What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-08-08 · 258 added, 205 removed, 260 unchanged (64% of the section changed)

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the cost to achieve compliance with relevant governmental regulations, including

per- and polyfluoroalkyl substances (“PFAS”) regulations, and the Lead and

per- and polyfluoroalkyl substances (“PFAS”) regulations, our

belief concerning class action settlements designed to resolve claims for PFAS

contamination and any related outcome, and the Lead and

Copper Rule Improvements, our expectation of the timing of decisions by

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10-K for the year ended December 31, 2024, and this Quarterly Report on Form

10-Q for the quarter ended June 30, 2025, such as changes in weather, changes

10-Q for the quarter ended September 30, 2025, such as changes in weather, changes

in our contractual obligations, changes in government policies, changes in tax laws,

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views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2025

RESULTS OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 2025

Our profitability is primarily attributable to the sale of water and wastewater services in our regulated utility business.

Our regulated utility segment comprised 93.0% of total operating revenues for the six months ended June 30, 2025 and 93.4% for the six months ended June 30, 2024.

Our regulated utility segment comprised 93.5% of total operating revenues for the nine months ended September 30, 2025 and 93.8% for the nine months ended September 30, 2024.

Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature.

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decreases, in our operating revenue.

of June 30, 2025, the number of metered water customers in Delaware increased approximately

1.7% compared to June 30, 2024.

number of metered water customers in Maryland increased approximately 2.0% compared

to June 30, 2024.

The number of metered

water customers in Pennsylvania remained consistent compared to June 30, 2024.

For the six months ended June 30, 2025, approximately

4.6 billion gallons of water were distributed in our Delaware systems and

approximately 48.4 million gallons of water were distributed in our Maryland

As of September 30, 2025,

the number of metered water customers in Delaware and in Maryland each increased

approximately 1.8% compared to September 30, 2024.

The number of metered water customers in

Pennsylvania remained consistent compared to September 30, 2024.

For the nine months ended September 30, 2025,

approximately 7.1 billion gallons of water were distributed in our Delaware

systems and approximately 78.0 million gallons of water were distributed in our

Maryland systems .

On April 4, 2025, Artesian

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Regulated Wastewater Subsidiaries

Artesian Wastewater and TESI own wastewater collection and treatment infrastructure and provide regulated wastewater services to customers in Sussex County, Delaware.

Artesian Wastewater Maryland is able to provide regulated wastewater services to customers in Maryland.

It is not currently providing these services in Maryland.

The majority of our residential and commercial wastewater customers are billed a flat monthly fee, and our large industrial wastewater customer is billed monthly based on wastewater flow, which contributes to providing a revenue stream unaffected by weather.

As of June 30, 2025, the number of Delaware wastewater customers increased approximately 6.2% compared to June 30, 2024.

Artesian Wastewater and

TESI own wastewater collection and treatment infrastructure and provide

regulated wastewater services to customers in Sussex County, Delaware.

Artesian Wastewater Maryland is able to

provide regulated wastewater services to customers in Maryland.

It is not currently providing these services

The majority of our

residential and commercial wastewater customers are billed a flat monthly fee,

and our large industrial wastewater customer is billed monthly based on

wastewater flow, which contributes to providing a revenue stream unaffected by

As of September 30, 2025, the

number of Delaware wastewater customers increased approximately 6.6% compared

to September 30, 2024.

Non-Utility Subsidiaries

Artesian Utility provides contract water and wastewater operation services to private, municipal, and governmental institutions.

Artesian Utility also offers three protection plans to customers:

the WSLP Plan, the SSLP Plan, and the ISLP Plan.

SLP Plan customers are billed a flat monthly or quarterly rate, which contributes to providing a revenue stream unaffected by weather.

Artesian Utility

implemented a rate increase effective December 1, 2024.

provides contract water and wastewater operation services to private,

municipal, and governmental institutions.

Artesian Utility also offers three protection plans to customers:

WSLP Plan, the SSLP Plan, and the ISLP Plan.

SLP Plan customers are billed a flat monthly or quarterly rate, which

contributes to providing a revenue stream unaffected by weather.

Artesian Utility implemented a rate increase

effective December 1, 2024.

There has been consistent customer growth over the years.

As of June 30, 2025, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 0.6%, collectively , compared to June 30, 2024.

As of September 30, 2025, the eligible

customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 0.4%,

collectively, compared to September 30, 2024 .

Strategic Direction and Recent Developments

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Other Matters

and Trading Markets

previously disclosed, on July 1, 2025, the Board of Directors of the Company

appointed a third independent director to the Board, who was also appointed to

serve on the Audit Committee effective as of such date.

On July 2, 2025, the Nasdaq Stock Market LLC,

or Nasdaq, delivered to the Company a formal confirmation that the Company has

regained compliance with Nasdaq’s Majority Independent Board Requirement and

Audit Committee Composition Requirement, as a result of the appointment of the

independent director prior to the deadline established in the Nasdaq’s initial

notice to the Company on May 30, 2025.

Accordingly, Nasdaq has determined that the Company has regained

compliance with Nasdaq Marketplace Rule 5605(b)(1) and Nasdaq Marketplace Rule

5605(c)(2), and the matter is now closed.

Environmental, Health and Safety, and Water Quality Regulation

As required by the Safe Drinking Water Act, the U.S.

Environmental Protection Agency, or EPA, establishes maximum contaminant levels, or MCLs, for various substances found in drinking water to ensure that the water is safe for human consumption.

On April 10, 2024, the EPA established MCLs for certain per- and polyfluoroalkyl substances, or PFAS, in drinking water.

Under these regulations, water utilities will be required to complete initial monitoring for PFAS by 2027 and to conduct ongoing compliance monitoring.

Water utilities also will

be required to meet the new MCLs by April 2029 and to notify the public of any

violations of the MCLs as of and after that date.

To allow drinking water systems more time to develop plans for

As required by the Safe

Drinking Water Act, the U.S.

Environmental Protection Agency, or EPA,

establishes maximum contaminant levels, or MCLs, for various substances found

in drinking water to ensure that the water is safe for human consumption.

On April 10, 2024, the EPA established MCLs

for certain per- and polyfluoroalkyl substances, or PFAS, in drinking

Under these regulations, water

utilities will be required to complete initial monitoring for PFAS by 2027 and

to conduct ongoing compliance monitoring.

At the national level, water utilities also will be required to meet the

new MCLs by April 2029 and to notify the public of any violations of the MCLs

as of and after that date.

water utilities will be required to notify the public of any violations of the

MCLs beginning January 15, 2026.To allow drinking water systems more time to develop plans for

addressing PFAS where they are found and implement solutions, the EPA plans to

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proposal to extend the compliance date to 2031.

The EPA plans to finalize this rule in the

Spring of 2026.

The Company has installed treatment for PFAS at several wellfields to date and has included installation of treatment at additional locations in 2025 in its capital budget, with any remaining necessary treatment planned to be installed before 2029.

The capital investment and operating costs for treatment of PFAS are anticipated to be recoverable in water rates charged to customers as approved by the applicable public service commission.

The Company is participating in the multi-district litigation class action settlements with certain manufacturers of PFAS seeking reimbursement of costs incurred and that will continue to be incurred.

The EPA plans to finalize

this rule in the Spring of 2026.

Company has installed treatment for PFAS at several wellfields to date and plans

to continue to install treatment at additional locations throughout the final

quarter of 2025.

The Company expects to

install PFAS treatment as necessary in future years.

The capital investment and operating costs

for treatment of PFAS are anticipated to be recoverable in water rates charged

to customers as approved by the applicable public service commission.

The Company is participating in the

multi-district litigation class action settlements with certain manufacturers

of PFAS seeking reimbursement of costs incurred and that will continue to be incurred.

See Note 15 – Legal Proceedings.

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Capital investment and operating costs incurred by water utilities for customer-side pipe replacements are typically recoverable in water rates charged to customers as approved by the applicable public service commission.

Results of Operations – Analysis of the Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024.

Results of Operations – Analysis of the Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024.

Operating Revenues

Revenues totaled $30.5

$28.5 million for the three months ended June 30, 2025, $1.1 million, or 4.1%,

more than revenues for the three months ended June 30, 2024 .

million for the three months ended September 30, 2025, $1.3 million, or 4.6%,

more than revenues for the three months ended September 30, 2024 .

Water sales revenue

increased $0.6 million, or 2.6%, for the three months ended June 30, 2025 from

the corresponding period in 2024, primarily the result of an

increase in DSIC revenue, a temporary rate increase of 1.22% of gross water

sales placed into effect on June 3, 2025, as permitted under Delaware law,

until permanent rates are determined by the DEPSC and customer growth.

Since the DSIC rate is set to zero when

temporary rates are placed into effect, the temporary rate increase of 2.88%, less

the DSIC rate of 1.66% that was previously in effect, resulted in a net change

increased $0.7 million, or 3.1%, for the three months ended September 30, 2025 from

the corresponding period in 2024, primarily the result of a

temporary rate increase placed into effect on June 3, 2025, as permitted under

Delaware law, until permanent rates are determined by the DEPSC, as well as an

increase in the number of customers served, partially offset by a slight

decrease in consumption.

Since the DSIC

rate is set to zero when temporary rates are placed into effect, the temporary

rate increase of 2.88%, less the DSIC rate of 0.34% in place for the third

quarter of 2024, resulted in a net increase in rates of 2.54% for the third quarter

We realized 81.5% and 82.7% of our total operating revenue for the three

months ended June 30, 2025 and June 30, 2024, respectively, from the sale of

Other utility operating revenue increased approximately $0.4 million, or 10.7%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

This increase is primarily due to an increase in wastewater revenue associated with customer growth.

months ended September 30, 2025 and September 30, 2024, respectively, from the

sale of water.

Other utility operating

revenue increased approximately $0.4 million, or 12.6%, for the three months

ended September 30, 2025 compared to the three months ended September 30,

This increase is primarily due to

an increase in wastewater revenue associated with growth in the number of customers served.

Non-utility operating

revenue increased approximately $0.2 million, or 10.8%, for the three months

ended June 30, 2025 compared to the three months ended June 30, 2024.

This increase is primarily due to an increase

in Service Line Protection Plan revenue, primarily the result of an increase in

rates that were placed into effect on December 1, 2024.

ended September 30, 2025 compared to the three months ended September 30,

This increase is primarily due to

an increase in Service Line Protection Plan revenue, primarily the result of an

increase in rates that were placed into effect on December 1, 2024.

Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $0.3 million, or 1.8%, for the three months ended June 30, 2025, compared to the same period in 2024.

expenses, excluding depreciation and income taxes, increased $1.0 million, or 6.7%, fo r the three

months ended September 30, 2025, compared to the same period in 2024.

Utility operating expenses increased $1.3 million, or 10.8%, for the three

months ended June 30, 2025 compared to the same period in 2024.

months ended September 30, 2025 compared to the same period in 2024.

The increase in utility operating expenses

consists of a $0.2 million increase in transmission, distribution and collection system costs and a $0.1 million increase in both purchased power and administrative

The increase in utility operating

expenses is partially offset by a $0.1 million decrease in payroll and employee

benefit costs.

Non-utility operating

expenses decreased $0.1 million, or 11.9%, for the three months ended June 30, 2025 compared to the same

period in 2024.

This decrease is primarily

due to a decrease in administrative costs and payroll and employee benefit

consists of a $0.7 million increase in payroll and employee benefit costs, a

$0.4 million increase in supply and treatment costs, a $0.2 million increase in

administrative costs, and a $0.1 million increase in transmission, distribution and collection system costs.

The increase in utility

operating expenses is partially offset by a $0.1 million decrease in purchased

Depreciation and amortization expense increased $0.2 million, or 6.4%,

primarily due to additional depreciation from continued investment in utility

plant related to providing supply, treatment, storage and distribution of water

to customers and service to our wastewater customers, partially offset by a decrease in depreciation expense related to an increase in utility plant funded

by Contributions in Aid of Construction, or CIAC.

Artesian Water offsets depreciation recorded

on utility plant by depreciation on utility property funded by CIAC.

ratio of operating expense, excluding depreciation and income taxes, to total revenue

was 53.0% for the three months ended June 30, 2025, compared to 54.2% fo r the three

months ended June 30, 2024.

was 52.2% for the three months ended September 30, 2025, compared to 51.2% fo r the three

months ended September 30, 2024.

and state income tax expense increased $0.1 million, or 5.0%, primarily due to

higher pre-tax book income, partially offset by higher regulatory deferred

income tax amortization in 2025 compared to 2024.

and other taxes increased $0.1 million, or 5.2%, primarily due to an increase

in New Castle County, Delaware tax rates on utility plant and an increase in

utility plant subject to taxation.

higher pre-tax book income .

and other taxes decreased $0.4 million, primarily due to a decrease in New

Castle County, Delaware tax rates on utility plant partially offset by an

increase in utility plant subject to taxation.

Property taxes are assessed on land, buildings and certain utility

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Other income increased $0.1 million, primarily due to an increase in allowance for funds used during construction, or AFUDC, as a result of higher long-term construction activity subject to AFUDC.

income applicable to common stock increased $1.0 million, or 18.1%.

Our net income applicable

to common stock increased $0.1 million, or 2.2%.

Total operating revenues increased $1.3 million

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total operating expenses.

Results of Operations – Analysis of the Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024.

Results of Operations – Analysis of the Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024.

Operating Revenues

Revenues totaled $84.9

$54.4 million for the six months ended June 30, 2025, $2.5 million, or 4.8%,

more than revenues for the six months ended June 30, 2024 .

revenue increased $1.4 million, or 3.4%, for the six months ended June 30, 2025

from the corresponding period in 2024, primarily the result of an increase in overall water

consumption, DSIC revenue, customer growth and a temporary rate increase of

1.22% of gross water sales placed into effect on June 3, 2025, as permitted

under Delaware law, until permanent rates are determined by the DEPSC.

Since the DSIC rate is set to zero when

temporary rates are placed into effect, the temporary rate increase of 2.88%, less

the DSIC rate of 1.66% that was previously in effect, resulted in a net change

We realized 80.4% and 81.5%

of our total operating revenue for the six months ended June 30, 2025 and June

million for the nine months ended September 30, 2025, $3.8 million, or 4.7%,

more than revenues for the nine months ended September 30, 2024 .

Water sales revenue

increased $2.2 million, or 3.3%, for the nine months ended September 30, 2025

from the corresponding period in 2024, primarily the result of a temporary rate increase placed into effect on June 3,

2025, as permitted under Delaware law, until permanent rates are determined by

the DEPSC, as well as an increase in the number of customers served, DSIC

revenue and overall water consumption.

DSIC rate of 1.66% was set to zero when the temporary rate increase of 2.88%

was placed into effect on June 3, 2025.

We realized 80.8% and 81.9% of our total

operating revenue for the nine months ended September 30, 2025 and September 30,

2024, respectively, from the sale of water .

utility operating revenue increased approximately $0.7 million, or 11.0%, for

the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Other utility operating revenue

increased approximately $1.1 million, or 11.6%, for the nine months ended September

30, 2025 compared to the nine months ended September 30, 2024.

This increase is primarily due to an increase

in wastewater revenue associated with customer growth.

operating revenue increased approximately $0.3 million, or 10.1%, for the six

months ended June 30, 2025 compared to the six months ended June 30, 2024.

Non-utility operating revenue

increased approximately $0.5 million, or 10.3%, for the nine months ended September

30, 2025 compared to the nine months ended September 30, 2024.

This increase is primarily due to an increase

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Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased

$0.7 million, or 2.4%, fo r the six months ended June

30, 2025, compared to the same period in 2024.

Utility operating expenses increased $0.7 million, or 2.9%, for the six

months ended June 30, 2025 compared to the same period in 2024.

expenses, excluding depreciation and income taxes, increased $1.7 million, or 3.9%, fo r the nine

months ended September 30, 2025, compared to the same period in 2024 .

Utility operating expenses increased $2.0 million, or 5.5%, for the nine

months ended September 30, 2025 compared to the same period in 2024.

The increase in utility operating expenses

consists of a $0.7 million increase in administrative costs, a $0.5 million

increase in each of purchased power and transmission, distribution and collection system costs.

The increase in utility

operating expenses is partially offset by a $0.2 million decrease in each of payroll

and employee benefit costs and supply and treatment costs.

Non-utility operating

expenses decreased $0.1 million, or 5.7%, for

the six months ended June 30, 2025 compared to the same period in 2024.

increase payroll and employee benefit costs, a $0.4 million increase in

transmission, distribution and collection system costs, a $0.3 million increase

in purchased power costs and a $0.2

million increase in supply and treatment costs.

The increase in utility operating expenses is

partially offset by a $0.1 million decrease in purchased water costs.

Non-utility operating expenses

decreased $0.1 million, or 2.2%, for the nine

months ended September 30, 2025 compared to the same period in 2024.

This decrease is primarily due to a decrease

in payroll and employee benefit costs.

The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 55.6% for the six months ended June 30, 2025, compared to 56.8% for the six months ended June 30, 2024.

and amortization expense decreased $0.1 million, or 1.7%, primarily due to a

decrease in depreciation expense related to an increase in depreciation on

utility plant funded by Contributions in Aid of Construction, or CIAC.

The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 54.3% for the nine months ended September 30, 2025, compared to 54.8% for the nine months ended September 30, 2024.

and amortization expense increased $0.1 million, or 0.9%, primarily due to

additional depreciation from continued investment in utility plant related to

providing supply, treatment, storage and distribution of water to customers and

service to our wastewater customers, partially offset by a decrease in depreciation

expense related to an increase in utility plant funded by CIAC.

Artesian Water offsets depreciation recorded

on utility plant by depreciation on utility property funded by CIAC .

Federal and state income tax expense increased $0.4 million, or 10.7%, primarily due to higher pre-tax book income, partially offset by higher regulatory deferred income tax amortization in 2025 compared to 2024.

Property and other taxes increased $0.2 million, or 5.0%, primarily due

to an increase in New Castle County, Delaware tax rates on utility plant and an

and state income tax expense increased $0.5 million, or 8.5%, primarily due to

higher pre-tax book income, partially offset by higher regulatory deferred

income tax amortization in 2025 compared to 2024 .

and other taxes decreased $0.2 million, or 4.4%, primarily due to a decrease in

New Castle County, Delaware tax rates on utility plant partially offset by an

increase in utility plant subject to taxation.

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LIQUIDITY AND CAPITAL RESOURCES

primary sourc es of liquidity for the six

months ended June 30, 2025 were $18.9 million of cash provided by operating

activities and $11.9 million in net contributions and advances from

primary sourc es of liquidity for the nine

months ended September 30, 2025 were $29.9 million of cash provided by

operating activities and $20.7 million in net contributions and advances from

We depend on the

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Operating Activities

primary sources of liquidity for the six months ended June 30, 2025 was $18.9

million provided by cash flow from operating activities, compared to $19.5

million for the six months ended June 30, 2024.

One of our primary sources

of liquidity for the nine months ended September 30, 2025 was $29.9 million

provided by cash flow from operating activities, compared to $30.1 million for

the nine months ended September 30, 2024.

The decrease in cash flows from operating activities is primarily from lower

material and supplies, accrued expenses and income taxes receivable, offset by

higher net income and accounts payable.

Cash flow from operating

activities is primarily provided by our utility operations and is impacted by

the timeliness and adequacy of rate increases and changes in water consumption

as a result of year-to-year variations in weather conditions, particularly

during the summer.

A significant part of

our ability to maintain and meet our financial objectives is to ensure that our

investments in utility plant and equipment are recovered in the rates charged

to customers.

As such, from time to

time, we file rate increase requests to recover increases in operating expenses

and investments in utility plant and equipment.

other deferred assets, material and supplies, and income taxes receivable, partially

offset by higher prepaid property taxes, net income, and accrued interest.

Cash flow from

operating activities is primarily provided by our utility operations and is

impacted by the timeliness and adequacy of rate increases and changes in water

consumption as a result of year-to-year variations in weather conditions,

particularly during the summer.

significant part of our ability to maintain and meet our financial objectives

is to ensure that our investments in utility plant and equipment are recovered

in the rates charged to customers.

such, from time to time, we file rate increase requests to recover increases in

operating expenses and investments in utility plant and equipment.

See Note 13 – Regulatory Proceedings.

We will continue to borrow on

available lines of credit in order to satisfy current liquidity needs.

the Company has a long history of paying regular quarterly dividends as

approved by our Board of Directors using net cash from operating activities.

continue to borrow on available lines of credit in order to satisfy current

liquidity needs.

In addition, the Company has a long history of paying regular quarterly

dividends as approved by our Board of Directors using net cash from operating

Investment Activities

The primary focus of our investments is to continue to

provide high quality reliable service to our growing service territory.

expenditures during the first six months of 2025 were $26.3 million compared to

$18.4 million during the same period in 2024.

During the first six months of 2025, these

The primary focus of our investments is to continue to provide high

quality reliable service to our growing service territory.

expenditures during the first nine months of 2025 were $40.5 million compared

to $30.9 million during the same period in 2024.

During the first nine months of 2025, these

investments include renewals associated with the rehabilitation of aging

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treatment plant, upgrading elevated storage tanks, upgrading and replacing our

meter reading equipment, and upgrading existing pumping stations to better

meter reading equipment, and upgrading existing pumping and treatment stations, including PFAS treatment upgrades, to better

serve our customers.

Financing Activities

For the six months ended June

For the nine months ended September

30, 2025, cash flows provided by financing activities were $10.0 million,

compared to $2.0 million for the six months ended June 30, 2024.

compared to $8.4 million for the nine months ended September 30, 2024.

Our primary source of liquidity from

financing activities for the six months ended June 30, 2025 was $11.9 million

in net contributions and advances from developers and $2.0 million from line of

credit borrowings.

The cash flows

provided by financing activities increased due to an increase in net contributions and advances from

developers and an increase in borrowings from lines of credit .

financing activities for the nine months ended September 30, 2025 was $20.7

million in net contributions and advances from developers.

The cash flows provided by financing

activities increased due to an increase in net contributions

and advances from developers, partially offset by a decrease in overdraft

payables and the issuance of long-term debt in 2024 .

several sources of liquidity to finance our investment in utility plant and

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future investments will be financed by our operations and external

We expect to fund our

activities for the next twelve months using our projected cash generated from

operations, bank credit lines, government grants and capital market financing as needed to

We expect to fund our activities

for the next twelve months using our projected cash generated from operations,

bank credit lines, government grants and capital market financing as needed to

provide sufficient working capital to maintain normal operations, to meet our

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fund our short-term and long-term capital, operating and financing needs.

However, there is no assurance that we will be able to secure funding on terms

there is no assurance that we will be able to secure funding on terms

acceptable to us, or at all.

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Lines of Credit and Long-Term Debt

At June 30, 2025,

At September 30, 2025,

Artesian Resources had a $40 million line of credit with Citizens Bank, or

Citizens, which is available to all subsidiaries of Artesian Resources.

As of June 30, 2025, there was $38.0 million

As of September 30, 2025, there was $39.7 million

of available funds under this line of credit.

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The Company expects to renew this line of credit.

At June 30, 2025, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland.

As of June 30, 2025, there was $20.0 million of available funds under this line of credit.

At September 30, 2025, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland.

As of September 30, 2025, there was $20.0 million of available funds under this line of credit.

The interest rate for borrowings under this line are either a daily SOFR rate plus 1.45% option or a term SOFR rate plus 1.45% option that is locked in for either one or three months.

The term of this line of credit expires on October 31, 2025.

Artesian Water expects to renew this line of credit.

This line of credit was to expire on October 31, 2025 and has been renewed to expire on October 31, 2026.

The Company’s material cash requirements include the following lines of credit commitments and contractual obligations:

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Unconditional purchase obligations

Tank painting contractual

Total contractual cash obligations

Artesian’s long-term debt agreements and revolving lines of credit contain customary affirmative and negative covenants that are binding on us (which are in some cases subject to certain exceptions), including, but not limited to, restrictions on our ability to make certain loans and investments, guarantee certain obligations, enter into, or undertake, certain mergers, consolidations or acquisitions, transfer certain assets or change our business.

As of June 30, 2025, we were in compliance with these covenants.

As of September 30, 2025, we were in compliance with these covenants.

Long-term debt obligations reflect the maturities of certain series of our first mortgage bonds, which we intend to refinance when due if not refinanced earlier.

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We have not experienced conditions that would result in our default under these agreements.

The asset purchase contractual obligation is related to the purchase of substantially all of the water operating assets from the Town of Clayton in May 2022, by Artesian Water.

The total purchase price was $5.0 million.

At closing, Artesian Water paid approximately $3.4 million.

The balance is payable in five equal annual installments on the anniversary date of the closing date.

Each annual installment is payable with interest at an annual rate of 2.0%.

The asset purchase

contractual obligation is related to the purchase of substantially all of the

water operating assets from the Town of Clayton in May 2022, by Artesian

The total purchase price was $5.0

At closing, Artesian Water paid

approximately $3.4 million.

is payable in five equal annual installments on the anniversary date of the

closing date.

Each annual installment is

payable with interest at an annual rate of 2.0%.

Payments for unconditional purchase obligations reflect minimum water purchase obligations based on rates that are subject to change under an interconnection agreement with the Chester Water Authority.

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The agreement includes a remaining automatic five-year renewal term, unless terminated by either party.

In April 2021, Artesian Water entered into a 3-year agreement with

Worldwide Industries Corporation effective July 1, 2021 to paint elevated water

storage tanks.

Pursuant to the

agreement, the total expenditure for the three years was $1.2 million.

In September 2022, this agreement was amended

to paint an additional elevated water storage tank and to extend the term of

the agreement for an additional year.

Pursuant to the amended agreement, the total expenditure for the four

years was $2.2 million.

expenditure was fully paid to

Worldwide Industries Corporation as of April 2025.

In order to control purchased power costs and avoid fluctuations in electricity rates that happen due to the change of seasons, energy supply changes, or other outside factors, we utilize contracts with electric suppliers that provide a fixed rate.

In February 2021, Artesian Water entered into an electric supply contract with MidAmerican that is effective from May 2021 to May 2025.

The fixed rate was lowered 5.6% starting in May 2021.

In April 2025, Artesian entered into an electric supply contract with Constellation NewEnergy, Inc.

that is effective from May 2025 to May 2029 for Delaware operations.

The supply rate was increased approximately 25% starting in May 2025.

The total estimated annual increase in electric supply expense beginning in May 2025 is approximately $0.5 million.

In February 2022, Artesian Water Maryland entered into an electric supply agreement with Constellation NewEnergy, Inc., effective from May 2022 through November 2025.

In April 2025, Artesian Water Maryland entered into an electric supply agreement with WGL Energy that is effective from November 2025 through November 2029 for Maryland operations.

The fixed rate was increased 5.5% starting in November 2025.

In January 2022, following the acquisition of Tidewater Environmental Services, Inc.

dba Artesian Wastewater, or TESI, assumed an electric supply contract with WGL Energy that was effective through December 2024.

In November 2024, TESI entered into a short-term electric supply contract with WGL Energy effective December 2024 through May 2025.

The fixed rate was increased 44.4% starting in December 2024.

These fixed rate electric supply contracts are for normal purchases and are not derivative instruments.

total expenditure of $2.2 million pursuant to the four-year agreement between

Artesian Water and Worldwide Industries Corporation to paint elevated water

storage tanks, effective July 1, 2021, was fully paid to Worldwide Industries

Corporation as of April 2025.

2025, Artesian Water entered into a new, three-year agreement with Worldwide Industries

Corporation, effective September 1, 2025, to paint elevated water storage

Pursuant to the agreement, the expected

total expenditure for the three years is $2.5 million.

In order to control

purchased power costs and avoid fluctuations in electricity rates that happen

due to the change of seasons, energy supply changes, or other outside factors,

we utilize contracts with electric suppliers that provide a fixed rate.

In February 2021, Artesian Water entered into

an electric supply contract with MidAmerican that was effective from May 2021

The fixed rate was lowered

5.6% starting in May 2021.

2025, Artesian entered into an electric supply contract with Constellation

NewEnergy, Inc.

that is effective from May 2025 to May 2029 for Delaware

The supply rate was

increased approximately 25% starting in May 2025.

The total estimated annual increase in

electric supply expense beginning in May 2025 is approximately $0.5

In February 2022, Artesian

Water Maryland entered into an electric supply agreement with Constellation

NewEnergy, Inc., effective from May 2022 through November 2025.

In April 2025, Artesian Water Maryland

entered into an electric supply agreement with WGL Energy that is effective

from November 2025 through November 2029 for Maryland operations.

The fixed rate will increase 5.5% starting in

November 2025.

In January 2022,

following the acquisition of Tidewater Environmental Services, Inc.

Artesian Wastewater, or TESI, an electric supply contract with WGL Energy that

was effective through December 2024.

In November 2024, TESI entered into a

short-term electric supply contract with WGL Energy effective December 2024

through May 2025.

The fixed rate was

increased 44.4% starting in December 2024.

These fixed rate electric supply contracts are for normal purchases and

are not derivative instruments.

Critical Accounting Estimates;

7 unchanged sentences

Information concerning our implementation and the impact of recent accounting pronouncements issued by the FASB is included in the notes to our 2024 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2024 and also in the notes to our unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.

We did not adopt any accounting policy in the first six months of 2025 that had a material impact on our financial condition, liquidity or results of operations.

We did not adopt any accounting policy in the first nine months of 2025 that had a material impact on our financial condition, liquidity or results of operations.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis