantly increased to **$25,446,926**, up **130.14%** from $11,057,158 in the prior year, primarily due to a **$10,564,474 revaluation loss on warrants liability** in 2025 compared to a $466,205 gain in 2024[6](index=6&type=chunk) - Exploration and evaluation expenses rose by **36.28%** to **$12,291,882** for the six months ended June 30, 2025, from $9,019,771 in the same period of 2024, reflecting increased activity[6](index=6&type=chunk) - Basic and diluted loss per common share increased to **$0.31** for the six months ended June 30, 2025, from $0.17 in the prior year, reflecting the higher net loss and increased weighted average common shares outstanding[6](index=6&type=chunk) [Interim Condensed Consolidated Statement of Cash Flows](index=4&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2025, the Company experienced a net cash outflow from operating activities, but this was significantly offset by substantial cash inflows from financing activities, primarily from share and warrant exercises, leading to a strong increase in cash and cash equivalents | Cash Flow Activity | For the six months ended June 30, 2025 ($) | For the six months ended June 30, 2024 ($) | Change ($) | % Change | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | :--------- | :------- | | Net loss | (25,446,926) | (11,057,158) | (14,389,768) | 130.14% | | Cash flows from (used in) operating activities | (13,015,016) | (10,597,286) | (2,417,730) | 22.82% | | Cash flows from (used in) financing activities | 44,266,124 | 18,041,924 | 26,224,200 | 145.35% | | Cash flows from (used in) investing activities | (132,079) | (66,649) | (65,430) | 98.17% | | Net change in cash and cash equivalents | 31,119,029 | 7,377,989 | 23,741,040 | 321.78% | | Cash and cash equivalents, end of period | 70,581,382 | 21,135,511 | 49,445,871 | 233.94% | - Cash proceeds from issuance of shares increased by **161.09%** to **$36,357,305** for the six months ended June 30, 2025, from $13,925,729 in the prior year, significantly boosting financing activities[8](index=8&type=chunk) - Cash proceeds from warrant exercises also saw a substantial increase of **80.55%** to **$7,857,044** in 2025, compared to $4,351,656 in 2024[8](index=8&type=chunk) [Interim Condensed Consolidated Statement of Changes in Equity](index=5&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) The Company's total equity significantly increased for the six months ended June 30, 2025, primarily driven by substantial share issuances and warrant exercises, despite a considerable net loss for the period | Metric | Balance January 1, 2025 ($) | Issuance of shares – Offering March 2025 ($) | Exercise of warrants ($) | Exercise of options ($) | Share-based compensation ($) | Net loss for the period ($) | Balance June 30, 2025 ($) | | :-------------------------- | :-------------------------- | :------------------------------------------- | :----------------------- | :---------------------- | :--------------------------- | :-------------------------- | :-------------------------- | | Share capital | 102,256,065 | 36,357,305 | 7,857,044 | 547,979 | – | – | 146,845,506 | | Contributed surplus | 17,110,478 | – | 13,727,590 | – | 1,069,473 | – | 31,907,541 | | Deficit | (82,358,377) | – | – | – | – | (25,446,926) | (107,805,303) | | Total | 37,008,166 | 36,357,305 | 21,584,634 | 547,979 | 1,069,473 | (25,446,926) | 70,947,744 | - Share capital increased by **$44,589,441** from January 1, 2025, to June 30, 2025, primarily due to the issuance of shares from the March 2025 Offering (**$36,357,305**) and the exercise of warrants (**$7,857,044**)[9](index=9&type=chunk) - Contributed surplus increased by **$14,797,063**, largely from the exercise of warrants (**$13,727,590**) and share-based compensation (**$1,069,473**)[9](index=9&type=chunk) - Despite a net loss of **$25,446,926** for the period, total equity nearly doubled from $37,008,166 at January 1, 2025, to **$70,947,744** at June 30, 2025, reflecting strong capital raising activities[9](index=9&type=chunk) Notes to the Interim Condensed Consolidated Financial Statements [1. Nature of Operations](index=6&type=section&id=1.%20NATURE%20OF%20OPERATIONS) Collective Mining Ltd. is engaged in mineral property acquisition, exploration, and development in Colombia. The Company's shares trade on the TSX and NYSE American LLC, but it has not yet generated revenue from mining operations, remaining in the exploration stage - Collective Mining Ltd. (CML) and its subsidiaries are primarily focused on the acquisition, exploration, and development of mineral properties in Colombia[12](index=12&type=chunk) - The Company's common shares trade on the Toronto Stock Exchange (TSX) under 'CNL' and on the NYSE American LLC under 'CNL' as of July 17, 2024[13](index=13&type=chunk) - To date, the Company has not generated any revenue from mining or other operations, as it is currently in the exploration stage[14](index=14&type=chunk) [2. Basis of Preparation](index=6&type=section&id=2.%20BASIS%20OF%20PREPARATION) The interim financial statements are prepared in accordance with IFRS Accounting Standards, specifically IAS 34, and are consistent with the most recent audited annual financial statements. Key accounting policy expansions include the capitalization of mining concession acquisition costs and the recognition of environmental remediation provisions - The interim consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS Accounting Standards) applicable to interim financial reporting, including IAS 34[15](index=15&type=chunk) - The Company expanded its accounting policy for exploration and evaluation expenditures to capitalize the cost of acquiring mining concessions as mining concession assets, where directly associated with a specific area of interest and meeting asset recognition criteria[17](index=17&type=chunk) - A new accounting policy includes provisions for environmental remediation assumed in connection with mining concession acquisitions, recognized when a present obligation exists, settlement is probable, and the amount can be reliably estimated[18](index=18&type=chunk) - Management exercises significant judgment in recognizing the mining concession asset and corresponding liability, based on a legally binding agreement and effective transfer of control, despite pending regulatory approval and future cash settlement[19](index=19&type=chunk) [3. New Accounting Standards](index=7&type=section&id=3.%20NEW%20ACCOUNTING%20STANDARDS) The Company is assessing the potential impact of IFRS 18, 'Presentation and Disclosure in Financial Statements,' which is effective January 1, 2027. This new standard will significantly change the presentation of primary financial statements, requiring separate categories for operating, investing, and financing activities, and new disclosure requirements for management-defined performance measures - IFRS 18, 'Presentation and Disclosure in Financial Statements,' issued in April 2024, is expected to have a substantive impact on financial statements, including changes to the income statement structure and disclosure requirements[22](index=22&type=chunk) - The standard, effective for annual reporting periods beginning on or after January 1, 2027, will require companies to present separate categories of income and expense for operating, investing, and financing activities with prescribed subtotals[22](index=22&type=chunk) - Management-defined performance measures will also need to be explained and included in a separate note within the consolidated financial statements[22](index=22&type=chunk) [4. Receivables and Prepaid Expenses](index=9&type=section&id=4.%20RECEIVABLES%20AND%20PREPAID%20EXPENSES) Receivables and prepaid expenses increased by 43.70% to $982,435 as of June 30, 2025, compared to December 31, 2024, primarily driven by higher prepaid expenses and advances to suppliers | Category | June 30, 2025 ($) | December 31, 2024 ($) | Change ($) | % Change | | :------------------ | :------------------ | :-------------------- | :--------- | :------- | | Prepaid expenses | 661,145 | 517,442 | 143,703 | 27.77% | | Advance to suppliers | 269,834 | 72,082 | 197,752 | 274.35% | | Other receivables | 51,456 | 94,131 | (42,675) | -45.33% | | Total | 982,435 | 683,655 | 298,780 | 43.70% | - Advances to suppliers saw a significant increase of **274.35%** from $72,082 to **$269,834**[25](index=25&type=chunk) [5. Mining Concession Asset](index=9&type=section&id=5.%20MINING%20CONCESSION%20ASSET) As of June 30, 2025, the Company recognized a new mining concession asset of $10,013,929, primarily from the exercise of the First Guayabales Option. This includes the original acquisition cost, adjusted for fair value, and a provision for environmental remediation | Component | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------------------------ | :------------------ | :-------------------- | | Opening balance | – | – | | Addition: Original acquisition cost – First Guayabales Option | 9,833,334 | – | | Addition: Environmental remediation | 490,434 | – | | Fair value adjustment – First Guayabales Option | (309,839) | – | | Total Mining concession asset | 10,013,929 | – | - On June 23, 2025, the Company exercised its option to acquire the mining concession contract under the First Guayabales Option, expediting full ownership and eliminating the option to terminate the agreement[28](index=28&type=chunk)[45](index=45&type=chunk) - The acquisition cost of the mining concession contract includes a **$490,434 provision for environmental remediation** related to past activities in the concession area, specifically for two tailings ponds and a waste dump[31](index=31&type=chunk)[32](index=32&type=chunk) [6. Property, Plant and Equipment](index=11&type=section&id=6.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT) The net book value of property, plant and equipment increased significantly to $1,562,263 as of June 30, 2025, from $680,062 at January 1, 2025, primarily due to substantial additions, particularly in right-of-use assets | Category | Net book value, June 30, 2025 ($) | Net book value, January 1, 2025 ($) | Change ($) | % Change | | :-------------------- | :-------------------------------- | :---------------------------------- | :--------- | :------- | | Land and Buildings | 57,086 | 58,749 | (1,663) | -2.83% | | Exploration Equipment and structures | 382,493 | 343,704 | 38,789 | 11.29% | | Computer Equipment | 16,218 | 34,123 | (17,905) | -52.47% | | Leasehold Improvement | 67,768 | 96,971 | (29,203) | -30.12% | | Right of use assets | 1,038,698 | 146,515 | 892,183 | 608.94% | | Total | 1,562,263 | 680,062 | 882,201 | 129.73% | - Additions to property, plant and equipment totaled **$1,406,077** for the six months ended June 30, 2025, with right-of-use assets accounting for **$1,273,998** of this amount[34](index=34&type=chunk) - Depreciation expense for the six months ended June 30, 2025, was **$376,036**, significantly higher than $158,864 for the same period in 2024, reflecting increased asset base[36](index=36&type=chunk) [7. Mineral Interests](index=12&type=section&id=7.%20MINERAL%20INTERESTS) The Company holds mineral interests primarily through the Guayabales and San Antonio projects in Colombia. Significant developments include the acceleration of the First Guayabales Option to acquire 100% ownership, leading to the recognition of a mining concession asset and related liabilities. The Company continues to incur substantial exploration and evaluation expenses across its projects and surface rights agreements - On June 23, 2025, the Company accelerated the terms of the First Guayabales Option agreement, leading to the transfer of **100%** of the mining concession contract into its name, with the transfer expected within 60 days[38](index=38&type=chunk)[45](index=45&type=chunk) - The accelerated First Guayabales Option resulted in the recognition of a **$9,833,334 original acquisition cost** and a **$490,434 provision for environmental remediation**, totaling a **$10,013,929 mining concession asset**[46](index=46&type=chunk)[47](index=47&type=chunk) - For the six months ended June 30, 2025, exploration and evaluation expenses for the First Guayabales Option were **$9,385,306**, a significant increase from $4,475,233 in the prior year[49](index=49&type=chunk) - The Company has made total option payments of **$1,750,000** for the Second Guayabales Option as of June 30, 2025, and **$580,000** for the San Antonio Project[56](index=56&type=chunk)[66](index=66&type=chunk) - For the six months ended June 30, 2025, exploration and evaluation expenses for the San Antonio Project increased substantially to **$1,719,915** from $142,577 in the prior year[65](index=65&type=chunk) [7. (a) Guayabales Project](index=12&type=section&id=7.%20(a)%20Guayabales%20Project) The Guayabales Project involves multiple option agreements for mineral and surface rights. The First Guayabales Option was accelerated, leading to full ownership and the recognition of a mining concession asset and related long-term liabilities. The Company continues to incur significant exploration expenditures and option payments for the Second Guayabales Option and various surface rights agreements - The Company exercised the First Guayabales Option on June 23, 2025, accelerating the acquisition of **100%** of the mining concession contract and removing the termination option[28](index=28&type=chunk)[45](index=45&type=chunk) - The total consideration for the First Guayabales Option, valued at **$9,833,334** (present value of **$9,523,495**), is now recognized as a mining concession asset and a corresponding financial liability, including a **$490,434 provision for environmental remediation**[46](index=46&type=chunk)[47](index=47&type=chunk) - For the six months ended June 30, 2025, exploration and evaluation expenses for the First Guayabales Option were **$9,385,306**, and total option payments made from inception reached **$2,166,666**[49](index=49&type=chunk)[50](index=50&type=chunk) - The Second Guayabales Option requires total payments of **$7,050,000** over three phases, with **$1,750,000** in option payments made as of June 30, 2025[54](index=54&type=chunk)[56](index=56&type=chunk) - The Company has entered into multiple surface rights agreements, with total option payments of **$1,875,000** for the October 2023 agreements and **$260,953** for the May 2024 agreements as of June 30, 2025[58](index=58&type=chunk)[61](index=61&type=chunk) [7. (b) San Antonio Project](index=15&type=section&id=7.%20(b)%20San%20Antonio%20Project) The San Antonio Project is under an option agreement expiring in July 2027, requiring total payments of $2,500,000, with an additional $2,500,000 option to acquire the NSR. Exploration and evaluation expenses for this project significantly increased for the six months ended June 30, 2025 - The San Antonio Project option agreement, entered on July 9, 2020, provides the Company the right to explore, develop, and acquire the property over a seven-year term, expiring July 9, 2027, for total payments of **$2,500,000**[62](index=62&type=chunk)[63](index=63&type=chunk) - An additional **$2,500,000** payment can be made upon reaching commercial production to acquire the **1.5% Net Smelter Return (NSR)**[63](index=63&type=chunk) - For the six months ended June 30, 2025, exploration and evaluation expenses for the San Antonio Project were **$1,719,915**, a substantial increase from $142,577 in the same period of 2024[65](index=65&type=chunk) - As of June 30, 2025, total option payments made for the San Antonio Project from inception amounted to **$580,000**[66](index=66&type=chunk) [8. Long-Term VAT Receivable](index=16&type=section&id=8.%20LONG-TERM%20VAT%20RECEIVABLE) The Company's long-term VAT receivable increased by 28.78% to $2,912,553 as of June 30, 2025, from $2,261,717 at December 31, 2024, reflecting additional VAT related to local purchases and services for exploration activities | Category | June 30, 2025 ($) | December 31, 2024 ($) | Change ($) | % Change | | :-------------------------------- | :------------------ | :-------------------- | :--------- | :------- | | Opening balance | 2,261,717 | 1,799,497 | 462,220 | 25.69% | | VAT related to local purchases and services | 650,836 | 462,220 | 188,616 | 40.81% | | Balance, end of period | 2,912,553 | 2,261,717 | 650,836 | 28.78% | | Long-term portion | 2,912,553 | 2,261,717 | 650,836 | 28.78% | - The VAT receivable is classified as long-term, as it will be recovered when the related project commences production, subject to local regulations[67](index=67&type=chunk) [9. Provision for Environmental Remediation](index=16&type=section&id=9.%20PROVISION%20FOR%20ENVIRONMENTAL%20REMEDIATION) A new provision for environmental remediation of $490,434 was recognized as of June 30, 2025, as part of the mining concession asset acquisition. This provision covers the treatment and closure of two tailings ponds and a waste dump from past activities, and management is evaluating potential additional costs | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------------------ | :------------------ | :-------------------- | | Opening balance | – | – | | Environmental remediation – First Guayabales Option | 490,434 | – | | Balance, end of period | 490,434 | – | - The **$490,434 provision** specifically covers the treatment and closure of two small tailings ponds and a waste dump, arising from past activities in the concession area prior to the Company's acquisition[69](index=69&type=chunk) - This provision has been capitalized as part of the costs directly attributable to the acquisition of the mining concession asset[70](index=70&type=chunk) - Management is continuing to evaluate regulatory, environmental, and legal requirements, including potential additional costs for decommissioning and reclamation related to a small-scale mining operation within the property boundaries[71](index=71&type=chunk) [10. Warrants Liability](index=18&type=section&id=10.%20WARRANTS%20LIABILITY) The warrants liability balance was reduced to zero as of June 30, 2025, from $3,163,115 at December 31, 2024, due to the exercise of all outstanding warrants. This resulted in a significant revaluation loss for the six months ended June 30, 2025 | Metric | Six-month period ended June 30, 2025 ($) | Year ended December 31, 2024 ($) | | :------------------------------------ | :--------------------------------------- | :------------------------------- | | Opening balance | 3,163,115 | 1,638,808 | | Warrants exercised | (13,727,589) | (1,784,361) | | Fair value revaluation of warrants liability | 10,564,474 | 2,115,036 | | Balance, end of period | – | 3,163,115 | - All **2,250,000 Warrants** from the March 2024 Offering were exercised on March 20, 2025, generating total proceeds of **$7,857,044** (C$11,272,500)[80](index=80&type=chunk) - For the six months ended June 30, 2025, the Company recognized a derivative loss of **$10,564,474** from the revaluation of warrants, a significant change from a gain of $611,760 in the prior year[79](index=79&type=chunk) - The warrants were classified as derivative financial liabilities because they were denominated in Canadian dollars while the Company's functional currency is the US dollar[75](index=75&type=chunk)[79](index=79&type=chunk) [11. Lease Liabilities](index=19&type=section&id=11.%20LEASE%20LIABILITIES) Lease liabilities significantly increased to $1,179,909 as of June 30, 2025, from $155,527 at December 31, 2024, primarily due to new leases entered during the period. The Company recognized substantial interest accretion expense and lease payments | Category | June 30, 2025 ($) | December 31, 2024 ($) | Change ($) | % Change | | :------------------------ | :------------------ | :-------------------- | :--------- | :------- | | Opening balance | 155,527 | 119,697 | 35,830 | 29.94% | | New leases during the period | 1,273,998 | 124,778 | 1,149,220 | 921.09% | | Termination of lease agreement | (155,527) | – | (155,527) | N/A | | Lease payments | (323,317) | (114,790) | (208,527) | 181.66% | | Interest accretion expense | 128,805 | 50,126 | 78,679 | 157.00% | | Foreign exchange | 100,423 | (24,284) | 124,707 | -513.53% | | Balance, end of period | 1,179,909 | 155,527 | 1,024,382 | 658.65% | | Current portion | (469,542) | (82,795) | (386,747) | 467.15% | | Long-term portion | 710,367 | 72,732 | 637,635 | 876.69% | - New leases totaling **$1,273,998** were added during the period, representing a substantial increase from $124,778 in the prior year[81](index=81&type=chunk) - Interest accretion expense on lease liabilities increased by **157%** to **$128,805** for the six months ended June 30, 2025, from $50,126 in the prior year[81](index=81&type=chunk) - Lease payments recognized as lease expense within exploration and evaluation expenses for contracts with terms of 12 months or less were **$281,844** for the six months ended June 30, 2025, up from $102,835 in the prior year[83](index=83&type=chunk) [12. Other Long-Term Liabilities](index=20&type=section&id=12.%20OTHER%20LONG-TERM%20LIABILITIES) A new other long-term liability of $9,523,495 was recognized as of June 30, 2025, stemming from the exercise of the First Guayabales Option. This represents the present value of the total consideration owed for the mining concession contract, with a significant portion classified as current | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------------------------ | :------------------ | :-------------------- | | Opening balance | – | – | | Original acquisition cost – First Guayabales Option | 9,833,334 | – | | Fair value long-term liability | (309,839) | – | | Balance, end of period | 9,523,495 | – | | Current portion | (7,407,142) | – | | Long-term portion | 2,116,353 | – | - The financial liability of **$9,523,495** represents the present value of the total consideration owing for the First Guayabales Option, discounted at **4.95%** over 2025 to 2028[85](index=85&type=chunk) - A significant portion, **$7,407,142**, is classified as current, indicating expected payments within one year[84](index=84&type=chunk) [13. Related Party Transactions](index=20&type=section&id=13.%20RELATED%20PARTY%20TRANSACTIONS) Compensation for key management personnel, including salaries, benefits, and share-based payments, increased by 85.24% to $1,041,030 for the six months ended June 30, 2025, compared to the same period in 2024 | Category | For the six months ended June 30, 2025 ($) | For the six months ended June 30, 2024 ($) | Change ($) | % Change | | :------------------------ | :--------------------------------------- | :--------------------------------------- | :--------- | :------- | | Management salaries and benefits | 465,554 | 390,000 | 75,554 | 19.37% | | Share-based payments | 575,476 | 171,993 | 403,483 | 234.59% | | Total | 1,041,030 | 561,993 | 479,037 | 85.24% | - Share-based payments to key management personnel saw a substantial increase of **234.59%** to **$575,476** in 2025 from $171,993 in 2024[88](index=88&type=chunk) [14. Financial Instruments](index=21&type=section&id=14.%20FINANCIAL%20INSTRUMENTS) The Company's financial liabilities significantly increased to $10,703,404 as of June 30, 2025, from $3,318,642 at December 31, 2024. This change is primarily due to the reclassification of warrants liability to zero (due to exercise) and the recognition of new lease and other long-term liabilities, all measured at amortized cost or fair value Level 2 | Financial Liabilities (As at June 30, 2025) | FVTPL ($) | FVOCI ($) | Amortized Cost ($) | Total ($) | | :---------------------------------------- | :-------- | :-------- | :----------------- | :-------- | | Warrants liability (level 2) | – | – | – | – | | Lease liabilities (level 2) | – | – | 1,179,909 | 1,179,909 | | Other long-term liabilities | – | – | 9,523,495 | 9,523,495 | | Total | – | – | 10,703,404 | 10,703,404 | | Financial Liabilities (As at December 31, 2024) | FVTPL ($) | FVOCI ($) | Amortized Cost ($) | Total ($) | | :---------------------------------------- | :-------- | :-------- | :----------------- | :-------- | | Warrants liability (level 2) | 3,163,115 | – | – | 3,163,115 | | Lease liabilities (level 2) | – | – | 155,527 | 155,527 | | Total | 3,163,115 | – | 155,527 | 3,318,642 | - The carrying values for cash and cash equivalents, accounts payable and accrued liabilities, lease liabilities, and other long-term liabilities approximate their fair values[91](index=91&type=chunk) - There were no transfers between the fair value hierarchy levels during the three months ended June 30, 2025[92](index=92&type=chunk) [15. Financial and Capital Risk Management](index=21&type=section&id=15.%20FINANCIAL%20AND%20CAPITAL%20RISK%20MANAGEMENT) The Company manages financial risks including currency, credit, liquidity, and interest rate risks, with a focus on mitigating exposure through cash management and dealing with reputable financial institutions. Capital management relies on equity issuances, with a current base shelf prospectus allowing for up to C$200,000,000 in future issuances, of which C$159,750,000 remains available - The Company is exposed to foreign currency risk from balances denominated in Canadian dollars and Colombian pesos; a **10%** strengthening/weakening against the U.S. dollar would impact net loss by **$506,821 (CAD)** and **$619,448 (COP)** respectively[96](index=96&type=chunk) - Liquidity risk is managed by evaluating cash position and forecasting requirements, but current cash is insufficient for continued exploration, mine building, and future option obligations, necessitating further financing[99](index=99&type=chunk) - The Company relies on equity issuances for capital, with a current base shelf prospectus allowing for up to **C$200,000,000**, of which **C$159,750,000** remains as of August 12, 2025[103](index=103&type=chunk)[104](index=104&type=chunk) [15. (a) Financial Risk Management](index=21&type=section&id=15.%20(a)%20Financial%20Risk%20Management) The Company faces foreign currency risk due to operations in Canadian dollars and Colombian pesos, credit risk primarily from cash and receivables managed by dealing with highly-rated financial institutions, and liquidity risk, which is significant given current cash levels are insufficient for long-term obligations without further financing. Interest rate risk on cash balances is minimal - The Company's functional currency is the U.S. dollar, but it conducts activities in Canadian dollars and Colombian pesos, exposing it to foreign exchange gains and losses[94](index=94&type=chunk) - As of June 30, 2025, a **10%** fluctuation in CAD or COP against the U.S. dollar would result in an increase/reduction in net loss of **$506,821 (CAD)** and **$619,448 (COP)** respectively[96](index=96&type=chunk) - Credit risk is managed by holding cash and cash equivalents with financial institutions rated 'BBB-' or higher and by minimal concentration of credit risk on receivables[97](index=97&type=chunk) - The Company's cash balance of **$70,581,382** as of June 30, 2025, is not sufficient to fund continued exploration, mine construction, and all future option obligations, highlighting significant liquidity risk[99](index=99&type=chunk) [15. (b) Capital Management](index=23&type=section&id=15.%20(b)%20Capital%20Management) The Company manages its capital to ensure going concern status for mineral exploration and evaluation, primarily through equity issuances. A new base shelf prospectus filed in December 2023 allows for up to C$200,000,000 in capital raises, with C$159,750,000 remaining available as of August 12, 2025 - The Company's capital structure includes equity components and cash and cash equivalents, with a primary reliance on equity issuances to raise new capital[101](index=101&type=chunk) - A new short form base shelf prospectus, effective until January 2026, allows the Company to issue various securities for up to an aggregate total of **C$200,000,000**[103](index=103&type=chunk) - As of August 12, 2025, **C$159,750,000** remains available under the current base shelf prospectus[104](index=104&type=chunk) - The Company monitors actual expenditures against annual estimates for exploration and administration to ensure sufficient capital for ongoing obligations[104](index=104&type=chunk) [16. Share Capital](index=24&type=section&id=16.%20SHARE%20CAPITAL) The Company's authorized share capital consists of an unlimited number of common shares without par value. During the six months ended June 30, 2025, the Company issued 7,251,818 common shares through a private placement, stock option exercises, and warrant exercises, significantly increasing its outstanding shares - Authorized share capital consists of an unlimited number of common shares without par value, and no dividends have been paid or declared since inception[107](index=107&type=chunk) - For the six months ended June 30, 2025, the Company issued **4,741,984 common shares** from a private placement, **259,834** from stock option exercises, and **2,250,000** from warrant exercises[112](index=112&type=chunk) - The March 2025 private placement generated **$36,357,304** (C$52,161,824) in proceeds, with issue costs of **$172,887** recognized as a reduction in share capital[112](index=112&type=chunk) [17. Earnings per Share](index=24&type=section&id=17.%20Earnings%20per%20share) The basic net loss per common share increased to $0.31 for the six months ended June 30, 2025, from $0.17 in the prior year, reflecting a higher net loss and an increased weighted average number of common shares outstanding. Diluted loss per share is the same as basic due to the anti-dilutive effect of outstanding options and warrants | Metric | For the six months ended June 30, 2025 | For the six months ended June 30, 2024 | | :------------------------------------ | :------------------------------------- | :------------------------------------- | | Net loss | $(25,446,926) | $(11,057,158) | | Weighted average number of common shares outstanding | 81,819,848 | 66,479,549 | | Basic net loss per common share | $ (0.31) | $ (0.17) | - The weighted average number of common shares outstanding increased by **23.07%** to **81,819,848** in 2025 from 66,479,549 in 2024[110](index=110&type=chunk) - All outstanding stock options and share warrants were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive due to the net loss incurred[111](index=111&type=chunk) [18. Share-Based Payments](index=25&type=section&id=18.%20SHARE%20BASED%20PAYMENTS) The Company granted 900,000 stock options during the six months ended June 30, 2025, increasing total outstanding options to 5,024,966. Share-based compensation expense recognized for the period significantly increased, and a substantial unamortized portion remains to be recognized in future periods | Metric | 2025 (Number of stock options) | 2025 (Weighted average exercise price C$) | 2024 (Number of stock options) | 2024 (Weighted average exercise price C$) | | :-------------------------- | :----------------------------- | :--------------------------------------- | :----------------------------- | :--------------------------------------- | | Outstanding, beginning of period | 4,434,800 | 4.07 | 4,177,217 | 3.10 | | Granted | 900,000 | 13.54 | – | – | | Exercised | (259,834) | (3.03) | (654,817) | (1.23) | | Forfeited | (50,000) | (4.12) | – | – | | Outstanding, June 30 | 5,024,966 | 5.82 | 3,522,400 | 3.45 | - The Company granted **900,000 stock options** with a weighted average exercise price of **C$13.54** and a grant date fair value of **$8.34 per share** during the six months ended June 30, 2025[115](index=115&type=chunk)[117](index=117&type=chunk) - Share-based compensation expense recognized for the six months ended June 30, 2025, was **$1,069,474**, an increase of **55.14%** from $689,360 in the prior year[117](index=117&type=chunk) - As of June 30, 2025, the unamortized portion of share-based expenses is **$4,158,348**, which will be recognized in future periods[116](index=116&type=chunk) [19. Expenses by Nature](index=26&type=section&id=19.%20EXPENSES%20BY%20NATURE) The Company's expenses by nature show significant increases across exploration and evaluation, general and administration, and finance costs for the six months ended June 30, 2025, compared to the prior year. Drilling services and share-based compensation were major contributors to the increases in their respective categories - Total exploration and evaluation expenses increased by **36.28%** to **$12,291,882** for the six months ended June 30, 2025, from $9,019,771 in the prior year[118](index=118&type=chunk) - Total general and administration expenses increased by **70.47%** to **$4,134,425** for the six months ended June 30, 2025, from $2,425,283 in the prior year[119](index=119&type=chunk) - Total finance costs increased by **31.54%** to **$169,887** for the six months ended June 30, 2025, from $129,153 in the prior year[120](index=120&type=chunk) [19. (a) Exploration and Evaluation Expenses](index=26&type=section&id=19.%20(a)%20Exploration%20and%20evaluation) Exploration and evaluation expenses significantly increased for the six months ended June 30, 2025, primarily driven by higher drilling services, salaries and benefits, and community expenses, reflecting intensified exploration activities | Category | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | Change ($) | % Change | | :-------------------------- | :--------------------------------- | :--------------------------------- | :--------- | :------- | | Drilling services | 5,241,694 | 3,040,470 | 2,201,224 | 72.39% | | Option payments and fees | 1,279,210 | 1,223,463 | 55,747 | 4.56% | | Salaries and benefits | 1,467,149 | 1,105,431 | 361,718 | 32.72% | | Assaying | 1,065,381 | 1,031,962 | 33,419 | 3.24% | | Field costs, surveys and other | 955,013 | 864,563 | 90,450 | 10.46% | | Transportation and meals | 641,438 | 490,037 | 151,401 | 30.90% | | Community expenses | 345,945 | 148,811 | 197,134 | 132.47% | | Depreciation and amortization | 352,382 | 137,877 | 214,505 | 155.58% | | Total | 12,291,882 | 9,019,771 | 3,272,111 | 36.28% | - Drilling services expenses increased by **72.39%** to **$5,241,694** for the six months ended June 30, 2025, from $3,040,470 in the prior year, indicating a significant ramp-up in exploration activities[118](index=118&type=chunk) - Community expenses more than doubled, increasing by **132.47%** to **$345,945**, reflecting increased engagement in local communities[118](index=118&type=chunk) [19. (b) General and Administration Expenses](index=27&type=section&id=19.%20(b)%20General%20and%20administration) General and administration expenses rose substantially for the six months ended June 30, 2025, primarily due to a significant increase in share-based compensation, salaries and benefits, and consulting and professional fees | Category | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | Change ($) | % Change | | :-------------------------- | :--------------------------------- | :--------------------------------- | :--------- | :------- | | Share-based compensation | 1,069,474 | 689,360 | 380,114 | 55.14% | | Salaries and benefits | 1,251,597 | 775,163 | 476,434 | 61.46% | | Consulting and professional fees | 741,028 | 216,402 | 524,626 | 242.43% | | Office administration | 299,751 | 174,750 | 125,001 | 71.53% | | Regulatory and compliance fees | 256,651 | 142,533 | 114,118 | 80.07% | | Total | 4,134,425 | 2,425,283 | 1,709,142 | 70.47% | - Consulting and professional fees experienced a significant increase of **242.43%** to **$741,028** for the six months ended June 30, 2025, from $216,402 in the prior year[119](index=119&type=chunk) - Share-based compensation increased by **55.14%** to **$1,069,474**, and salaries and benefits rose by **61.46%** to **$1,251,597**[119](index=119&type=chunk) [19. (c) Finance Costs](index=27&type=section&id=19.%20(c)%20Finance%20costs) Finance costs increased for the six months ended June 30, 2025, primarily due to a substantial rise in interest accretion expense related to lease liabilities, partially offset by the absence of finance issue expense from the prior year | Category | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | Change ($) | % Change | | :------------------------ | :--------------------------------- | :--------------------------------- | :--------- | :------- | | Finance issue expense | – | 65,849 | (65,849) | -100.00% | | Interest accretion expense | 128,805 | 26,549 | 102,256 | 385.16% | | Other finance expense | 41,082 | 36,755 | 4,327 | 11.77% | | Total | 169,887 | 129,153 | 40,734 | 31.54% | - Interest accretion expense increased significantly by **385.16%** to **$128,805** for the six months ended June 30, 2025, from $26,549 in the prior year, primarily due to lease liabilities[120](index=120&type=chunk) [20. Cash Flow Information](index=27&type=section&id=20.%20CASH%20FLOW%20INFORMATION) Net changes in working capital items resulted in a cash inflow of $926,264 for the six months ended June 30, 2025, a positive reversal from a cash outflow of $476,332 in the prior year. This improvement was driven by a significant increase in accounts payables and accrued liabilities | Category | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | Change ($) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | :--------- | | Receivables and prepaid expenses | (747,018) | (228,306) | (518,712) | | Accounts payables and accrued liabilities | 1,673,282 | (248,026) | 1,921,308 | | Net changes in working capital items | 926,264 | (476,332) | 1,402,596 | - Accounts payables and accrued liabilities contributed a cash inflow of **$1,673,282** in 2025, a significant improvement from a cash outflow of $248,026 in 2024[121](index=121&type=chunk) - Receivables and prepaid expenses resulted in a higher cash outflow of **$747,018** in 2025 compared to $228,306 in 2024[121](index=121&type=chunk) [21. Commitments, Option Agreements and Contingencies](index=28&type=section&id=21.%20COMMITMENTS,%20OPTION%20AGREEMENTS%20AND%20CONTINGENCIES) As of June 30, 2025, the Company has total contractual commitments of $4,858,815, primarily for service contracts (drilling) and lease commitments. Additionally, under the assumption of exercising all options, future payments for mineral option agreements total $12,288,329. The Company is also subject to environmental contingencies related to Colombian laws | Commitment Category | Total ($) | Less than 1 Year ($) | Years 2 – 5 ($) | After 5 Years ($) | | :-------------------- | :-------- | :------------------- | :-------------- | :---------------- | | Service contracts | 3,516,520 | 3,516,520 | – | – | | Other lease commitments | 1,342,295 | 631,928 | 710,367 | – | | Total Commitments | 4,858,815 | 4,148,448 | 710,367 | – | | Option Agreement Category | Total ($) | Less than 1 Year ($) | Years 2 – 5 ($) | After 5 Years ($) | | :-------------------------- | :-------- | :------------------- | :-------------- | :---------------- | | Second Guayabales Option | 5,300,000 | 250,000 | 2,900,000 | 2,150,000 | | San Antonio Option | 4,420,000 | 420,000 | 1,500,000 | 2,500,000 | | Other Option agreements | 2,568,329 | 999,900 | 1,568,429 | – | | Total Option Agreements | 12,288,329 | 1,669,900 | 5,968,429 | 4,650,000 | - The Company's exploration activities are subject to Colombian environmental laws and regulations, which may become more restrictive and require future expenditures not yet recognized in the financial statements[127](index=127&type=chunk) [22. Subsequent Events](index=28&type=section&id=22.%20SUBSEQUENT%20EVENTS) Subsequent to the quarter end, the Company made a payment of $4 million related to the amended First Guayabales Option agreement - Subsequent to June 30, 2025, the Company paid **$4 million** with respect to the amended First Guayabales Option[128](index=128&type=chunk)

[Applied Therapeutics Second Quarter 2025 Results](index=1&type=section&id=Applied%20Therapeutics%20Second%20Quarter%202025%20Results) [Management Commentary](index=1&type=section&id=Management%20Commentary) The interim CEO highlighted strong execution in H1 2025, focusing on clinical operations, pipeline advancement, and regulatory alignment for rare disease programs - The company is preparing for a potential New Drug Application (NDA) submission for govorestat for the treatment of CMT-SORD, with a meeting scheduled with the FDA in **Q3 2025**[3](index=3&type=chunk) - A new sponsored sorbitol assay has been launched at no cost to patients to remove barriers to diagnosis and treatment for the CMT-SORD community[3](index=3&type=chunk) - The company's primary focus for the remainder of the year is on regulatory alignment across its pipeline for rare diseases, including CMT-SORD, Classic Galactosemia, and PMM2-CDG[3](index=3&type=chunk) [Recent Highlights & Pipeline Update](index=1&type=section&id=Recent%20Highlights%20%26%20Pipeline%20Update) Applied Therapeutics reported significant progress across its clinical pipeline, advancing CMT-SORD, addressing Classic Galactosemia CRL, presenting PMM2-CDG data, and completing corporate developments [CMT-SORD Program](index=1&type=section&id=CMT-SORD%20Program) The govorestat program for CMT-SORD is advancing toward a potential NDA submission, supported by positive 24-month MRI data and a newly launched no-cost Urine Sorbitol Assay - A meeting with the FDA is scheduled for **Q3 2025** to align on the planned NDA submission strategy for govorestat in treating CMT-SORD[6](index=6&type=chunk) - Full 12-month results and 24-month MRI data from the INSPIRE Phase 2/3 trial were presented, demonstrating that govorestat slowed the progression of the disease and was generally safe and well-tolerated[7](index=7&type=chunk) - In July 2025, the company launched a sponsored, no-cost Urine Sorbitol Assay to help healthcare providers identify patients with suspected CMT-SORD[6](index=6&type=chunk)[7](index=7&type=chunk) [Classic Galactosemia Program](index=2&type=section&id=Classic%20Galactosemia%20Program) The company is actively evaluating its response to the FDA's Complete Response Letter (CRL) for govorestat in Classic Galactosemia, with the review progressing as planned - The company is actively evaluating its response to the FDA's Complete Response Letter (CRL) for govorestat in Classic Galactosemia, with the process progressing as planned[8](index=8&type=chunk) [PMM2-CDG Program](index=2&type=section&id=PMM2-CDG%20Program) Results from an investigator-initiated trial of govorestat for PMM2-CDG are scheduled for presentation, with govorestat having received Orphan Drug and Rare Pediatric Disease designations - Data from an ongoing trial of govorestat for PMM2-CDG will be presented at the ASHG Annual Meeting in **October 2025**[9](index=9&type=chunk) - Govorestat has received Orphan Drug Designation and Rare Pediatric Disease designation from the FDA for the treatment of PMM2-CDG, an ultra-rare and severe metabolic disorder[9](index=9&type=chunk) [Corporate Developments](index=2&type=section&id=Corporate%20Developments) The company entered an out-licensing agreement for AT-001 for Diabetic Cardiomyopathy and made key leadership promotions in July 2025 - Entered into an out-licensing agreement with Biossil, Inc. for AT-001, granting Biossil exclusive worldwide rights to develop and commercialize the drug for Diabetic Cardiomyopathy (DbCM), with Applied Therapeutics receiving an upfront payment and eligibility for future royalties and milestones[10](index=10&type=chunk) - Promoted Evan Bailey, M.D., to Chief Medical Officer and Dottie Caplan to Executive Vice President, Patient Advocacy and Government Affairs[10](index=10&type=chunk) [Second Quarter 2025 Financial Results](index=3&type=section&id=Second%20Quarter%202025%20Financial%20Results) Applied Therapeutics reported a net loss of **$21.3 million** for Q2 2025, a significant shift from a net income of **$2.9 million** in Q2 2024, primarily due to changes in warrant liabilities and increased G&A expenses Financial Metrics | Financial Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Net Income (Loss)** | $(21.3) million | $2.9 million | Decreased significantly | | **Net Loss per Share (basic)** | $(0.15) | $0.02 (income) | N/A | | **R&D Expenses** | $9.9 million | $10.0 million | -1.0% | | **G&A Expenses** | $13.2 million | $10.6 million | +24.5% | | **Cash & Cash Equivalents** | $30.4 million (as of Jun 30, 2025) | $79.4 million (as of Dec 31, 2024) | -61.7% YTD | - The increase in General and administrative expenses was primarily driven by higher legal, professional, personnel, and data storage costs[16](index=16&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) The condensed financial statements detail the company's financial position and operational results, reflecting a significant reduction in cash and total assets and a net loss for the quarter due to non-operational changes [Condensed Balance Sheets](index=6&type=section&id=Condensed%20Balance%20Sheets) As of June 30, 2025, total assets decreased to **$37.3 million** from **$86.7 million** at year-end 2024, primarily due to a decline in cash and cash equivalents Balance Sheet Summary (in thousands) | (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $30,421 | $79,398 | | Total current assets | $34,511 | $83,646 | | **Total Assets** | **$37,342** | **$86,691** | | **Liabilities & Equity** | | | | Total current liabilities | $17,749 | $27,296 | | Total liabilities | $19,904 | $29,685 | | Total stockholders' equity | $17,438 | $57,006 | | **Total Liabilities and Stockholders' Equity** | **$37,342** | **$86,691** | [Condensed Statements of Operations](index=7&type=section&id=Condensed%20Statements%20of%20Operations) For Q2 2025, the company reported no revenue and a net loss of **$21.3 million**, contrasting with a **$2.9 million** net income in Q2 2024, largely due to changes in the fair value of warrant liabilities Statements of Operations Summary (in thousands, except per share data) | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenue | $— | $144 | | Research and development | $9,923 | $10,004 | | General and administrative | $13,175 | $10,580 | | Loss from operations | $(23,098) | $(20,440) | | Change in fair value of warrant liabilities | $1,437 | $22,744 | | **Net income (loss)** | **$(21,330)** | **$2,898** | | **Net income (loss) per share - basic** | **$(0.15)** | **$0.02** |

Table of Contents FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-41529 SPRING VALLEY ACQUISITION CORP. II (Exact name of registrant as specified in its charter) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Cayman Islands 98- ...

Table of Contents ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-41529 SPRING VALLEY ACQUISITION CORP. II UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (Exact name of registrant as specified in its charter) Cayman Islands 98- ...

[Report Information](index=1&type=section&id=Report%20Information) Global Water Resources, Inc is classified as a non-accelerated filer and a smaller reporting company - Global Water Resources, Inc is a **non-accelerated filer** and a **smaller reporting company**[4](index=4&type=chunk) Key Metrics | Metric | Value | | :--- | :--- | | Common shares outstanding as of August 12, 2025 | 27,473,277 shares | | Common stock par value | $0.01 per share | [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. Financial Statements (Unaudited)](index=5&type=section&id=ITEM%201.%20Financial%20Statements%20(Unaudited)) This section presents the company's unaudited condensed consolidated financial statements, reflecting growth in total assets and equity alongside a year-over-year decrease in net income [Condensed Consolidated Balance Sheets (unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) The balance sheet shows an increase in total assets, primarily driven by growth in net utility plant, and a significant rise in shareholders' equity Financial Position Summary | Metric (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Net utility plant | 401,749 | 359,379 | | Cash and cash equivalents | 10,220 | 9,047 | | Total assets | 449,382 | 405,137 | | **Capitalization and Liabilities** | | | | Total shareholders' equity | 76,740 | 47,604 | | Long-term debt, net | 116,803 | 118,518 | | Total capitalization | 193,543 | 166,122 | | Total current liabilities | 20,006 | 22,258 | | Total other liabilities | 235,833 | 216,757 | | Total capitalization and liabilities | 449,382 | 405,137 | [Condensed Consolidated Statements of Operations (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(unaudited)) The operations statement reveals a year-over-year revenue increase, but higher operating expenses led to a slight decline in net income Operating Performance Summary | Metric (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | 14,241 | 13,510 | 26,698 | 25,120 | | Operating income | 2,620 | 2,797 | 3,875 | 4,064 | | Net income | 1,612 | 1,730 | 2,203 | 2,421 | | Basic earnings per share | 0.06 | 0.07 | 0.08 | 0.10 | | Diluted earnings per share | 0.06 | 0.07 | 0.08 | 0.10 | | Dividends per share | 0.08 | 0.08 | 0.15 | 0.15 | [Condensed Consolidated Statements of Shareholders' Equity (unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(unaudited)) Shareholders' equity increased significantly due to the issuance of common stock, which raised substantial net proceeds - Total shareholders' equity was **$76,740 thousand** as of June 30, 2025, a significant increase from $47,604 thousand on December 31, 2024, primarily due to the issuance of **3,220,000 common shares** for net proceeds of **$30,783 thousand**[18](index=18&type=chunk) Shareholders' Equity Summary | Metric (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Common shares outstanding | 27,830,545 | 24,570,994 | | Common stock | 273 | 240 | | Additional paid-in capital | 76,469 | 47,366 | | Retained earnings | — | — | | Total shareholders' equity | 76,740 | 47,604 | [Condensed Consolidated Statements of Cash Flows (unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) Cash flow from operations decreased, while cash used in investing activities increased significantly, offset by strong cash generation from financing activities Cash Flow Summary | Cash Flow Activity (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | 8,827 | 13,571 | | Net cash used in investing activities | (35,395) | (12,211) | | Net cash provided by financing activities | 27,788 | 13,573 | | Increase in cash, cash equivalents, and restricted cash | 1,220 | 14,933 | | Cash, cash equivalents, and restricted cash at end of period | 12,376 | 19,696 | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of accounting policies, recent acquisitions, regulatory matters, and other key financial components [1. Description of Business, Basis of Presentation, Significant Accounting Policies, and Recent Accounting Pronouncements](index=10&type=section&id=1.%20Description%20of%20Business%2C%20Basis%20of%20Presentation%2C%20Significant%20Accounting%20Policies%2C%20and%20Recent%20Accounting%20Pronouncements) This note outlines the basis for the financial statements and discusses the potential impact of new accounting standards on future disclosures - The company is evaluating the impact of ASU 2023-09 (Income Tax Disclosure Improvements) and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures for Comprehensive Income) on its financial statement disclosures[25](index=25&type=chunk)[26](index=26&type=chunk) [2. Acquisitions](index=10&type=section&id=2.%20Acquisitions) This note details the company's recent acquisition of seven water systems in Tucson to expand its service area and customer base in Pima County - On July 8, 2025, the company's subsidiary GW-Ocotillo acquired seven water systems from Tucson Water for approximately **$8.2 million in cash**, serving about **2,200 water connections** with a current rate base of approximately **$7.7 million**[27](index=27&type=chunk) [3. Regulatory Matters](index=11&type=section&id=3.%20Regulatory%20Matters) This note details recent decisions and activities by the Arizona Corporation Commission (ACC) that affect the company's revenue requirements and rate structures - GW-Santa Cruz and GW-Palo Verde filed rate case applications on March 5, 2025, with hearings expected to begin in the **fourth quarter of 2025**[28](index=28&type=chunk) - The ACC approved the GW-Farmers rate case on April 29, 2025, with a **$1.1 million annual revenue increase**, a **9.6% return on equity**, and rates effective in three phases starting May 1, 2025[29](index=29&type=chunk) - The ACC approved the rate case for GW-Saguaro and six other utilities on June 20, 2024, resulting in a collective annual revenue increase of approximately **$351 thousand**, effective in five phases starting July 1, 2024[30](index=30&type=chunk) [4. Revenue Recognition](index=12&type=section&id=4.%20Revenue%20Recognition) This note provides a breakdown of revenue by source and customer class, along with policies for contract balances and credit loss allowances Revenue by Source | Revenue Source (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total water service revenue | 7,368 | 6,668 | 13,348 | 11,894 | | Total wastewater and recycled water service revenue | 6,873 | 6,842 | 13,350 | 13,226 | | Total regulated revenue | 14,241 | 13,510 | 26,698 | 25,120 | Contract Balances | Contract Balance (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accounts receivable, net | 3,830 | 3,233 | | Deferred revenue - ICFA | 22,449 | 21,517 | Allowance for Credit Losses | Credit Loss Allowance (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Beginning balance | (163) | (122) | | Credit loss expense | (59) | (103) | | Write-offs | 56 | 90 | | Recoveries | (4) | (28) | | Ending balance | (170) | (163) | [5. Earnings Per Share](index=13&type=section&id=5.%20Earnings%20Per%20Share) This note provides the calculation for basic and diluted earnings per share, including the impact of dilutive securities - For the three and six months ended June 30, 2025, approximately **130,000 share-based awards** were excluded from the diluted EPS calculation because their effect was anti-dilutive[38](index=38&type=chunk) Weighted-Average Shares Outstanding | Metric (in thousands of shares) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic weighted-average common shares | 27,463 | 24,199 | 25,925 | 24,188 | | Effect of dilutive securities | 42 | 110 | 62 | 118 | | Diluted weighted-average common shares | 27,505 | 24,309 | 25,987 | 24,306 | [6. Utility Plant](index=14&type=section&id=6.%20Utility%20Plant) This note details the composition of the company's utility plant assets and provides information on depreciation expenses - Depreciation expense for the three and six months ended June 30, 2025, was **$3.2 million** and **$6.4 million**, respectively, an increase from the prior year periods[39](index=39&type=chunk) Utility Plant Composition | Utility Plant (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Transmission and distribution plant | 342,068 | 321,075 | | Equipment | 75,931 | 67,917 | | Office buildings and other structures | 68,858 | 67,313 | | Construction in progress | 73,095 | 54,388 | | Land | 2,315 | 2,300 | | Total utility plant | 562,267 | 512,993 | [7. Taxes, prepaid expenses and other current assets](index=14&type=section&id=7.%20Taxes%2C%20prepaid%20expenses%20and%20other%20current%20assets) This note provides a detailed breakdown of taxes, prepaid expenses, and other current assets as of the reporting date Current Assets Breakdown | Current Assets (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ICFA receivable | 2,191 | 1,871 | | Prepaid expenses | 697 | 648 | | Buckeye growth premium receivable | 615 | 738 | | Prepaid insurance | 303 | 533 | | Income taxes receivable | 149 | 149 | | Other current assets | 14 | 141 | | Total taxes, prepaid expenses and other current assets | 3,969 | 4,080 | [8. Goodwill](index=14&type=section&id=8.%20Goodwill) This note explains the changes in goodwill during the reporting period, primarily related to a reclassification to regulatory assets for a rate case - In March 2025, the company reclassified approximately **$3.0 million of goodwill** to regulatory assets to establish an acquisition premium related to the GW-Farmers rate case[42](index=42&type=chunk) Goodwill Reconciliation | Goodwill Movement (in thousands of USD) | Amount | | :--- | :--- | | Balance at December 31, 2024 | 9,486 | | Reclassification to regulatory assets | (2,959) | | Other adjustments | (245) | | Balance at June 30, 2025 | 6,282 | [9. Equity](index=15&type=section&id=9.%20Equity) This note discloses the details of the company's public offering of common stock completed in March 2025 - On March 27, 2025, the company completed a public offering of **3,220,000 shares** of common stock at **$10.00 per share**, raising gross proceeds of approximately **$32.2 million** and net proceeds of approximately **$30.8 million**[43](index=43&type=chunk) - Certain existing shareholders, including directors and their affiliates, purchased **1,439,200 shares** of common stock[43](index=43&type=chunk) [10. Debt](index=15&type=section&id=10.%20Debt) This note details the company's debt arrangements, including updates on its WIFA loan and revolving credit facility - The final disbursement of the WIFA loan was received in May 2025, with an outstanding balance of **$1.6 million** as of June 30, 2025[44](index=44&type=chunk) - The company's revolving credit facility with Northern Trust was amended on April 14, 2025, extending the maturity date to May 18, 2027, and increasing the maximum borrowing amount from **$15 million to $20 million**[45](index=45&type=chunk) - As of June 30, 2025, and December 31, 2024, the company had **no outstanding borrowings** under the revolving credit facility[45](index=45&type=chunk) [11. Accrued Expenses and Other Current Liabilities](index=15&type=section&id=11.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This note presents a detailed breakdown of accrued expenses and other current liabilities as of the reporting date Current Liabilities Breakdown | Current Liabilities (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued project liabilities | 4,536 | 5,858 | | Other taxes | 1,550 | 1,648 | | AIAC refund, current portion | 1,431 | 1,431 | | Interest | 1,186 | 1,180 | | Accrued payroll | 1,036 | 991 | | Dividends payable | 695 | 614 | | Customer advances | 545 | 556 | | Accrued franchise fees | 350 | 353 | | Other accrued liabilities | 1,190 | 1,170 | | Total accrued expenses and other current liabilities | 12,519 | 13,801 | [12. Fair Value](index=16&type=section&id=12.%20Fair%20Value) This note provides information on financial assets and liabilities measured at fair value and explains the valuation methods used - The estimated fair value of the contingent consideration (growth premium) related to the GW-Farmers acquisition was **$1.2 million**, and for the GW-Saguaro utilities was **$0.7 million**, remaining unchanged as of June 30, 2025, and December 31, 2024[48](index=48&type=chunk)[49](index=49&type=chunk) Fair Value Measurements | Fair Value Measurement (in thousands of USD) | Total at June 30, 2025 | Total at December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | HUF funds - restricted cash | 507 | 870 | | Certificates of deposit - restricted | 1,649 | 1,239 | | **Liabilities** | | | | Contingent consideration | 1,923 | 1,942 | Fair Value of Long-Term Debt | Long-Term Debt (in thousands of USD) | Carrying Value at June 30, 2025 | Fair Value at June 30, 2025 | Carrying Value at Dec 31, 2024 | Fair Value at Dec 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Long-term debt | 116,803 | 115,145 | 118,518 | 118,702 | [13. Income Taxes](index=17&type=section&id=13.%20Income%20Taxes) This note provides the company's effective tax rate for the reporting periods and explains the primary reasons for rate changes - The increase in the effective tax rate for the second quarter of 2025 was primarily due to differences between book and taxable compensation expense related to **share-based compensation**[53](index=53&type=chunk) - The increase in the effective tax rate for the first half of 2025 was mainly due to a **reduction in deferred tax assets** in the prior year period[53](index=53&type=chunk) - The company is evaluating the impact of the "One Big Beautiful Bill Act" but does not expect a material impact on its results of operations, cash flows, or financial condition[54](index=54&type=chunk) Effective Tax Rate | Effective Tax Rate | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Effective tax rate | 27.7% | 25.7% | 26.6% | 24.9% | [14. Share-based Compensation](index=17&type=section&id=14.%20Share-based%20Compensation) This note details the share-based compensation expenses for employees and non-employees during the reporting periods Share-based Compensation Expense | Share-based Compensation (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total employee share-based compensation | 192 | 268 | 369 | 551 | | Total non-employee share-based compensation | (2) | 53 | (5) | 44 | | Total share-based compensation | 190 | 321 | 364 | 595 | [15. Transactions With Related Parties](index=17&type=section&id=15.%20Transactions%20With%20Related%20Parties) This note discloses transactions between the company and its related parties, including an employee medical benefits plan and stock purchases - The company provides medical benefits to employees through a plan sponsored by an affiliate of a significant shareholder and director, with medical claims paid totaling **$0.5 million** and **$1.0 million** for the three and six months ended June 30, 2025, respectively[56](index=56&type=chunk) - Certain directors and their affiliates purchased a total of **1,439,200 common shares** in the March 2025 public offering[57](index=57&type=chunk) [16. Commitments and Contingencies](index=17&type=section&id=16.%20Commitments%20and%20Contingencies) This note details the company's commitments and contingencies, including growth premiums, ICFA repayment obligations, and asset retirement obligations - As of June 30, 2025, the estimated fair value of the growth premium liability related to the Farmers Water Co acquisition was **$1.2 million**[58](index=58&type=chunk) - The carrying value of the growth premium liability within the GW-Saguaro utility service area was **$0.7 million**[59](index=59&type=chunk) - The company has an obligation to repay ICFA advances related to the CP Water utility through future ICFA fee reductions, with a liability of **$0.9 million**[60](index=60&type=chunk) - As of June 30, 2025, the estimated liability for asset retirement obligations was **$1.0 million**, an increase from $0.7 million at December 31, 2024[61](index=61&type=chunk) - Management is not aware of any legal proceedings that would have a material effect on the company's financial condition, results of operations, or cash flows[62](index=62&type=chunk) [17. Business Segment Information](index=18&type=section&id=17.%20Business%20Segment%20Information) This note states that the company operates as a single segment and provides a reconciliation of non-GAAP measures used by management - The company operates as a **single operating and reportable segment**, providing regulated water, wastewater, and recycled water services primarily within one geographic region in Arizona[63](index=63&type=chunk) Reconciliation of Non-GAAP Measures | Metric (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | 1,612 | 1,730 | 2,203 | 2,421 | | EBITDA | 6,826 | 6,565 | 12,307 | 11,768 | | Adjusted EBITDA | 6,935 | 6,793 | 12,577 | 12,197 | [18. Other, Net](index=20&type=section&id=18.%20Other%2C%20Net) This note presents the components of "Other, Net" for the reporting periods, primarily consisting of the Buckeye growth premium and AFUDC-Equity Components of Other, Net | Other, Net (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Buckeye growth premium | 615 | 480 | 1,233 | 1,257 | | AFUDC-Equity | 277 | 237 | 556 | 444 | | Other | (3) | 55 | (2) | 73 | | Total Other, Net | 889 | 772 | 1,787 | 1,774 | [19. Supplemental Cash Flow Information](index=20&type=section&id=19.%20Supplemental%20Cash%20Flow%20Information) This note provides supplemental cash flow data, including cash paid for interest and income taxes, and non-cash activities Supplemental Cash Flow Data | Supplemental Cash Flow Info (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash paid for interest (net of capitalized amounts) | 2,839 | 2,290 | | Cash paid for income taxes | 1,027 | — | | Operating cash flows used for operating leases | 192 | 153 | | Capital expenditures (accrued in accounts payable and accrued liabilities) | 5,067 | 710 | | Utility plant constructed and contributed by developers | 15,424 | 2,645 | | Increase in asset retirement obligations | 278 | — | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operational results, covering business outlook, key performance factors, and a comparative analysis of liquidity and capital resources [Overview](index=21&type=section&id=Overview) The company is a water resource management firm that owns and operates 39 utility systems in Arizona using a "Total Water Management" approach - GWRI is a water resource management company that owns, operates, and manages **39 water, wastewater, and recycled water utility systems** in the Phoenix and Tucson metropolitan areas of Arizona[71](index=71&type=chunk) - The company employs a **"Total Water Management"** approach to reduce reliance on scarce water resources and ensure sustainability through recycled water reuse and regional planning[71](index=71&type=chunk)[76](index=76&type=chunk) [Business Outlook](index=22&type=section&id=Business%20Outlook) The company continues to experience organic growth and is optimistic about long-term prospects despite a recent downturn in housing permit forecasts - As of June 30, 2025, the company's active connections **grew by 3.8% year-over-year**, demonstrating organic growth[72](index=72&type=chunk) - The Phoenix metropolitan area's population is projected to reach **5.8 million by 2030** and **6.5 million by 2040**[72](index=72&type=chunk) Phoenix Metro Housing Permit Forecast | Phoenix Metro Area Housing Permit Forecast | 2025 | 2026 | | :--- | :--- | :--- | | Single-family permits | 24,010 | 24,090 | | Multi-family permits | 10,559 | 10,728 | Housing Equivalent Permits (Y-o-Y Change) | Housing Equivalent Permits (Y-o-Y Change) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | City of Maricopa single-family permits | 177 | 233 | (24)% | 365 | 558 | (35)% | | Phoenix Metro single-family permits | 5,929 | 6,898 | (14)% | 12,337 | 14,433 | (15)% | | City of Maricopa multi-family equivalent permits | 86 | 776 | (89)% | 290 | 1,176 | (75)% | [Factors Affecting our Results of Operations](index=22&type=section&id=Factors%20Affecting%20our%20Results%20of%20Operations) This section discusses various factors influencing the company's performance, including growth, acquisitions, regulation, investment, costs, weather, and water supply [Population and Community Growth](index=23&type=section&id=Population%20and%20Community%20Growth) Population and community growth in the Phoenix metropolitan area directly drive revenue and variable expense growth through an increase in active service connections - As of June 30, 2025, active service connections increased by **2,383, or 3.8%**, to **65,639**, primarily due to organic growth in the service area[80](index=80&type=chunk) - Approximately **89.8%** of active service connections are served by the GW-Santa Cruz and GW-Palo Verde utilities[80](index=80&type=chunk) [Recent Acquisition Activity](index=24&type=section&id=Recent%20Acquisition%20Activity) The company recently acquired seven water systems in Tucson to expand its customer base and improve operational efficiency through integration and upgrades - On July 8, 2025, the company completed the acquisition of seven water systems from Tucson Water, serving approximately **2,200 water connections** and expected to generate about **$1.5 million** in annual revenue[84](index=84&type=chunk) - This acquisition brings the company's total customer count in Pima County to approximately **7,200**, and the company plans to upgrade these systems by installing AMI smart water meters[84](index=84&type=chunk) [Economic and Environmental Utility Regulation](index=24&type=section&id=Economic%20and%20Environmental%20Utility%20Regulation) The company is extensively regulated by the ACC and must comply with environmental rules, which may increase costs but are typically recoverable through rates - The ACC sets **"just and reasonable" rates** by evaluating the "used and useful" nature of utility plant and the "prudence" of costs using a historical test year[85](index=85&type=chunk) - Revenue for the company's water utilities consists of a fixed fee and a consumption-based volumetric fee, while wastewater services are based on a fixed fee[86](index=86&type=chunk) - The EPA has finalized Maximum Contaminant Levels (MCLs) for six PFAS, and the company expects compliance to **increase capital expenditures and operating costs**[89](index=89&type=chunk) - The company has completed its service line inventory, found **no lead pipes**, and does not expect the new Lead and Copper Rule to materially impact its results of operations[93](index=93&type=chunk) [Infrastructure Investment](index=25&type=section&id=Infrastructure%20Investment) Infrastructure investment is a key driver of earnings growth by expanding the "used and useful" rate base, which is supported by a capital improvement plan - Capital expenditures are a component of the rate base, and the company recovers a return on equity and debt service costs on these investments through rates[94](index=94&type=chunk) - As of December 31, 2024, the company's estimated rate base was **$212.5 million**, an **82% increase** since 2019[96](index=96&type=chunk) [Production and Treatment Costs](index=25&type=section&id=Production%20and%20Treatment%20Costs) Significant production costs are incurred for water and wastewater services, and while generally recoverable, regulatory lag can impact profits during periods of cost increases - The company's most significant costs include **labor, water and wastewater treatment chemicals, and electricity** for operating pumps and other equipment[97](index=97&type=chunk) - **Regulatory lag** can lead to decreased profit margins and earnings when production costs or other operating expenses increase significantly[97](index=97&type=chunk) [Weather and Seasonality](index=26&type=section&id=Weather%20and%20Seasonality) Customer water consumption is influenced by weather, with higher demand in summer, and the company's geographic concentration makes it sensitive to extreme weather patterns - Customer water usage is affected by weather conditions, with **higher demand in the summer** due to increased temperatures and outdoor uses like irrigation[99](index=99&type=chunk) - The geographic concentration of the company's service areas makes its operations **more sensitive to extreme weather patterns**[100](index=100&type=chunk) - The **second and third quarters** are typically the highest revenue periods for water and wastewater services[100](index=100&type=chunk) [Access to and Quality of Water Supply](index=26&type=section&id=Access%20to%20and%20Quality%20of%20Water%20Supply) The company relies on groundwater and recycled water, faces water resource constraints in parts of Pima County, and expects a new "farm-to-city" program to support sustainability - The company primarily relies on **groundwater and recycled water supplies** to meet future demand in its service areas[101](index=101&type=chunk) - Water resource constraints exist in areas near the City of Maricopa in Pima County, which could affect developers' ability to obtain final plat approval[101](index=101&type=chunk) - Arizona's **"farm-to-city" program** (Senate Bill 1611), signed in June 2025, allows agricultural water rights to be converted for new development, which is expected to promote water sustainability and regional growth[102](index=102&type=chunk) [Rate Regulation Updates](index=26&type=section&id=Rate%20Regulation%20Updates) The ACC has approved a "formula rate plan" policy to allow for more predictable rate adjustments, and the company has filed a new rate case seeking a significant revenue increase - In December 2024, the ACC approved a **"Formula Rate Policy Statement"** allowing utilities to adjust rates annually based on a pre-approved formula to reduce "regulatory lag"[103](index=103&type=chunk) - On March 5, 2025, GW-Santa Cruz and GW-Palo Verde filed a rate case requesting a net annual revenue increase of approximately **$6.5 million**, to be implemented in two phases starting May 2026[105](index=105&type=chunk) - The company has proposed adopting a **formula rate** in the future for smaller, more gradual annual updates to costs and investments[105](index=105&type=chunk) Recent Rate Case History | Company | Approved ROE | Approved Incremental Annual Revenue (in millions of USD) | Application Date | ACC Decision No | Rate Effective Date | | :--- | :--- | :--- | :--- | :--- | :--- | | GW-Santa Cruz | 9.20% | 1.2 | July 22, 2020 | 78644 | July 1, 2022 | | GW-Palo Verde | 9.20% | 0.7 | July 22, 2020 | 78644 | July 1, 2022 | | GW-Farmers | 9.60% | 1.1 | June 27, 2024 | 80695 | May 1, 2025 | [Comparison of Results of Operations for the Three Months Ended June 30, 2025 and 2024](index=28&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) Total revenue grew 5.4% to $14.2 million, but an 8.5% increase in operating expenses led to a 6.3% decline in operating income and a 6.8% drop in net income - Revenue growth was primarily driven by organic growth in active water and wastewater connections, increased water and recycled water consumption, and rate increases for GW-Saguaro and GW-Farmers[111](index=111&type=chunk) - The increase in operations and maintenance personnel costs was mainly due to higher salaries and medical costs from filling vacant positions[113](index=113&type=chunk) - The increase in depreciation and amortization was primarily attributable to an increase in depreciable fixed assets and additional amortization from a new office lease[115](index=115&type=chunk) Q2 Operating Results Summary | Metric (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 14,241 | 13,510 | 731 | 5.4% | | Operating expenses | 11,621 | 10,713 | (908) | (8.5)% | | Operating income | 2,620 | 2,797 | (177) | (6.3)% | | Net income | 1,612 | 1,730 | (118) | (6.8)% | | Basic earnings per share | 0.06 | 0.07 | (0.01) | (14.3)% | Q2 Revenue Breakdown | Revenue Detail (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total water service revenue | 7,368 | 6,668 | 700 | 10.5% | | Total wastewater and recycled water service revenue | 6,873 | 6,842 | 31 | 0.5% | | Active water connections | 36,382 | 35,128 | 1,254 | 3.6% | | Active wastewater connections | 29,257 | 28,128 | 1,129 | 4.0% | | Water consumption (million gallons) | 1,201 | 1,110 | 91 | 8.2% | | Recycled water consumption (million gallons) | 289 | 232 | 57 | 24.5% | Q2 Operating Expense Breakdown | Operating Expense Detail (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operations and maintenance personnel costs | 1,356 | 1,184 | (172) | (14.5)% | | Utilities, chemicals, and repairs | 1,183 | 1,084 | (99) | (9.1)% | | Depreciation and amortization | 3,317 | 2,996 | (321) | (10.7)% | | Total operations and maintenance expenses | 3,917 | 3,485 | (432) | (12.4)% | | Total general and administrative expenses | 4,387 | 4,232 | (155) | (3.7)% | | Total operating expenses | 11,621 | 10,713 | (908) | (8.5)% | [Comparison of Results of Operations for the Six Months Ended June 30, 2025 and 2024](index=31&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Total revenue grew 6.3% to $26.7 million, but an 8.4% increase in operating expenses led to a 4.7% decline in operating income and a 9.0% drop in net income - Revenue growth was primarily driven by organic growth in active water and wastewater connections, increased water and recycled water consumption, and rate increases for GW-Saguaro and GW-Farmers[119](index=119&type=chunk) - The increase in utilities, chemicals, and repairs expense was mainly due to **higher electricity purchases ($0.2 million)** and **increased chemical costs ($0.1 million)** to support higher consumption and equipment operation[122](index=122&type=chunk) - The increase in depreciation and amortization was primarily attributable to a **6.7% increase in depreciable fixed assets** and additional amortization from a new office lease[125](index=125&type=chunk) H1 Operating Results Summary | Metric (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 26,698 | 25,120 | 1,578 | 6.3% | | Operating expenses | 22,823 | 21,056 | (1,767) | (8.4)% | | Operating income | 3,875 | 4,064 | (189) | (4.7)% | | Net income | 2,203 | 2,421 | (218) | (9.0)% | | Basic earnings per share | 0.08 | 0.10 | (0.02) | (20.0)% | H1 Revenue Breakdown | Revenue Detail (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total water service revenue | 13,348 | 11,894 | 1,454 | 12.2% | | Total wastewater and recycled water service revenue | 13,350 | 13,226 | 124 | 0.9% | | Active water connections | 36,382 | 35,128 | 1,254 | 3.6% | | Active wastewater connections | 29,257 | 28,128 | 1,129 | 4.0% | | Water consumption (million gallons) | 2,037 | 1,783 | 254 | 14.2% | | Recycled water consumption (million gallons) | 399 | 301 | 98 | 32.5% | H1 Operating Expense Breakdown | Operating Expense Detail (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operations and maintenance personnel costs | 2,696 | 2,477 | (219) | (8.8)% | | Utilities, chemicals, and repairs | 2,215 | 1,875 | (340) | (18.1)% | | Depreciation and amortization | 6,645 | 5,930 | (715) | (12.1)% | | Total operations and maintenance expenses | 7,604 | 6,769 | (835) | (12.3)% | | Total general and administrative expenses | 8,574 | 8,357 | (217) | (2.6)% | | Total operating expenses | 22,823 | 21,056 | (1,767) | (8.4)% | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company funds its operations through cash flow, debt, equity, and grants, and believes its current resources are sufficient for future needs - The company's primary capital sources are **internal operating cash flow, debt and equity financing, and government grants**[128](index=128&type=chunk) - On March 27, 2025, the company raised approximately **$30.8 million in net proceeds** from a public offering of common stock[130](index=130&type=chunk) - WIFA awarded a **$1.6 million grant** to the GW-Farmers utility for smart water meter replacement[131](index=131&type=chunk) - The revolving credit facility was increased to **$20 million** with its maturity extended to May 18, 2027, and had **no outstanding balance** as of June 30, 2025[133](index=133&type=chunk) - The company expects its existing cash and **$20 million revolving credit facility** to be sufficient to meet its operational and capital needs for the next 12 months and beyond, while remaining in compliance with debt covenants[137](index=137&type=chunk) - The company maintains a monthly dividend program, currently set at **$0.02533 per share** (annualized at $0.30396)[138](index=138&type=chunk) - For the six months ended June 30, 2025, net cash provided by operating activities was **$8.8 million**, net cash used in investing activities was **$35.4 million**, and net cash provided by financing activities was **$27.8 million**[140](index=140&type=chunk)[141](index=141&type=chunk)[144](index=144&type=chunk) - As of June 30, 2025, the company was in **compliance with the financial debt covenants** under its senior secured notes and Northern Trust loan agreement[146](index=146&type=chunk) [ITEM 3. Qualitative and Quantitative Disclosures About Market Risk](index=35&type=section&id=ITEM%203.%20Qualitative%20and%20Quantitative%20Disclosures%20About%20Market%20Risk) This section states that disclosures about market risk are not applicable - This section is **not applicable**[149](index=149&type=chunk) [ITEM 4. Controls and Procedures](index=35&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, and no material changes were made to internal controls - As of June 30, 2025, the company's disclosure controls and procedures were determined to be **effective**[149](index=149&type=chunk) - There were **no material changes** to the company's internal controls during the fiscal quarter ended June 30, 2025[150](index=150&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=37&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material impact - The company is **not involved in any legal proceedings** expected to have a material impact on it[151](index=151&type=chunk) [ITEM 1A. Risk Factors](index=37&type=section&id=ITEM%201A.%20Risk%20Factors) This section updates risk factors, highlighting regulatory dependence for expansion and water resource limitations in Pima County - The company's expansion into new service areas and existing water/wastewater services **depend on regulatory approvals**, and failure to obtain them would adversely affect future growth[152](index=152&type=chunk) - **Water resource limitations** near the City of Maricopa in Pima County could affect developers' ability to obtain final plat approval, thereby limiting future growth[153](index=153&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section discloses that no unregistered equity securities were sold and details stock repurchases to cover employee tax obligations - There were **no sales of unregistered securities** during the three months ended June 30, 2025[155](index=155&type=chunk) - The shares purchased represent shares withheld from employees or board members to satisfy tax obligations related to the vesting of restricted stock awards[158](index=158&type=chunk) Share Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 1, 2025 to May 31, 2025 | 11,347 | $10.41 | [ITEM 3. Defaults Upon Senior Securities](index=38&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section states that no defaults upon senior securities occurred during the reporting period - There were **no defaults upon senior securities**[159](index=159&type=chunk) [ITEM 4. Mine Safety Disclosures](index=38&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable - Mine safety disclosures are **not applicable**[160](index=160&type=chunk) [ITEM 5. Other Information](index=38&type=section&id=ITEM%205.%20Other%20Information) This section discloses that no Rule 10b5-1 trading plans were adopted or terminated by directors or officers during the period - During the three months ended June 30, 2025, **no director or officer** of the company adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement[161](index=161&type=chunk) [ITEM 6. Exhibits](index=39&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the report, including corporate charters, loan agreement amendments, and XBRL files - Exhibits include the company's Articles of Incorporation, Amended Bylaws, the Sixth Modification Agreement with Northern Trust Company, and **XBRL-related files**[162](index=162&type=chunk) [Signatures](index=40&type=section&id=Signatures) The report was duly signed on behalf of the company by its Chief Financial Officer - The report was signed on August 13, 2025, by **Michael J. Liebman, Chief Financial Officer and Corporate Secretary**, on behalf of Global Water Resources, Inc[167](index=167&type=chunk)

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the Company's unaudited consolidated financial statements, management's analysis, market risk, and internal controls [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201%2E%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Bank of the James Financial Group, Inc. and its subsidiaries for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, income statements, comprehensive income, cash flows, and changes in stockholders' equity, along with detailed notes on accounting policies, debt, fair value measurements, securities, business segments, and credit losses [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total assets | $1,004,242 | $979,244 | | Total liabilities | $932,577 | $914,379 | | Total stockholders' equity | $71,665 | $64,865 | - Total assets increased by **2.56%** from December 31, 2024, to June 30, 2025, primarily driven by growth in federal funds sold, securities available-for-sale, and loans[10](index=10&type=chunk)[146](index=146&type=chunk) - Total deposits increased by **3.19% to $910,527,000** as of June 30, 2025, largely due to the reversal of one-way Insured Cash Sweep (ICS) placements[11](index=11&type=chunk)[147](index=147&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) This section outlines the Company's financial performance over specific periods, presenting revenues, expenses, and net income | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest income | $11,638 | $10,935 | $22,872 | $21,444 | | Total interest expense | $3,388 | $3,844 | $6,903 | $7,403 | | Net interest income | $8,250 | $7,091 | $15,969 | $14,041 | | Recovery of credit losses | $(528) | $(123) | $(391) | $(676) | | Total noninterest income | $4,075 | $4,191 | $7,358 | $7,498 | | Total noninterest expenses | $9,455 | $8,739 | $19,281 | $16,827 | | Income before income taxes | $3,398 | $2,666 | $4,437 | $5,388 | | Net Income | $2,704 | $2,148 | $3,546 | $4,335 | | Net income per common share - basic | $0.60 | $0.47 | $0.78 | $0.95 | - Net income for the three months ended June 30, 2025, increased by **25.9%** year-over-year, while for the six months, it decreased by **18.2%** year-over-year[173](index=173&type=chunk) - Net interest income increased for both the three-month (**16.3%**) and six-month (**13.7%**) periods ended June 30, 2025, driven by higher loan portfolio growth and increased yields on earning assets, coupled with an **11.9% decline in total interest expense**[12](index=12&type=chunk)[176](index=176&type=chunk)[181](index=181&type=chunk) [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the Company's total comprehensive income, including net income and other comprehensive income components | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $2,704 | $2,148 | $3,546 | $4,335 | | Other comprehensive income (loss), net of tax | $1,066 | $(422) | $4,162 | $(1,758) | | Comprehensive income | $3,770 | $1,726 | $7,708 | $2,577 | - Comprehensive income significantly increased for both periods in 2025, primarily due to unrealized gains on available-for-sale securities, net of tax, which were **positive $1,066,000 and $4,162,000** for the three and six months ended June 30, 2025, respectively, compared to losses in the prior year[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $4,416 | $1,653 | | Net cash used in investing activities | $(16,449) | $(6,914) | | Net cash provided by financing activities | $16,631 | $5,050 | | Increase (decrease) in cash and cash equivalents | $4,598 | $(211) | | Cash and cash equivalents at end of period | $77,907 | $74,627 | - Net cash provided by operating activities increased significantly to **$4,416,000** for the six months ended June 30, 2025, from $1,653,000 in the prior year, mainly due to adjustments reconciling net income[16](index=16&type=chunk) - Investing activities saw a higher net cash outflow of **$16,449,000** in 2025, primarily due to increased purchases of available-for-sale securities and loan originations[16](index=16&type=chunk) - Financing activities provided substantially more cash, **$16,631,000**, in 2025, driven by a net increase in deposits and repayment of capital notes[16](index=16&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section tracks changes in the Company's equity accounts, including common stock, retained earnings, and comprehensive income | Metric (in thousands) | Balance at Dec 31, 2024 | Net Income (Q1 2025) | Dividends Paid (Q1 2025) | Other Comprehensive Income (Q1 2025) | Balance at Mar 31, 2025 | Net Income (Q2 2025) | Dividends Paid (Q2 2025) | Other Comprehensive Income (Q2 2025) | Balance at Jun 30, 2025 | | :-------------------- | :---------------------- | :------------------- | :----------------------- | :----------------------------------- | :---------------------- | :------------------- | :----------------------- | :----------------------------------- | :---------------------- | | Common Stock | $9,723 | - | - | - | $9,723 | - | - | - | $9,723 | | Additional Paid-in Capital | $35,253 | - | - | - | $35,253 | - | - | - | $35,253 | | Retained Earnings | $42,804 | $842 | $(455) | - | $43,191 | $2,704 | $(455) | - | $45,442 | | Accumulated Other Comprehensive (Loss) | $(22,915) | - | - | $3,096 | $(19,819) | - | - | $1,066 | $(18,753) | | Total Stockholders' Equity | $64,865 | $842 | $(455) | $3,096 | $68,348 | $2,704 | $(455) | $1,066 | $71,665 | - Total stockholders' equity increased from **$64,865,000** at December 31, 2024, to **$71,665,000** at June 30, 2025, primarily due to net income and positive other comprehensive income from unrealized gains on available-for-sale securities, partially offset by dividends paid[11](index=11&type=chunk)[18](index=18&type=chunk) [Note 1 – Basis of Presentation](index=12&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) This note describes the geographical market, accounting principles, and key intangible assets underlying the financial statements - The Company's primary market area is Region 2000 in Central Virginia, with recent expansion into Charlottesville, Roanoke, Blacksburg, Harrisonburg, Lexington, Rustburg, Wytheville, Buchanan, and Nellysford[20](index=20&type=chunk) - The unaudited consolidated financial statements reflect all necessary adjustments for fair presentation as of June 30, 2025, and December 31, 2024, in conformity with GAAP[21](index=21&type=chunk) - An intangible asset for customer relationships, valued at **$8,406,000** from the PWW acquisition, is amortized straight-line over 15 years, with a net balance of **$6,445,000** as of June 30, 2025[22](index=22&type=chunk) [Note 2 – Significant Accounting Policies and Estimates](index=12&type=section&id=Note%202%20%E2%80%93%20Significant%20Accounting%20Policies%20and%20Estimates) This note outlines the critical accounting policies and estimates, such as credit loss allowance and securities valuation, used in financial reporting - The financial statements rely on management estimates and assumptions, particularly for the allowance for credit losses on loans (ACLL) and the valuation of available-for-sale securities, which are susceptible to changes in regional economic conditions and interest rates[23](index=23&type=chunk)[119](index=119&type=chunk) - There have been no significant changes to the application of significant accounting policies since December 31, 2024[25](index=25&type=chunk) [Note 3 – Earnings Per Common Share (EPS)](index=13&type=section&id=Note%203%20%E2%80%93%20Earnings%20Per%20Common%20Share%20%28EPS%29) This note details the calculation of basic and diluted earnings per common share for the reported periods | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $2,704 | $2,148 | $3,546 | $4,335 | | Weighted average shares outstanding | 4,543,338 | 4,543,338 | 4,543,338 | 4,543,338 | | Earnings per common share - basic and diluted | $0.60 | $0.47 | $0.78 | $0.95 | - Basic and diluted EPS increased to **$0.60** for the three months ended June 30, 2025, from $0.47 in the prior year, but decreased to **$0.78** for the six months ended June 30, 2025, from $0.95 in the prior year[26](index=26&type=chunk)[173](index=173&type=chunk) [Note 4 – Debt (Current and Long Term)](index=13&type=section&id=Note%204%20%E2%80%93%20Debt%20%28Current%20and%20Long%20Term%29) This note provides information on the Company's debt obligations, including subordinated notes and the NBB Note, and their repayment or modification - The Company repaid **$10,050,000** in 3.25% fixed-rate subordinated notes on their maturity date of June 30, 2025, using parent-company cash, which is expected to save approximately **$327,000 annually** in interest expense[28](index=28&type=chunk)[168](index=168&type=chunk) - The NBB Note, with a principal balance of approximately **$8,992,000** at June 30, 2025, had its balloon payment date extended to December 31, 2026, and its interest rate lowered to **3.90%** from 4.00% in June 2022[30](index=30&type=chunk)[31](index=31&type=chunk) [Note 5 – Fair Value Measurements](index=14&type=section&id=Note%205%20%E2%80%93%20Fair%20Value%20Measurements) This note explains the three-level hierarchy for fair value measurements and the classification of assets like available-for-sale securities and IRLCs - Fair value measurements are categorized into a three-level hierarchy based on the observability of inputs, with Level 1 for quoted prices in active markets, Level 2 for observable inputs, and Level 3 for unobservable inputs[35](index=35&type=chunk)[39](index=39&type=chunk) | Asset (in thousands) | June 30, 2025 (Level 2) | June 30, 2025 (Level 3) | December 31, 2024 (Level 2) | December 31, 2024 (Level 3) | | :------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Securities available-for-sale | $196,585 | $0 | $187,916 | $0 | | IRLCs - asset | $0 | $239 | $0 | $42 | - All of the Company's available-for-sale securities are classified as **Level 2**, while Interest Rate Lock Commitments (IRLCs) are classified as **Level 3** due to unobservable inputs like the range of pull-through rates[37](index=37&type=chunk)[38](index=38&type=chunk)[42](index=42&type=chunk) - No nonrecurring fair value adjustments were recorded for collateral-dependent loans or loans held for sale at June 30, 2025, or December 31, 2024[45](index=45&type=chunk)[46](index=46&type=chunk) [Note 6 – Securities](index=19&type=section&id=Note%206%20%E2%80%93%20Securities) This note details the Company's held-to-maturity and available-for-sale securities, including unrealized gains/losses and pledged collateral | Security Type (in thousands) | Amortized Costs (Jun 30, 2025) | Fair Value (Jun 30, 2025) | Amortized Costs (Dec 31, 2024) | Fair Value (Dec 31, 2024) | | :--------------------------- | :----------------------------- | :------------------------ | :----------------------------- | :------------------------ | | Held-to-Maturity | $3,598 | $3,251 | $3,606 | $3,170 | | Available-for-sale | $220,322 | $196,585 | $216,921 | $187,916 | - As of June 30, 2025, available-for-sale securities had gross unrealized losses of **$24,025,000**, primarily due to market volatility and increased interest rates, but management does not expect to realize these losses[52](index=52&type=chunk)[54](index=54&type=chunk)[161](index=161&type=chunk) - The Company had no sales of available-for-sale securities during the three and six months ended June 30, 2025, compared to **$8,754,000** in sales during the same periods in 2024[58](index=58&type=chunk) - The Company pledged approximately **$49,360,000** of available-for-sale securities as collateral for public deposits, **$37,000,000** with correspondent banks, and **$26,000,000** for advances at the Federal Reserve Bank's discount window as of June 30, 2025[60](index=60&type=chunk)[165](index=165&type=chunk) [Note 7 – Business Segments](index=22&type=section&id=Note%207%20%E2%80%93%20Business%20Segments) This note provides financial information for the Company's Community Banking, Mortgage Banking, and Investment Advisory segments - The Company operates three business segments: Community Banking (loans, deposits), Mortgage Banking (residential mortgage originations for sale), and Investment Advisory (investment advisory and financial planning services through PWW)[61](index=61&type=chunk)[64](index=64&type=chunk) | Segment (in thousands) | Segment Income Before Taxes (Q2 2025) | Segment Income Before Taxes (Q2 2024) | Segment Income Before Taxes (YTD 2025) | Segment Income Before Taxes (YTD 2024) | | :--------------------- | :------------------------------------ | :------------------------------------ | :------------------------------------- | :------------------------------------- | | Community Banking | $2,607 | $2,147 | $3,279 | $4,212 | | Mortgage Banking | $369 | $202 | $370 | $447 | | Investment Advisory | $614 | $522 | $1,187 | $1,001 | - Investment Advisory's Assets Under Management (AUM) increased to **$930.0 million** at June 30, 2025, from $854.0 million at December 31, 2024, due to new asset inflows and market value increases[66](index=66&type=chunk)[191](index=191&type=chunk) - Community Banking's total loans held for investment, net, increased to **$649.1 million** at June 30, 2025, from $636.6 million at December 31, 2024, and deposits grew to **$915.4 million** from $882.4 million[63](index=63&type=chunk) [Note 8 – Loans and allowance for credit losses](index=27&type=section&id=Note%208%20%E2%80%93%20Loans%20and%20allowance%20for%20credit%20losses) This note details the Company's loan portfolio by segment, the allowance for credit losses, and nonperforming assets | Loan Segment (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Commercial | $70,510 | $66,418 | | Commercial Real Estate | $366,351 | $359,415 | | Consumer | $80,617 | $78,310 | | Residential | $137,919 | $139,453 | | Total loans | $655,397 | $643,596 | | Less allowance for credit losses | $6,308 | $7,044 | | Net loans | $649,089 | $636,552 | - Total loans, net of allowance, increased by **1.97% to $649,089,000** at June 30, 2025, driven by higher balances in commercial, commercial real estate, and consumer loan categories, partially offset by decreases in residential loans[148](index=148&type=chunk) - The allowance for credit losses decreased to **$6,308,000 (0.96% of total loans)** at June 30, 2025, from $7,044,000 (1.10%) at December 31, 2024, and the Company recorded a recovery of **$528,000** for the three months ended June 30, 2025[80](index=80&type=chunk)[199](index=199&type=chunk) - Nonperforming assets increased to **$1,846,000** at June 30, 2025, from $1,640,000 at December 31, 2024, consisting of nonaccrual loans and loans past due 90 days or more and still accruing[156](index=156&type=chunk) - The allowance for credit losses for unfunded commitments was **$678,000** at June 30, 2025, with a provision of **$27,000** for the three months ended June 30, 2025[108](index=108&type=chunk)[109](index=109&type=chunk) [Note 9 – Recent accounting pronouncements and other authoritative guidance](index=41&type=section&id=Note%209%20%E2%80%93%20Recent%20accounting%20pronouncements%20and%20other%20authoritative%20guidance) This note discusses the impact of recently issued accounting pronouncements, specifically ASU 2024-03, on the Company's financial reporting - ASU 2024-03, requiring disaggregation of income statement expenses, is effective for public business entities for annual periods beginning after December 15, 2026, and interim periods after December 15, 2027. The Company does not expect a material impact from its adoption[111](index=111&type=chunk) [Note 10 - Subsequent Events](index=41&type=section&id=Note%2010%20-%20Subsequent%20Events) This note confirms management's review of events occurring after the balance sheet date, with no material adjustments or disclosures required - Management has reviewed events through the financial statement issuance date and determined no subsequent events require accrual or disclosure beyond those already provided[113](index=113&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, highlighting key drivers of changes in assets, liabilities, equity, and earnings. It includes discussions on critical accounting policies, business overview, off-balance sheet arrangements, and detailed analysis of interest income, expense, noninterest income, noninterest expense, and credit losses [CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS](index=42&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements subject to various risks and uncertainties, including economic and regulatory factors - The report contains forward-looking statements subject to risks and uncertainties, including technology problems, regulatory changes, economic conditions, geopolitical risks, liquidity, credit loss allowance adequacy, management team reliance, real estate value changes, and new accounting standards[115](index=115&type=chunk)[117](index=117&type=chunk) [GENERAL](index=43&type=section&id=GENERAL) This section provides an overview of the Company's critical accounting policies, business activities, and strategic plans for branch expansion - The Company's financial statements are prepared in accordance with GAAP, with critical accounting policies including the Allowance for Credit Losses on Loans (ACLL) and Goodwill impairment testing[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) - Financial is a bank holding company primarily engaged in retail banking through Bank of the James, with additional activities in mortgage banking, investment services, insurance, and investment advisory services via PWW[123](index=123&type=chunk) - PWW, the investment advisory subsidiary, manages approximately **$929,957,000** in assets as of June 30, 2025, generating revenue primarily through investment advisory fees[126](index=126&type=chunk)[191](index=191&type=chunk) - The Bank plans to open additional branches, including relocating its Temporary Nellysford Branch to a permanent location in Fall 2025, and anticipates new branches to become profitable within **12 to 18 months**[135](index=135&type=chunk)[140](index=140&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=45&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) This section describes the Company's off-balance sheet financial instruments, such as credit commitments and mortgage rate lock commitments, and associated risks - The Bank uses off-balance sheet financial instruments, including commitments to extend credit and standby letters of credit, totaling **$189,294,000** at June 30, 2025, which involve credit and interest rate risk[141](index=141&type=chunk) - Mortgage rate lock commitments (IRLCs) are presold to third-party investors, mitigating credit or interest rate risk for the Bank[143](index=143&type=chunk) [SUMMARY OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=46&type=section&id=SUMMARY%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section summarizes the Company's financial position and operational performance, detailing changes in assets, liabilities, equity, and earnings drivers [Financial Condition Summary](index=46&type=section&id=Financial%20Condition%20Summary) This section summarizes the Company's balance sheet, including asset and deposit growth, loan portfolio composition, nonperforming assets, and capital levels - Total assets increased by **2.56% to $1,004,242,000** at June 30, 2025, from $979,244,000 at December 31, 2024, driven by growth in federal funds sold, available-for-sale securities, and loans[146](index=146&type=chunk) - Total deposits increased by **3.19% to $910,527,000**, primarily due to the reversal of one-way Insured Cash Sweep (ICS) placements[147](index=147&type=chunk) - Total loans, net of allowance, increased by **1.97% to $649,089,000**, with growth in commercial, commercial real estate, and consumer loans, partially offset by a decrease in residential loans[148](index=148&type=chunk) - Non-owner occupied commercial real estate loans totaled **$202,147,000**, or approximately **31% of total loans**, with minimal exposure to large office buildings or shopping centers[151](index=151&type=chunk) - Nonperforming assets increased to **$1,846,000** at June 30, 2025, from $1,640,000 at December 31, 2024[156](index=156&type=chunk) - The Bank's regulatory capital levels exceeded well-capitalized institution requirements at June 30, 2025, with a **Tier 1 risk-based capital ratio of 11.38%** and a **total risk-based capital ratio of 12.19%**[167](index=167&type=chunk)[169](index=169&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) This section analyzes the Company's income statement, focusing on net income, net interest income, noninterest income, expenses, and credit loss recovery | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $2,704 | $2,148 | $3,546 | $4,335 | | Net interest income | $8,250 | $7,091 | $15,969 | $14,041 | | Noninterest income | $4,075 | $4,191 | $7,358 | $7,498 | | Noninterest expenses | $9,455 | $8,739 | $19,281 | $16,827 | | Recovery of credit losses | $(528) | $(123) | $(391) | $(676) | - Net interest income increased by **16.3%** for the three months and **13.7%** for the six months ended June 30, 2025, driven by higher yields on earning assets (loan rates up to **5.70%** from 5.42% YoY for Q2) and a decline in interest expense[176](index=176&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk) - Noninterest income slightly decreased for both periods, primarily due to lower other income and no gains on available-for-sale securities sales in 2025, partially offset by increased gains on loan sales and wealth management fees[176](index=176&type=chunk)[184](index=184&type=chunk)[192](index=192&type=chunk) - Noninterest expense increased by **8.2%** for the quarter and **14.6%** year-to-date, mainly due to higher salaries, employee benefits, and a significant rise in professional, data processing, and other outside services, including a **$1,000,000** consulting fee[176](index=176&type=chunk)[194](index=194&type=chunk) - The allowance for credit losses decreased, and the Bank recorded a recovery of **$528,000** for the three months ended June 30, 2025, influenced by updated CECL loss models incorporating post-pandemic loss history and revised loss-rate parameters[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - The effective tax rate for the three and six months ended June 30, 2025, was **20.43%** and **20.08%**, respectively, lower than the statutory rate due to tax benefits from bank-owned life insurance and tax-exempt municipal bonds[203](index=203&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no applicable quantitative and qualitative disclosures about market risk for the Company in this report - The Company has no applicable quantitative and qualitative disclosures about market risk in this report[212](index=212&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, evaluated the effectiveness of the Company's disclosure controls and procedures, concluding they were effective as of June 30, 2025. No significant changes in internal controls over financial reporting occurred during the quarter - Financial's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, ensuring timely and accurate reporting of required information[213](index=213&type=chunk) - No significant changes occurred in the Company's internal controls over financial reporting during the quarter ended June 30, 2025[214](index=214&type=chunk) [PART II – OTHER INFORMATION](index=59&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=59&type=section&id=Item%201%2E%20Legal%20Proceedings) The Company is not currently involved in any legal proceedings other than routine litigation incidental to its business - The Company is not involved in any pending legal proceedings beyond routine litigation incidental to its business[215](index=215&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A%2E%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the Company's risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024[217](index=217&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=60&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This item is not applicable to the Company for the reporting period - This item is not applicable[218](index=218&type=chunk) [Item 3. Defaults Upon Senior Securities](index=60&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period - This item is not applicable[218](index=218&type=chunk) [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period - This item is not applicable[218](index=218&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205%2E%20Other%20Information) This item is not applicable to the Company for the reporting period - This item is not applicable[218](index=218&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications under the Sarbanes-Oxley Act and XBRL-formatted financial statements - Exhibits include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, dated August 13, 2025[218](index=218&type=chunk) - The financial statements for the quarter ended June 30, 2025, are provided in eXtensible Business Reporting Language (XBRL) format[218](index=218&type=chunk) [SIGNATURES](index=61&type=section&id=SIGNATURES) This section contains the official signatures of the Company's principal executive and financial officers, certifying the report's accuracy [SIGNATURES](index=61&type=section&id=SIGNATURES) The report is signed on behalf of Bank of the James Financial Group, Inc. by Robert R. Chapman III, President (Principal Executive Officer), and J. Todd Scruggs, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer), both dated August 13, 2025 - The report was signed by Robert R. Chapman III, President (Principal Executive Officer), and J. Todd Scruggs, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer) on August 13, 2025[221](index=221&type=chunk)[223](index=223&type=chunk)