ARTESIAN RESOURCES CORP 10-Q

ITEM 1 – FINANCIAL STATEMENTS ARTESIAN RESOURCES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited (In thousands) ASSETS September 30, 2025 December 31, 2024 Utility plant, at original cost (less accumulated depreciation - 2025 - $ 199,048 ; 2024 - $ 192,253 ) $ 788,318 $ 747,186 Current assets Cash and cash equivalents 705 1,147 Accounts and other receivables (less provision for expected credit loss 2025 - $ 406 ; 2024 - $ 343 ) 8,161 11,339 Income tax receivable 185 624 Unbilled operating revenues 2,573 1,861 Materials and supplies 4,041 4,278 Prepaid property taxes 186 2,188 Prepaid expenses and other 3,726 3,091 Total current assets 19,577 24,528 Other assets Non‑utility property (less accumulated depreciation - 2025 - $ 1,130 ; 2024 - $ 1,116 ) 3,584 3,603 Other deferred assets 6,979 6,525 Goodwill 1,939 1,939 Operating lease right-of-use assets 409 414 Total other assets 12,911 12,481 Regulatory assets, net 13,102 14,428 Total Assets $ 833,908 $ 798,623 LIABILITIES AND STOCKHOLDERS' EQUITY Stockholders' equity Common stock $ 10,313 $ 10,300 Preferred stock - - Additional paid-in capital 144,316 143,920 Retained earnings 94,214 84,969 Total stockholders' equity 248,843 239,189 Long-term debt, net of current portion 174,660 176,509 423,503 415,698 Current liabilities Lines of credit 309 - Current portion of long-term debt 2,225 2,167 Accounts payable 12,212 11,228 Accrued expenses 6,712 5,336 Overdraft payable 35 31 Accrued interest 1,343 930 Income taxes payable 631 500 Customer and other deposits 3,480 3,347 Other 2,025 2,054 Total current liabilities 28,972 25,593 Commitments and contingencies Deferred credits and other liabilities Net advances for construction 1,369 1,582 Operating lease liabilities 399 404 Regulatory liabilities 26,725 30,267 Deferred investment tax credits 398 409 Deferred income taxes 53,753 52,265 Total deferred credits and other liabilities 82,644 84,927 Net contributions in aid of construction 298,789 272,405 Total Liabilities and Stockholders' Equity $ 833,908 $ 798,623 See notes to the condensed consolidated financial statements . 3 Table of Contents ARTESIAN RESOURCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Unaudited (In thousands, except per share amounts) For the Three Months Ended For the Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Operating revenues Water sales $ 24,837 $ 24,092 $ 68,608 $ 66,419 Other utility operating revenue 3,780 3,358 10,777 9,661 Non-utility operating revenue 1,874 1,692 5,541 5,022 Total Operating Revenues 30,491 29,142 84,926 81,102 Operating expenses Utility operating expenses 13,431 12,125 38,261 36,261 Non-utility operating expenses 1,265 1,213 3,396 3,474 Depreciation and amortization 3,497 3,287 10,268 10,177 State and federal income taxes 2,473 2,355 6,488 5,982 Property and other taxes 1,206 1,572 4,494 4,700 Total Operating Expenses 21,872 20,552 62,907 60,594 Operating income 8,619 8,590 22,019 20,508 Other income, net Allowance for funds used during construction (AFUDC) 584 474 1,771 1,126 Miscellaneous (expense) income ( 48 ) ( 58 ) 1,411 1,450 Income before interest charges 9,155 9,006 25,201 23,084 Interest charges 2,193 2,193 6,514 6,535 Net income applicable to common stock $ 6,962 $ 6,813 $ 18,687 $ 16,549 Income per common share: Basic $ 0.68 $ 0.66 $ 1.81 $ 1.61 Diluted $ 0.68 $ 0.66 $ 1.81 $ 1.61 Weighted average common shares outstanding: Basic 10,312 10,297 10,308 10,293 Diluted 10,314 10,298 10,309 10,294 Cash dividends per share of common stock $ 0.3074 $ 0.2955 $ 0.9162 $ 0.8807 See notes to the condensed consolidated financial statements. 4 Table of Contents ARTESIAN RESOURCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited (In thousands) For the Nine Months Ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 18,687 $ 16,549 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,268 10,177 Amortization of debt expense 264 265 Amortization of deferred income tax regulatory liability ( 974 ) ( 592 ) Provision for expected credit loss 161 153 Deferred income taxes, net 1,477 1,558 Stock compensation 152 172 AFUDC, equity portion ( 1,216 ) ( 772 ) Changes in assets and liabilities, net of acquisitions: Accounts and other receivables 3,017 2,062 Income tax receivable 439 1,608 Unbilled operating revenues ( 712 ) ( 342 ) Materials and supplies 237 1,524 Income tax payable 131 330 Prepaid property taxes 2,002 ( 1,017 ) Prepaid expenses and other ( 635 ) 117 Other deferred assets ( 480 ) 1,944 Regulatory assets 112 ( 283 ) Regulatory liabilities ( 2,777 ) ( 2,734 ) Accounts payable ( 521 ) 175 Accrued expenses ( 444 ) ( 184 ) Accrued interest 413 ( 919 ) Customer deposits and other, net 280 330 NET CASH PROVIDED BY OPERATING ACTIVITIES 29,881 30,121 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (net of AFUDC, equity portion) ( 40,513 ) ( 30,933 ) Proceeds from sale of assets 118 620 NET CASH USED IN INVESTING ACTIVITIES ( 40,395 ) ( 30,313 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayments under lines of credit agreements ( 2,034 ) - Borrowings under lines of credit agreements 2,343 - Increase in overdraft payable 4 3,909 Proceeds from contributions in aid of construction and advances 22,734 15,652 Payouts for contributions in aid of construction and advances ( 1,999 ) ( 1,410 ) Net proceeds from issuance of common stock 257 260 Issuance of long–term debt - 758 Dividends paid ( 9,442 ) ( 9,065 ) Principal repayments of long-term debt ( 1,791 ) ( 1,714 ) NET CASH PROVIDED BY FINANCING ACTIVITIES $ 10,072 $ 8,390 5 Table of Contents ARTESIAN RESOURCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED Unaudited (In thousands) For the Nine Months Ended September 30, 2025 2024 NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS $ ( 442 ) $ 8,198 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,147 2,505 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 705 $ 10,703 Supplemental Disclosures of Cash Flow Information: For the Nine Months Ended September 30, 2025 2024 Non-cash Investing and Financing Activity: Utility plant received as construction advances and contributions $ 9,232 $ 7,475 Change in amounts included in accounts payable, accrued payables and other related to capital expenditures $ 3,149 $ 1,888 Supplemental Disclosures of Cash Flow Information: Interest paid $ 5,837 $ 7,188 Income taxes paid $ 5,459 $ 4,452 Income taxes refunded $ 50 $ 701 See notes to the condensed consolidated financial statements. 6 Table of Contents ARTESIAN RESOURCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Unaudited (In thousands) Common Shares Outstanding Class A Non-Voting (1) (3) (4) Common Shares Outstanding Class B Voting (2) $ 1 Par Value Class A Non-Voting $ 1 Par Value Class B Voting Additional Paid-in Capital Retained Earnings Total Balance as of December 31, 2023 9,404 881 $ 9,404 $ 881 $ 143,369 $ 76,743 $ 230,397 Net income - - - - - 4,411 4,411 Cash dividends declared Common stock - - - - - ( 2,980 ) ( 2,980 ) Issuance of common stock Dividend reinvestment plan 3 - 3 - 87 - 90 Employee stock options and awards(4) - - - - 68 - 68 Employee Retirement Plan(3) - - - - - - - Balance as of March 31, 2024 9,407 881 9,407 881 143,524 78,174 231,986 Net income - - - - - 5,325 5,325 Cash dividends declared - Common stock - - - - - ( 3,042 ) ( 3,042 ) Issuance of common stock Dividend reinvestment plan 3 - 3 - 87 - 90 Employee stock options and awards(4) 5 - 5 - 52 - 57 Employee Retirement Plan(3) - - - - - - - Balance as of June 30, 2024 9,415 881 9,415 881 143,663 80,457 234,416 Net income - - - - - 6,813 6,813 Cash dividends declared Common stock - - - - - ( 3,043 ) ( 3,043 ) Issuance of common stock Dividend reinvestment plan 2 - 2 - 78 - 80 Employee stock options and awards(4) - - - - 48 - 48 Employee Retirement Plan(3) - - - - - - - Balance as of September 30, 2024 9,417 881 $ 9,417 $ 881 $ 143,789 $ 84,227 $ 238,314 Common Shares Outstanding Class A Non-Voting (1) (3) (4) Common Shares Outstanding Class B Voting (2) $1 Par Value Class A Non-Voting $1 Par Value Class B Voting Additional Paid-in Capital Retained Earnings Total Balance as of December 31, 2024 9,419 881 $ 9,419 $ 881 $ 143,920 $ 84,969 $ 239,189 Net income - - - - - 5,435 5,435 Cash dividends declared Common stock - - - - - ( 3,104 ) ( 3,104 ) Issuance of common stock Dividend reinvestment plan 3 - 3 - 82 - 85 Employee stock options and awards(4) - - - - 45 - 45 Employee Retirement Plan(3) - - - - - - - Balance as of March 31, 2025 9,422 881 9,422 881 144,047 87,300 241,650 Net income - - - - - 6,290 6,290 Cash dividends declared - - Common stock - - - - - ( 3,169 ) ( 3,169 ) Issuance of common stock Dividend reinvestment plan 3 - 3 - 84 - 87 Employee stock options and awards(4) 5 - 5 - 42 - 47 Employee Retirement Plan(3) - - - - - - - Balance as of June 30, 2025 9,430 881 9,430 881 144,173 90,421 244,905 Net income - - - - - 6,962 6,962 Cash dividends declared Common stock - - - - - ( 3,169 ) ( 3,169 ) Issuance of common stock Dividend reinvestment plan 2 - 2 - 83 - 85 Employee stock options and awards(4) - - - - 60 - 60 Employee Retirement Plan(3) - - - - - - - Balance as of September 30, 2025 9,432 881 $ 9,432 $ 881 $ 144,316 $ 94,214 $ 248,843 7 Table of Contents (1) At September 30, 2025 and September 30, 2024, Class A Stock had 15,000,000 shares authorized. For the same periods, shares issued, inclusive of treasury shares, were 9,460,651 and 9,445,316 , respectively. (2) At September 30, 2025 and September 30, 2024, Class B Stock had 1,040,000 shares authorized and 881,452 shares issued. (3) Artesian Resources Corporation registered 200,000 shares of Class A Stock, subsequently adjusted for stock splits, available for purchase through the Company’s 401(k) retirement plan. (4) Under the Equity Compensation Plan, effective December 9, 2015, or the 2015 Plan, Artesian Resources Corporation authorized up to 331,500 shares of Class A Stock for issuance of grants in the form of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the 2015 Plan. Includes stock compensation expense for September 30, 2025 and September 30, 2024. See Note 8 – Stock Compensation Plans. See notes to the condensed consolidated financial statements. 8 Table of Contents NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – GENERAL Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all of our wholly-owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries. DELAWARE REGULATED UTILITY SUBSIDIARIES Artesian Water Company, Inc., or Artesian Water, distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware. In addition, Artesian Water provides services to other water utilities, including operations, and has contract operation agreements with private, municipal and state water providers. Artesian Water also provides water for public and private fire protection to customers in our service territories. Artesian Wastewater Management, Inc., or Artesian Wastewater, operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI. Artesian Wastewater and TESI are regulated entities that own wastewater collection and treatment infrastructure and provide wastewater services to customers in Sussex County, Delaware as regulated public wastewater service companies. MARYLAND REGULATED UTILITY SUBSIDIARIES Artesian Water Maryland, Inc., or Artesian Water Maryland, distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland. Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, is authorized and able to provide regulated wastewater services to customers in the State of Maryland. It is currently not providing these services. PENNSYLVANIA REGULATED UTILITY SUBSIDIARY Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, provides water service to a residential community in Chester County, Pennsylvania. OTHER NON-UTILITY SUBSIDIARIES We have two other subsidiaries, neither of which are regulated. They are Artesian Utility Development, Inc., or Artesian Utility, and Artesian Development Corporation, or Artesian Development. Artesian Utility designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions. Artesian Utility may also evaluate land parcels and provide recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities. Artesian Utility also contracts with developers and government agencies for design and construction of wastewater infrastructure throughout the Delmarva Peninsula. Artesian Utility currently operates wastewater treatment facilities for the Town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20 -year contract that expires in July 2039. Artesian Utility currently operates three wastewater treatment systems with a combined capacity of up to approximately 3.8 million gallons per day. The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area. Artesian Utility also offers three protection plans to customers, the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan (collectively, SLP Plan or SLP Plans). The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up to an annual limit. The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit. The ISLP Plan enhances available coverage to include water and wastewater lines within customers' residences up to an annual limit. 9 Table of Contents Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware. NOTE 2 – BASIS OF PRESENTATION Basis of Presentation The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information provided not misleading. Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes thereto in the Company's annual report on Form 10-K for fiscal year 2024 as filed with the SEC on March 26, 2025. The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly-owned subsidiaries, including its principal operating company, Artesian Water. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of September 30, 2025, the results of its operations for the three and nine-month periods ended September 30, 2025 and September 30, 2024, its cash flows for the nine-month periods ended September 30, 2025 and September 30, 2024 and the changes in stockholders’ equity for the three and nine-month periods ended September 30, 2025 and September 30, 2024. The December 31, 2024 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2024 audited consolidated financial statements but does not include all disclosures and notes normally provided in annual financial statements. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods. Regulated Utility Accounting The accounting records of Artesian Water, Artesian Wastewater, and TESI are maintained in accordance with the uniform system of accounts as prescribed by the Delaware Public Service Commission, or the DEPSC. The accounting records of Artesian Water Pennsylvania are maintained in accordance with the uniform system of accounts as prescribed by the Pennsylvania Public Utility Commission, or the PAPUC. The accounting records of Artesian Water Maryland, and Artesian Wastewater Maryland, are maintained in accordance with the uniform system of accounts as prescribed by the Maryland Public Service Commission, or the MDPSC. All these subsidiaries follow the provisions of Accounting Standards Codification, or ASC, 980, Regulated Operations, which provides guidance for companies in regulated industries. These regulated subsidiaries account for the majority of our operating revenue. See Note 16 – Business Segment Information to our Condensed Consolidated Financial Statements for a full description of our segment information. Use of Estimates The condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S., which require management to make certain estimates and assumptions that could impact the Company’s financial condition, results of operations and cash flows. Actual results could differ from management's estimates. Management makes certain estimates and assumptions regarding unbilled revenues, accounting for income taxes, credit losses and reserves for bad debt, lease agreements, goodwill and contingent assets and liabilities at the date of the condensed consolidated financial statements. Utility Plant All additions to utility plant are recorded at cost. Business combinations pursuant to ASC 805, Business Combinations, may result in a purchase price allocation and the acquired assets are required to be evaluated by the applicable regulatory agency. 10 Table of Contents Depreciation and Amortization For financial reporting purposes, depreciation is recorded using the straight-line method at rates based on estimated economic useful lives, which range from 5 to 85 years. Composite depreciation rates for water utility plant were 1.92 %, and 1.93 % for September 30, 2025 and December 31, 2024, respectively. In a rate order issued by the DEPSC, the Company was directed, effective June 12, 2024, to begin using revised depreciation rates for utility plant in Artesian Water, which are based on the estimated useful life years. Artesian Water offsets depreciation recorded on utility plant by depreciation on utility property funded by Contributions in Aid of Construction, or CIAC, and Advances for Construction, or Advances. This reduction in depreciation expense is also netted against outstanding CIAC and Advances on the Condensed Consolidated Balance Sheet. Regulatory assets are amortized using the straight-line method over future periods, which range from 5 to 80 years. NOTE 3 – REVENUE RECOGNITION Background Artesian’s operating revenues are primarily derived from contract services based upon regulated tariff rates approved by the DEPSC, the MDPSC, and the PAPUC. Regulated tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent standalone selling prices. Our non-tariff contract revenues, which are primarily non-utility revenues, are derived from SLP Plan fees, water and wastewater contract operations, design and installation contract services, and wastewater inspection fees. Other regulated operating revenue is primarily derived from developer guarantee contributions for wastewater and rental income for antenna agreements, which are not considered in the scope of ASC 606, Revenue from Contracts with Customers. Tariff Contract Revenues Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory. We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period. As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle. Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware. We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred. These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue. The contract also provides for a minimum required volume of wastewater flow to our facility. At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue. Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year. Any estimated revenue amounts are recorded as unbilled operating revenue (contract asset) through the end of the accounting period and will be billed at each year end for any shortfall of the actual volume from the required minimal volume. Artesian generates revenue from metered wastewater services provided to customers in Sussex County, Delaware. We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of the last meter reading to the end of the accounting period. As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s volume in the same period, the previous billing period’s volume, or averaging. While actual volume for individual customers may differ from the estimate based on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of these wastewater customers are billed for the volume of wastewater transferred on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next quarterly cycle. 11 Table of Contents Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer requests service in our territory. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service. These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis. For contract services billed in arrears, we record unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle. For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. This deferred revenue is netted against unbilled operating revenue on the Condensed Consolidated Balance Sheet. Artesian generates service charges primarily from non-payment fees, such as water shut-off and reconnection fees and finance charges. These fees are billed and recognized as revenue at the point in time when our tariff indicates the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed. There is no contract asset or liability associated with these fees. Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements. This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period. This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement. Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed-fee revenue. Artesian generates revenue from interim temporary rates. In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis, pending resolution of an application for a base rate increase by the DEPSC. Temporary rate revenue is calculated as a percentage increase on tariff rates. We recognize this revenue based on the same guidelines as noted above depending on whether the additional rate was applied to consumption revenue or fixed-fee revenue. Until final rates are determined by the DEPSC, if it is probable that a refund of revenue associated with temporary rates will occur, a reserve would be recorded reducing revenue from temporary rates. As of September 30, 2025 and September 30, 2024, no such reserve or reduction to revenue was recorded. Temporary rates that were previously effective as of November 28, 2023 were replaced with final rates effective June 12, 2024, with no reserve or reduction to previously recorded revenue, as approved by the DEPSC. The DEPSC approved and Artesian Water implemented a temporary rate increase effective June 3, 2025. Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing. A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant. Non-tariff Contract Revenues Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customer’s residence, up to an annual limit. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services. These contract services are billed in advance on a monthly or quarterly basis. As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing. A provision for expected credit loss is calculated as a percentage of total SLP Plan contract revenue. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant. Artesian generates contract operation revenue from water and wastewater operation services provided to customers. We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services, over time as customers receive and consume the benefits of such services performed. The majority of these services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with most of these revenues. We have one operation contract that was paid in advance resulting in a contract liability for services that have not yet been provided. A provision for expected credit loss is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness. The related provision for expected credit loss and associated bad debt expense has not been significant. 12 Table of Contents Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract. We recognize revenue from these services over time as services are performed using the percentage-of-completion method based on an input method of incurred costs (cost-to-cost). These services are invoiced at the end of every month based on incurred costs to date. As of September 30, 2025, there is no associated contract asset or liability. There is no provision for expected credit loss or bad debt expense associated with this revenue. Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities. These fees are paid by developers in advance when a service is requested for a new phase of a development. Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed. As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected. There are no accounts receivable, provision for expected credit loss or bad debt expense associated with inspection fee contracts. Sales Tax The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax. Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax. Therefore, no sales tax is collected on revenues. Disaggregated Revenues The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location: For the Three Months For the Nine Months Ended September 30, Ended September 30, (in thousands) 2025 2024 2025 2024 Tariff Revenue Consumption charges $ 17,131 $ 16,747 $ 45,607 $ 44,232 Fixed fees 9,725 9,156 28,325 27,578 Service charges 186 186 544 565 DSIC - 67 534 67 Metered wastewater services 229 253 629 598 Industrial wastewater services 532 467 1,464 1,390 Total Tariff Revenue $ 27,803 $ 26,876 $ 77,103 $ 74,430 Non-Tariff Revenue Service line protection plans $ 1,643 $ 1,468 $ 4,889 $ 4,323 Contract operations 255 255 757 760 Design and installation 4 2 11 61 Inspection fees 246 120 561 331 Total Non-Tariff Revenue $ 2,148 $ 1,845 $ 6,218 $ 5,475 Other Operating Revenue $ 540 $ 421 $ 1,605 $ 1,197 Total Operating Revenue $ 30,491 $ 29,142 $ 84,926 $ 81,102 13 Table of Contents Contract Assets and Contract Liabilities Our contract assets and liabilities consist of the following: (in thousands) September 30, 2025 December 31, 2024 Contract Assets – Tariff $ 3,717 $ 3,030 Deferred Revenue Deferred Revenue – Tariff $ 1,428 $ 1,385 Deferred Revenue – Non-Tariff 622 714 Total Deferred Revenue $ 2,050 $ 2,099 For the nine months ended September 30, 2025, the Company recognized revenue of $ 1.4 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $ 0.5 million from amounts that were included in Deferred Revenue – Non-Tariff at the beginning of the year. The changes in Contract Assets and Deferred Revenue are primarily due to normal timing differences between our performance and customer payments. Remaining Performance Obligations As of September 30, 2025 and December 31, 2024, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months . As of September 30, 2025 and December 31, 2024, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services, contract water operation services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months , approximately four years and one year , respectively. NOTE 4 – ACCOUNTS RECEIVABLE Accounts receivable are recorded at the invoiced amounts. As set forth in a settlement agreement, Artesian Water received reimbursements from the Delaware Sand and Gravel Remedial Trust, or Trust, for Artesian Water’s past capital and operating costs, totaling approximately $ 10.0 million, related to the treatment costs associated with the release of contaminants from the Delaware Sand & Gravel Landfill Superfund Site, or Site, in groundwater that Artesian Water uses for public potable water supply. The full amount of $ 10.0 million has been paid to us, in four installments of approximately $ 2.5 million each, in August 2022, July 2023, July 2024 and July 2025. In addition, from July 1, 2021 onward the Trust shall reimburse Artesian Water for documented reasonable and necessary capital and operating costs that Artesian Water incurs to treat contaminants of concern and of emerging concern. A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current and reasonable projections based upon expected economic conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant. The following table summarizes the changes in the Company’s accounts receivable balance: (in thousands) September 30, 2025 December 31, 2024 December 31, 2023 Customer accounts receivable – water $ 6,706 $ 6,824 $ 6,573 Customer accounts receivable – wastewater 749 928 869 Customer accounts receivable – SLP Plan 457 470 409 Settlement agreement receivable – short term - 2,523 2,747 Developer receivable 518 837 2,089 Miscellaneous accounts receivable 137 100 471 8,567 11,682 13,158 Less: provision for expected credit loss 406 343 328 Net accounts receivable $ 8,161 $ 11,339 $ 12,830 14 Table of Contents NOTE 5 – LEASES The Company leases land and office equipment under operating leases from non-related parties. Our leases have remaining lease terms of 2.5 years to 71 years, some of which include options to automatically extend the leases for up to 66 years and are included as part of the lease liability and right-of-use assets as we expect to exercise the options. One of the leases for land was terminated in its entirety effective October 10, 2024. The remaining lease liability and right-of-use asset for the terminated lease was removed in the fourth quarter of 2024. The difference between the carrying amounts of the right-of-use asset and the lease liability was recorded in the income statement. Payments made under operating leases are recognized in the consolidated statement of operations on a straight-line basis over the period of the lease. The annual lease payment for the remaining land operating lease increases each year by the most recent increase in the Consumer Price Index and includes a provision to periodically adjust the annual lease payment based on the fair market value of the parcel of land. None of the operating leases contain contingent rent provisions. The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment. The Company currently does not have any financing leases and does not have any lessor leases that require disclosure. Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right-of-use asset and liability amounts for the operating leases. As our leases do not provide an implicit rate, we use our incremental borrowing rates for long-term and short-term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments. Rent expense for all operating leases, except those with terms of 12 months or less, comprises: For the Three Months Ended September 30, For the Nine Months Ended September 30, (in thousands) 2025 2024 2025 2024 Minimum rentals $ 2 $ 4 $ 6 $ 13 Contingent rentals - - - - Rent expenses $ 2 $ 4 $ 6 $ 13 Supplemental cash flow information related to leases is as follows: (in thousands) Nine months ended Nine months ended September 30, 2025 September 30, 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 6 $ 13 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 409 $ 499 Supplemental balance sheet information related to leases is as follows: (in thousands, except lease term and discount rate) September 30, 2025 December 31, 2024 Operating Leases: Operating lease right-of-use assets $ 409 $ 414 Other current liabilities $ 8 $ 8 Operating lease liabilities 399 404 Total operating lease liabilities $ 407 $ 412 Weighted Average Remaining Lease Term Operating leases 68 years 68 years Weighted Average Discount Rate Operating leases 5.0 % 5.0 % 15 Table of Contents Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of September 30, 2025 are as follows: (in thousands) Operating Leases Year 2025 $ 29 2026 29 2027 25 2028 21 2029 21 Thereafter 1,337 Total undiscounted lease payments $ 1,462 Less effects of discounting ( 1,055 ) Total lease liabilities recognized $ 407 As of September 30, 2025, we have not entered into operating or finance leases that will commence at a future date. NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Current Assets and Liabilities For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments. Under the fair value hierarchy, the fair value of such financial instruments is classified as a Level 1. Long-term Financial Liabilities As of September 30, 2025 and December 31, 2024, all of the Company’s outstanding long-term debt interest rates were a fixed rate. The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with ASC 825, Financial Instruments. Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements. Level 2 is valued using observable inputs other than quoted prices. The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates. The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below: (in thousands) September 30, 2025 December 31, 2024 Carrying amount $ 176,885 $ 178,676 Estimated fair value 157,065 154,795 The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts. Refund payments are based on the water sales to new customers in the particular development constructed. The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing. 16 Table of Contents NOTE 7 – INCOME TAXES Deferred income taxes are provided in accordance with ASC 740, Income Taxes, on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the condensed consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated subsidiaries recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate. Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties. Under ASC 740, Income Taxes, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known. The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense. For the full year 2024, the Company accrued approximately $ 17 thousand in penalties and interest related to positions taken on the 2022 corporate income tax return. For the nine months ended September 30, 2025, the Company has accrued approximately $ 16 thousand in penalties and interest related to positions taken on the 2022 and 2024 corporate income tax return. The Company remains subject to examination by federal and state authorities for the tax years 2022 through 2024 . Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets. On July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, was signed into law, which includes several changes to U.S. tax and related laws, including the temporary and permanent extension of expiring provisions of the Tax Cuts and Jobs Act of 2017. The Company has begun evaluating the impact that the OBBBA may have on its consolidated financial condition and results of operations and determined that the majority of the provisions in the OBBBA does not apply to the Company and management anticipates minimal impact. NOTE 8 – STOCK COMPENSATION PLANS On October 30, 2025, the Company’s stockholders approved the 2025 Equity Compensation Plan, or the 2025 Plan, that replaced the 2015 Equity Compensation Plan, or the 2015 Plan. Outstanding grants under the 2015 Plan shall continue in effect according to their terms, consistent with the 2015 Plan. No further grants will be made under the 2015 Plan after the approval date of the 2025 Plan. The 2025 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2025 Plan is administered and interpreted by the Compensation Committee of the Board of Directors, or the Committee. The Committee has the authority to determine the individuals to whom grants will be made under the 2025 Plan, determine the type, size and terms of the grants, determine the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2025 Plan) and deal with any other matters arising under the 2025 Plan. All of the employees of the Company and its subsidiaries are eligible for grants under the 2025 Plan. Non-employee directors of the Company are also eligible to receive grants under the 2025 Plan. On September 16, 2025, 5,000 shares of Class A Stock were granted as restricted stock awards. The fair value per share was $ 32.08 , the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on September 16, 2025. These restricted stock awards will be fully vested and released one year after the grant date and, prior to their vesting date, are subject to forfeiture in the event of the recipient’s termination of service. On July 1, 2025, 1,000 shares of Class A Stock were granted as a restricted stock award. The fair value per share was $ 33.96 , the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on July 1, 2025. This restricted stock award will be fully vested and released May 6, 2026 and, prior to its vesting date, is subject to forfeiture in the event of the recipient’s termination of service. 17 Table of Contents On May 5, 2025, 4,000 shares of Class A Stock were granted as restricted stock awards. The fair value per share was $ 34.27 , the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 5, 2025. These restricted stock awards will be fully vested and released one year after the grant date and, prior to their vesting date, are subject to forfeiture in the event of the recipient’s termination of service. On April 11, 2025, 1,000 shares of Class A Stock were granted as a restricted stock award. The fair value per share was $ 33.51 , the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on April 11, 2025. This restricted stock award will be fully vested and released one year after the grant date and, prior to its vesting date, is subject to forfeiture in the event of the recipient’s termination of service. On May 6, 2024, 5,000 shares of Class A Stock were granted as restricted stock awards. The fair value per share was $ 37.07 , the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 6, 2024. These restricted stock awards were fully vested and released one year after the grant. Compensation expense of approximately $ 60 thousand and $ 152 thousand was recorded for the three and nine months ended September 30, 2025, respectively, for restricted stock awards issued in May 2024, April 2025, May 2025, July 2025 and September 2025. Compensation expense of approximately $ 47 thousand and $ 172 thousand was recorded for the three and nine months ended September 30, 2024, respectively, for restricted stock awards issued in May 2023. Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards. There was no stock compensation cost capitalized as part of an asset. The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the nine months ended September 30, 2025: Options Restricted Awards Option Shares Weighted Average Exercise Price Weighted Average Remaining Life (Yrs.) Aggregate Intrinsic Value (in thousands) Outstanding Restricted Stock Awards Weighted Average Grant Date Fair Value Plan options/restricted stock awards Outstanding at January 1, 2025 - $ - - $ - 5,000 $ 37.07 Granted - - - - 11,000 33.18 Exercised/vested and released - - - - ( 5,000 ) 37.07 Expired/cancelled - - - - - - Outstanding at September 30, 2025 - $ - - $ - 11,000 $ 33.18 Exercisable/vested at September 30, 2025 - $ - - $ - - $ - There were no options exercised during the nine months ended September 30, 2025. There were no unvested option shares outstanding under the 2015 Plan during the nine months ended September 30, 2025. As of September 30, 2025, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan. As of September 30, 2025, there was approximately $ 276 thousand total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan. The cost will be recognized over 0.76 years, the remaining vesting period for the restricted stock awards. 18 Table of Contents NOTE 9 - GEOGRAPHIC CONCENTRATION OF CUSTOMERS Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide regulated water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC. As of September 30, 2025, Artesian Water was serving approximately 98,800 customers, Artesian Water Maryland was serving approximately 2,700 customers and Artesian Water Pennsylvania was serving approximately 40 customers. Artesian Wastewater and TESI provide regulated wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. As of September 30, 2025, Artesian Wastewater and TESI were serving approximately 9,000 customers combined, including one large industrial customer. NOTE 10 – OTHER DEFERRED ASSETS The investment in CoBank, ACB, or CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements . (in thousands) September 30, 2025 December 31, 2024 Investment in CoBank $ 6,889 $ 6,425 Other deferred assets 90 100 $ 6,979 $ 6,525 NOTE 11 - REGULATORY ASSETS The ASC 980, Regulated Operations, stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC. The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed. Debt related costs include debt issuance costs and other debt related expense. The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations. Affiliated interest agreement deferred costs relate to the regulatory and administrative costs resulting from efforts necessary to secure water allocations in Artesian Water Pennsylvania’s territory for the provision of service to the surrounding area and interconnection to Artesian Water Pennsylvania’s affiliate regulated water utility Artesian Water. These costs were specifically included for cost recovery pursuant to an Affiliated Interest Agreement between Artesian Water and Artesian Water Pennsylvania and were approved for recovery by the PAPUC. Amortization of these deferred costs began in the fourth quarter of 2023. Deferred acquisition adjustments represent the excess payment for purchases of utility plant from Delaware municipalities over the determined original cost net of depreciation. Deferred acquisition costs represent the closing cost associated with the acquisitions. Costs of $ 3.7 million were reclassified from net utility plant and $ 0.1 million were reclassified from contributions in aid of construction, which are being amortized over the periods noted in the table below and recovered in customer rates effective June 12, 2024 as part of the DEPSC approved settlement agreement for the Artesian Water rate application filed on April 28, 2023. Unrecovered reserve for depreciation of $ 4.3 million was the result of the implementation of a change in depreciation methods for certain general plant assets that are being amortized over five years and recovered in customer rates effective June 12, 2024 as part of the DEPSC approved settlement agreement for the Artesian Water rate application filed on April 28, 2023. Amortization of these deferred costs began in the third quarter of 2024. Regulatory expenses amortized on a straight-line basis are noted below: 19 Table of Contents Expense Years Amortized Deferred contract costs and other 5 Rate case studies 5 Delaware rate proceedings 3 Debt related costs 15 to 30 (based on term of related debt) Deferred costs affiliated interest agreement 20 Goodwill (Mountain Hill Water Company acquisition in 2008) 50 Deferred acquisition and franchise costs - Maryland 20 – 80 Deferred acquisition costs – Delaware 20 Deferred acquisition adjustments - Delaware 36 – 62 Unrecovered reserve for depreciation (general plant assets) 5 Regulatory assets, net of amortization, comprise: (in thousands) September 30, 2025 December 31, 2024 Deferred contract costs and other $ 165 $ 271 Rate case studies 114 141 Delaware rate proceedings 342 474 Deferred income taxes 408 423 Debt related costs 3,705 3,969 Deferred costs affiliated interest agreement 1,012 1,054 Goodwill 245 251 Deferred acquisition and franchise costs - Maryland 361 389 Deferred acquisition costs – Delaware 222 231 Deferred acquisition adjustments – Delaware 3,306 3,359 Unrecovered reserve for depreciation 3,222 3,866 $ 13,102 $ 14,428 NOTE 12 – REGULATORY LIABILITIES ASC 980, Regulated Operations, stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC. Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates. Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties. As authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability. The annual amortization currently authorized by the DEPSC could be adjusted in future rate applications. Deferred settlement refunds consist of reimbursements from the Trust for Artesian Water’s past capital and operating costs, totaling approximately $ 10.0 million, related to the treatment costs associated with the release of contaminants from the Site in groundwater that Artesian Water uses for public potable water supply, pursuant to the Settlement Agreement. The full amount of $ 10.0 million has been paid to us, in four installments of approximately $ 2.5 million each, in August 2022, July 2023, July 2024 and July 2025. Artesian Water received approval from the DEPSC in October 2022 to refund to its customers these reimbursements for past capital and operating costs. The refund for the reimbursements was applied to customer bills in annual installments. The refunds occurred in October 2022, August 2023, August 2024 and August 2025. The amount of the credit was calculated by dividing the amount of the reimbursement by the number of eligible customers. Beginning in 2022, Artesian Water began recording recovery of capital expenditures related to treatment of contaminants from the Site as Contributions in Aid of Construction and began recording expense recovery as an offset to operations and maintenance expense, with the intention that those recoveries will be available for inclusion and consideration in any future rate applications. 20 Table of Contents Pursuant to the enactment of the Tax Cuts and Jobs Act, or TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34 % to 21 % (see Note 7 – Income Taxes) resulting in a decrease in the net deferred income tax liability of $ 24.3 million, of which $ 22.8 million was reclassified to a regulatory liability related to Artesian Water and Artesian Water Maryland. The regulatory liability amount is subject to certain Internal Revenue Service, or IRS, normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes. On January 31, 2019, the DEPSC approved Artesian Water to amortize the regulatory liability amount of $ 22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date. In May 2022, Artesian Water received a rate order from the DEPSC instructing Artesian Water to continue amortizing the liability over a period of 49.5 years, subject to review in Artesian Water’s next base rate filing. On June 12, 2024, the DEPSC approved a settlement agreement for the Artesian Water rate application, filed on April 28, 2023, that required two changes to the deferred income tax regulatory liability effective June 12, 2024. A $ 7.6 million gross-up adjustment was recorded to reflect the benefit customers would receive from the implementation of new base rates and $ 4.0 million of the regulatory liability, which represents costs not subject to IRS normalization rules, is now required to be amortized over a six-year period rather than 49.5 years. The MDPSC has not issued a final order on the regulatory liability amount of $ 0.6 million regarding the effects of the TCJA on Maryland customers. Regulatory liabilities comprise: (in thousands) September 30, 2025 December 31, 2024 Utility plant retirement cost obligation $ 207 $ 279 Deferred settlement refunds - 2,496 Deferred income taxes (related to TCJA) 26,518 27,492 $ 26,725 $ 30,267 NOTE 13 - REGULATORY PROCEEDINGS Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state public service commissions through a rate-setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the Company’s requested level of rates. We are subject to regulation by the following state regulatory commissions: · The DEPSC, regulates Artesian Water, Artesian Wastewater, and TESI. · The MDPSC, regulates Artesian Water Maryland and Artesian Wastewater Maryland. · The PAPUC, regulates Artesian Water Pennsylvania. Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws. These laws and regulations establish criteria and standards for drinking water and for wastewater discharges. Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates. Water and Wastewater Rates Our regulated subsidiaries periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business. In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. Any DSIC rate in effect will be reset to zero upon implementation of a temporary increase in base rates charged to customers. The first temporary increase may be up to the lesser of $ 2.5 million on an annual basis or 15 % of gross water sales. Should the rate case not be completed within seven months , by law, the utility may put the entire requested rate relief, up to 15 % of gross water sales, in effect under bond until a final resolution is ordered and placed into effect. If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest. The timing of our rate increase requests is therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase. We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase. 21 Table of Contents Artesian Water filed an initial request with the DEPSC on April 28, 2023, further supplemented with a request filed on November 30, 2023, to implement new rates to meet a requested increase in revenue of approximately $ 16.7 million, on an annualized basis, or 22.7 %. The DEPSC approved and Artesian Water implemented a temporary rate increase effective November 28, 2023 of approximately $ 10.8 million, on an annualized basis, or 14.6 %, subject to refund, and reduced the DSIC previously in effect from approximately 7.5 % to zero. On May 22, 2024, Artesian Water, the Staff of the DEPSC, and the Division of the Public Advocate, or DPA, (collectively, the Parties) entered into an agreement, or Settlement Agreement, to settle Artesian Water’s April 2023 application to implement new rates. On June 12, 2024, a DEPSC order was issued approving the settlement agreement entered into on May 22, 2024 between the Parties. The Settlement Agreement authorized a total increase in the revenue requirement of $ 11.2 million, on an annualized basis, or approximately 15.2 %, with a rate effective date of June 12, 2024, which encompassed a 9.5 % return on common equity and an overall rate of return on rate base of 6.75 %. Temporary rates that were in effect since November 28, 2023 were replaced with the final approved rates from the Settlement Agreement. Revised depreciation rates for utility plant and revised amortization rates for certain regulatory assets and liabilities were also approved effective June 12, 2024. On April 4, 2025, Artesian Water filed a request with the DEPSC to implement new rates to meet a requested increase in revenue of 12.41 %, or approximately $ 10.8 million, on an annualized basis. The actual effective increase is less than 12.41 % since Artesian Water has been permitted to recover specific investments made in infrastructure through the assessment of a 1.66 % DSIC. Since the DSIC rate is set to zero when temporary rates are placed into effect, customers would experience an incremental increase of 10.75 %, the net of the overall 12.41 % increase less the DSIC rate of 1.66 % currently in effect, if the requested increase is granted in full by the DEPSC. The new proposed rates are designed to support Artesian Water’s ongoing capital improvement program and to cover increased costs of operations, including chemicals and electricity for water treatment, water quality regulation compliance, taxes, labor and benefits. In accordance with applicable Delaware law, the DEPSC approved and Artesian Water implemented the first temporary rate increase effective June 3, 2025 of approximately $ 2.5 million in additional annual revenue, or 2.88 %, subject to refund, and reduced the DSIC previously in effect from approximately 1.66 % to zero, for a temporary rate increase of net 1.22 %. Other Proceedings Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at 7.50 % of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0 % within any 12-month period. The following table summarizes (1) Artesian Water’s last two applications with the DEPSC to collect DSIC rates and (2) the rate upon which eligible plant improvements was based: Application Date 05/30/2024 11/22/2024 DEPSC Approval Date 06/12/2024 12/18/2024 Effective Date 07/01/2024 01/01/2025 Cumulative DSIC Rate 0.34 % 1.66 % Net Eligible Plant Improvements – Cumulative Dollars (in millions) $ 2.0 $ 11.7 Eligible Plant Improvements – Installed Beginning Date 11/01/2023 11/01/2023 Eligible Plant Improvements – Installed Ending Date 04/30/2024 10/31/2024 On December 18, 2024, the DEPSC approved Artesian Water’s application to implement a DSIC rate of 1.66 %, effective January 1, 2025. Effective July 1, 2024, Artesian Water was permitted to recover specific investments made in infrastructure through the assessment of a 0.34 % DSIC. The January 1, 2025 DSIC rate is subject to periodic audit by the DEPSC. The January 1, 2025 DSIC rate was reset to zero when the temporary base rate increase was placed into effect on June 3, 2025. For the three months ended September 30, 2025, we did no t report any earnings in DSIC revenue. For the nine months ended September 30, 2025, we earned approximately $ 0.5 million, in DSIC revenue. In each of the three and nine months ended September 30, 2024, we earned approximately $ 0.1 million in DSIC revenue. 22 Table of Contents NOTE 14 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards. The following table summarizes the shares used in computing basic and diluted net income per share: Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 (in thousands) (in thousands) Weighted average common shares outstanding during the period for basic computation 10,312 10,297 10,308 10,293 Dilutive effect of employee stock options and awards 2 1 1 1 Weighted average common shares outstanding during the period for diluted computation 10,314 10,298 10,309 10,294 For the three months and nine months ended September 30, 2025 and 2024, no shares of restricted stock awards were excluded from the calculations of diluted net income per share. For the three and nine months ended September 30, 2025 and 2024, no stock options were excluded from the calculations of diluted net income per share. The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Stock. As of September 30, 2025, 9,431,674 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of September 30, 2024, 9,416,339 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. The par value for both classes is $ 1.00 per share. Equity per common share was $ 24.14 and $ 23.24 at September 30, 2025 and December 31, 2024, respectively. These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on September 30, 2025 and December 31, 2024, respectively. NOTE 15 - LEGAL PROCEEDINGS Periodically, we are involved in other proceedings or litigation arising in the ordinary course of business. We do not believe that the ultimate resolution of these matters will materially affect our business, financial position or results of operations. However, we cannot ensure that we will prevail in any litigation and, regardless of the outcome, may incur significant litigation expense and may have significant diversion of management attention. Several of the water systems of Artesian Resources’ subsidiaries are claimants in four multi-district litigation, or MDL, class action settlements designed to resolve claims for per- and polyfluoroalkyl substances, or PFAS, contamination in Public Water Systems’ Drinking Water, as those terms are defined in the respective Agreements (the “Settlements”), which are with four groups of settling defendants on behalf of: (1) the 3M Company (“3M”); (2) E.I. Du Pont de Nemours and Company (n/k/a Eidp, Inc.), DuPont de Nemours Inc., The Chemours Company, The Chemours Company FC, LLC, and Corteva, Inc. (collectively, “DuPont”); (3) Tyco Fire Products LP and Chemguard, Inc. ( collectively, “the Tyco Defendants”); and (4) BASF Corporation (“BASF”). Claims Forms have been submitted on behalf of Artesian Resources’ eligible systems in each of the Settlements. In October 2025, the Company received its first payment from 3M in the amount of $ 2.3 million with an anticipated total net settlement of approximately $ 12.6 million to be paid over 8 years. DuPont settlement payments to claimants began on or about October 15, 2025. Although the Company has not yet received its first payment, it expects to soon receive approximately $ 1.3 million, equal to approximately 95 % of its total DuPont settlement award. The Company anticipates receiving the balance of the 3M settlement award, the Dupont settlement award and additional settlement payments from the other MDL lawsuit defendants. The current projected payment timeline for the Tyco Defendants and BASF settlements is December 2025; however, that timeline is heavily dependent on timely resolution of claim deficiencies by claimants and the outcome of the quality control review process. The settlement proceeds are intended to reimburse the Company for past and future capital investments or operations and maintenance expenses related to PFAS water contamination to its water systems . The DEPSC will review and approve the regulatory treatment for the settlement funds received to date as well as future settlement funds. It is expected that the funds will be returned to customers through regulatory mechanisms as determined by the DEPSC. 23 Table of Contents On September 15, 2025, Artesian Water was served as a third-party defendant in a third-party complaint filed by Metra Industries, Inc., in the Superior Court of the State of Delaware. The litigation arises from a contractual dispute related to a water main renewal project and asserts a claim against us in the total amount of $ 3.4 million comprised mainly of $ 2.7 million in unabsorbed office overhead as well as $ 0.1 million in end-of-job direct costs and $ 0.6 million in change orders . While we plan to defend the claim vigorously, it is possible that we could incur a loss; however, any loss is not estimable at this time. NOTE 16 - BUSINESS SEGMENT INFORMATION The Company’s operating segments are comprised of its businesses which generate revenues and incur expenses, for which separate operational financial information is available and is regularly evaluated by management for the purpose of making operating decisions, assessing performance, and allocating resources. The Company operates its businesses primarily through one reportable segment, the Regulated Utility segment. The Regulated Utility segment is the largest component of the Company’s business and includes an aggregation of our five regulated utility subsidiaries that are in the business of providing regulated water and wastewater services on the Delmarva Peninsula. Our regulated water utility services include treating, distributing, and selling water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware and in Cecil County, Maryland and to a residential community in Chester County, Pennsylvania. Our regulated wastewater utility services include the treatment and disposal of wastewater for customers in Sussex County, Delaware. The Company is subject to regulations as to its rates, services, and other matters by the states of Delaware, Maryland and Pennsylvania with respect to utility service within these states. The Chief Operating Decision Maker, or CODM, is the Executive Committee led by the Chief Executive Officer and includes the Chief Financial Officer. The CODM uses operating income as its measure of profit to assess the performance of each segment. This profit measure excludes the financing component and allows management to focus on controllable expenses, to allocate resources during the annual budgeting process and to monitor budget versus actual results on a monthly basis. The accounting policies of the operating segments are the same as those described in Note 2 – Basis of Presentation. The measurement of depreciation, interest, and capital expenditures are predominately related to our Regulated Utility segment. These amounts in our non-utility business are negligible and account for approximately less than 1% of condensed consolidated amounts as of September 30, 2025 and September 30, 2024. In thousands Three Months Ended September 30, 2025 2024 Regulated Utility Total Regulated Utility Total Regulated Utility Revenues $ 28,617 $ 28,617 $ 27,450 $ 27,450 Reconciliation of revenue Other revenues 1,938 (a) 1,751 (a) Inter-segment elimination ( 64 ) ( 59 ) Consolidated revenues $ 30,491 $ 29,142 Less: (b) Payroll and Benefits (c) 6,873 6,160 Supply and Delivery (d) 4,066 3,640 Administrative (e) 2,557 2,384 Depreciation and Amortization 3,484 3,274 Income Taxes 2,229 2,147 Property and other taxes 1,188 1,556 Regulated Utility Operating Income $ 8,220 $ 8,220 $ 8,289 $ 8,289 Reconciliation of operating income Other profit 399 (a) 301 (a) Consolidated operating income $ 8,619 $ 8,590 24 Table of Contents In thousands Nine Months Ended September 30, 2025 2024 Regulated Utility Total Regulated Utility Total Regulated Utility Revenues $ 79,385 $ 79,385 $ 76,080 $ 76,080 Reconciliation of revenue Other revenues 5,733 (a) 5,198 (a) Inter-segment elimination ( 192 ) ( 176 ) Consolidated revenues $ 84,926 $ 81,102 Less: (b) Payroll and Benefits (c) 19,266 18,772 Supply and Delivery (d) 11,587 10,767 Administrative (e) 7,600 6,899 Depreciation and Amortization 10,229 10,137 Income Taxes 5,680 5,297 Property and other taxes 4,442 4,653 Regulated Utility Operating Income $ 20,581 $ 20,581 $ 19,555 $ 19,555 Reconciliation of operating income Other profit 1,438 (a) 953 (a) Consolidated operating income $ 22,019 $ 20,508 25 Table of Contents In thousands Regulated Utility Total Regulated Utility Total Assets Regulated Utility Assets $ 829,477 $ 829,477 $ 793,118 $ 793,118 Reconciliation of assets Other assets 4,431 5,505 Consolidated assets $ 833,908 $ 798,623 (a) Other revenues and other profit: – Revenue and profit from segments below the quantitative thresholds are attributable to four non-utility businesses of the Company – These businesses are primarily comprised of: Service Line Protection Plan services for water, sewer and internal plumbing; design, construction and engineering services; contract services for the operation and maintenance of water and wastewater systems in Delaware and Maryland; and leased space to the Regulated Utility Segment – These non-utility businesses do not individually or in the aggregate meet the quantitative thresholds for determining reportable segments – Certain corporate costs have been allocated from the regulated utility segment to the non-utility businesses and are included in the other profit amounts shown (b) Significant expense categories: – The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM – Inter-segment expenses related to leased space provided by one non-utility business, calculated on the lower of cost or market method, are included in the amounts shown (c) Payroll and benefits: – This category does not include amounts capitalized on the Condensed Consolidated Balance Sheet (d) Supply and Delivery: – This category includes purchased power, purchased water, chemicals, infrastructure maintenance and repair costs, and wastewater disposal fees (e) Administration expense: – This category includes computer systems maintenance and subscription fees, audit and legal fees, insurance, customer billing, and other general and administrative expenses NOTE 17 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS In December 2023, the Financial Accounting Standards Board, or FASB, issued amended guidance on Income Taxes: Improvements to Income Tax. The amendments require the Company to provide further disaggregated income tax disclosures for specific categories on the effective tax rate reconciliation, as well as additional information about federal, state/local and foreign income taxes. The standard also requires the Company to annually disclose its income taxes paid (net of refunds received), disaggregated by jurisdiction. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be applied on a prospective basis, although optional retrospective application is permitted. While the standard will require additional disclosures related to the Company’s income taxes, management does not expect the adoption of this guidance to have an impact on the Company’s results of operations or cash flows. In November 2024, FASB issued amended guidance which requires disaggregated disclosure of income statement expenses for public business entities. The guidance does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The standard is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. 26 Table of Contents