What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-07 · 264 added, 277 removed, 241 unchanged (69% of the section changed)

46 unchanged sentences

10-K for the year ended December 31, 2025, and this Quarterly Report on Form

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

10-Q for the quarter ended March 31, 2026, such as changes in weather, changes

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

7 unchanged sentences

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 SEPTEMBER 30, 2025

RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2026

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

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.

Our regulated utility segment comprised 92.5% of total operating revenues for the three months ended March 31, 2026 and 92.7% for the three months ended March 31, 2025.

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

3 unchanged sentences

We continue to seek growth opportunities to provide wastewater services in Delaware and the surrounding areas.

Our profitability is also attributed to other non-utility business, such as various contract operations, SLP Plans and other services we provide.

Our contract operations, SLP Plans and other services also provide a revenue stream that is not affected by changes in weather patterns.

We also continue to explore and develop relationships with developers and municipalities in order to increase revenues from contract water and wastewater operations, wastewater management services, and design, construction and engineering services.

We plan to continue developing and expanding our contract operations and other services in a manner that complements our growth in water service to new customers.

Our anticipated growth in these areas is subject to changes in residential and commercial construction, which may be affected by interest rates, inflation and general housing and economic market conditions.

We anticipate continued growth in our non-utility subsidiaries mostly due to our SLP Plans.

Our profitability is also

attributed to other non-utility business, such as various contract operations,

water, sewer and internal SLP Plans and other services we provide.

Our contract operations, SLP Plans and other

services also provide a revenue stream that is not affected by changes in

weather patterns.

We also continue to

explore and develop relationships with developers and municipalities in order

to increase revenues from contract water and wastewater operations, wastewater

management services, and design, construction and engineering services.

We plan to continue developing and expanding

our contract operations and other services in a manner that complements our

growth in water service to new customers.

Our anticipated growth in these areas is subject to changes in

residential and commercial construction, which may be affected by interest

rates, inflation and general housing and economic market conditions.

We anticipate continued growth in our

non-utility subsidiaries due to our water and sewer SLP Plans .

We are affected by inflation, most notably by the continually increasing costs required to maintain, improve and expand our service capability.

10 unchanged sentences

decreases, in our operating revenue.

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 .

of March 31, 2026, the number of metered water customers in Delaware increased approximately

1.8% compared to March 31, 2025.

number of metered water customers in Maryland increased approximately 1.5%

compared to March 31, 2025.

of metered water customers in Pennsylvania remained consistent compared to March

For the three months ended March

31, 2026, approximately 2.0 billion gallons of water were distributed in our

Delaware systems and approximately 109.6 million gallons of water were

distributed in our Maryland systems .

On April 4, 2025, Artesian

1 unchanged sentence

increase in revenue of 12.41%, or approximately $10.8 million, on an annualized

The DEPSC approved and Artesian

Water implemented a temporary rate increase effective June 3, 2025, until

permanent rates are determined by the DEPSC.

This is discussed further in Note 13 –

Regulatory Proceedings.

Supplemental and rebuttal

filings were subsequently filed, reducing the requested increase to 10.2%, or approximately

$9.0 million, on an annualized basis.

DEPSC approved and Artesian Water implemented temporary rate increases

effective June 3, 2025 and November 6, 2025, until permanent rates are

determined by the DEPSC.

discussed further in Note 13 – Regulatory Proceedings .

Regulated Wastewater Subsidiaries

9 unchanged sentences

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.

As of March 31, 2026, the

number of Delaware wastewater customers increased approximately 6.

compared to March 31, 2025.

Non-Utility Subsidiaries

2 unchanged sentences

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 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 .

Artesian Utility also offers protection plans to customers:

Plan and the SSLP Plan.

customers are billed a flat monthly or quarterly rate, which contributes to

providing a revenue stream unaffected by weather.

There has been consistent customer growth

over the years.

As of March 31, 2026,

the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP

Plan increased 5.4%, 7.3% and 0.7%, respectively, compared to March 31, 2025.

The Company also

maintains the ISLP Plan, in which the Company discontinued enrolling new

customers effective January 2026.

Strategic Direction and Recent Developments

18 unchanged sentences

We believe this will reduce operational costs at the smaller treatment facilities in the future because they will be converted from treatment and disposal plants to pump stations to assist with transitioning the flow of wastewater from one regional facility to another.

In addition, Artesian’s Delaware wastewater subsidiaries are the sole regional regulated wastewater utilities in Delaware, which we believe will enable us to increase efficiencies in the treatment and disposal of wastewater and provide additional opportunities to expand our wastewater operations.

In April 2024, Artesian Wastewater received a permit from the Delaware Department of Natural Resources and Environmental Control for construction of a 625,000 gallon per day regional wastewater treatment facility, including a primary receiving headworks at its Sussex Regional Recharge Facility, or SRRF.

Under its previous permit, SRRF provided solely land disposal services for a single commercial processing and treatment plant.

Under its new permit, SRRF will continue providing those disposal services alongside the new treatment plant.

The new treatment facility will provide service for Artesian Wastewater’s regional system comprised primarily of residential and small commercial customers.

The construction will also include the primary receiving facility for untreated effluent, sized to allow for the expansion of the regional treatment system planned for the site.

The new treatment facility will utilize the existing disposal infrastructure and is expected to be completed in 2025.

Artesian’s Delaware wastewater subsidiaries are the sole regional regulated

wastewater utilities in Delaware, which we believe will enable us to continue

to increase efficiencies in the treatment and disposal of wastewater and expand

our wastewater operations .

In April 2024,

Artesian Wastewater received a permit from the Delaware Department of Natural

Resources and Environmental Control, or DNREC, for construction of a 625,000

gallon per day regional wastewater treatment facility, including a primary

receiving headworks at its Sussex Regional Recharge Facility, or SRRF.

Under its previous permit, SRRF provided

solely land disposal services for a single commercial processing and treatment

Under its new permit, SRRF will

continue providing those disposal services alongside the new treatment plant.

The new treatment facility will provide service for Artesian Wastewater’s

regional system comprised primarily of residential and small commercial

The construction will also

include the primary receiving facility for untreated effluent, sized to allow

for the expansion of the regional treatment system planned for the site.

The new treatment facility will utilize the

existing disposal infrastructure and was completed in the first quarter of

In February 2026, Artesian

Wastewater received a permit from DNREC for construction of an

additional 1,250,000 gallon per day regional wastewater treatment facility.

The general need for increased capital investment in our water and wastewater systems is due to a combination of population growth, more protective water quality standards, aging infrastructure and acquisitions.

1 unchanged sentence

The DEPSC and MDPSC have generally recognized the operating and capital costs associated with these improvements in setting water and wastewater rates for current customers and capacity charges for new customers.

In our non-utility subsidiaries, we continue pursuing opportunities to expand our contract operations.

Through Artesian Utility, we will seek to expand our contract design, engineering and construction services of water and wastewater facilities for developers, municipalities and other utilities.

We also anticipate continued growth due to our water, sewer and internal SLP Plans.

Artesian Development owns two nine-acre parcels of land, located in Sussex County, Delaware, which allows for construction of a water treatment facility and wastewater treatment facility.

In our non-utility

subsidiaries, we continue pursuing opportunities to expand our contract

Through Artesian Utility, we

will seek to expand our contract design, engineering and construction services

of water and wastewater facilities for developers, municipalities and other

We also anticipate continued

growth due to our water and sewer SLP Plans.

Artesian Development owns two nine-acre parcels of land, located in

Sussex County, Delaware, which allows for construction of a water treatment

facility and wastewater treatment facility .

Other Matters

5 unchanged sentences

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

develop a rulemaking to provide additional time for compliance, including a

proposal to extend the compliance date to 2031.

2024, the EPA established MCLs for certain per- and polyfluoroalkyl substances,

or PFAS, in drinking water.

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.

Delaware water utilities are required to

notify the public of any violations of the MCLs beginning January 15,

To allow drinking water systems

more time to develop plans for addressing PFAS where they are found and

implement solutions, the EPA plans to develop a rulemaking to provide

additional time for compliance, including a proposal to extend the compliance

date to 2031.

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

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

plans to continue to install treatment at additional locations 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

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.

11 unchanged sentences

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 September 30, 2025 Compared to the Three Months Ended September 30, 2024.

Results of Operations – Analysis of the Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025.

Operating Revenues

Revenues totaled $27.8

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 .

million for the three months ended March 31, 2026, $1.9 million, or 7.3%, more

than revenues for the three months ended March 31, 2025 .

Water sales revenue

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

sale of water.

increased $1.5 million, or 7.3%, for the three months ended March 31, 2026 from

the corresponding period in 2025, primarily the result of two temporary rate

increases as permitted under Delaware law, until permanent rates are determined

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

The first temporary rate increase of 2.88%

was placed into effect on June 3, 2025 at which time the DSIC rate of 1.66% was

The second temporary rate

increase of 6.82% was placed into effect on November 6, 2025, of which a portion has

been reserved for refund and is not reflected in income.

We realized 79.9% and 79.9% of our total

operating revenue for the three months ended March 31, 2026 and March 31, 2025,

respectively, from the sale of water.

Other utility operating

revenue increased approximately $0.2 million, or 6.2%, 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.

ended March 31, 2026 compared to the three months ended March 31, 2025.

This increase is primarily

due to an increase in revenue related to industrial wastewater services and an

increase in wastewater revenue associated with additional residential and

commercial customers.

Non-utility operating

revenue increased approximately $0.2 million, or 9.5%, 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 Service Line Protection Plan revenue, primarily the result of an

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

ended March 31, 2026 compared to the three months ended March 31, 2025.

This increase is primarily due to an increase in SLP Plan revenue, primarily the result

of an increase in the number of customers participating in the SLP Plans and an increase in fees that

were placed into effect on January 1, 2026.

Operating Expenses

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.

expenses, excluding depreciation and income taxes, increased $0.9 million, or 5.7%, for the three

months ended March 31, 2026, compared to the same period in 2025 .

Utility operating expenses increased $0.8 million, or 6.7%, for the three

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

months ended March 31, 2026 compared to the same period in 2025.

The increase in utility operating expenses

consists of a $0.6 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 52.2% for the three months ended September 30, 2025, compared to 51.2% fo r the three

months ended September 30, 2024.

$0.2 million increase in supply and treatment 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 administrative costs .

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

was 57.6% for the three months ended March 31, 2026, compared to 58.5% for the three

months ended March 31, 2025 .

and state income tax expense increased $0.2 million, or 11.2%, primarily due to

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

plant, which include the footage and size of pipe, hydrants and wells .

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.

Other income decreased $0.2 million, primarily due to a decrease

in patronage refunds on the Company’s lines of credit and loan volume and a

decrease in allowance for funds used during construction, or AFUDC, as a result

of lower long-term construction activity subject to AFUDC.

Our net income applicable

1 unchanged sentence

Total operating revenues increased $1.9 million,

and other income increased $0.1 million, offset by a $1.3 million increase in

total operating expenses.

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

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 .

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.

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

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

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 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 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 .

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.

Property taxes are assessed on land, buildings and certain utility

plant, which include the footage and size of pipe, hydrants and wells .

increased $0.6 million, or 23.5%, primarily

as a result of higher long-term construction activity subject to AFUDC.

Our net income applicable

to common stock increased $2.1 million, or 12.9%.

Total operating revenues increased $3.8

million and other income increased $0.6 million, offset by a $2.3 million

increase in total operating expenses.

offset by a $1.2 million increase in total operating expenses, and a decrease

of $0.2 million in other income.

LIQUIDITY AND CAPITAL RESOURCES

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

primary sources of liquidity for the three

months ended March 31, 2026 were $8.6 million of cash provided by operating

activities, $10.0 million from the

issuance of long-term debt, and

$8.1 million in net contributions and advances from developers.

We depend on the

4 unchanged sentences

One of our primary sources

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

of liquidity for the three months ended March 31, 2026 was $8.6 million

provided by cash flow from operating activities, compared to $11.0 million for

the nine months ended September 30, 2024.

the three months ended March 31, 2025.

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

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.

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

accounts receivable and accounts payable, partially offset by higher materials

and supplies, customer deposits and other, net income, deferred income taxes, and

accrued expenses.

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

See Note 13 – Regulatory

We will 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 activities .

Investment Activities

1 unchanged sentence

quality reliable service to our growing service territory.

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

expenditures during the first three months of 2026 were $13.1 million compared

to $10.4 million during the same period in 2025.

During the first nine months of 2025, these

investments include renewals associated with the rehabilitation of aging

infrastructure, installation of new mains, construction of a new wastewater

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

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

serve our customers.

During the first three months of 2026, these

investments include installation of new mains, services and hydrants, renewals

associated with the rehabilitation of aging infrastructure, upgrading and

replacing our meter reading equipment, installation of wastewater force mains,

upgrading existing pumping and treatment stations, including PFAS treatment

upgrades, and construction of new wastewater treatment plants, to better serve

our customers.

Financing Activities

For the nine months ended September

For the three months ended March

31, 2026, cash flows provided by financing activities were $8.7 million,

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

Our primary source of liquidity from

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 .

compared to $2.0 million for the three months ended March 31, 2025.

Our primary sources of liquidity from

financing activities for the three months ended March 31, 2026 were $10.0 million

from the issuance of long-term debt and $8.1 million in net contributions and

advances from developers.

The cash flows

provided by financing activities increased due to higher issuance of long-term

debt and an increase in net contributions

and advances from developers, partially offset by an increase in repayments of

lines of credit and a decrease in overdraft payables.

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

2 unchanged sentences

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

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

financing requirements and to expand through strategic acquisitions.

We expect to fund our

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

operations, bank credit lines, contributions from developers and settlement

funds, government grants and capital market financing as needed to provide

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

requirements and to expand through strategic acquisitions.

We believe that our cash on hand and future

1 unchanged sentence

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

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

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

acceptable to us, or at all.

4 unchanged sentences

Lines of Credit and Long-Term Debt

At September 30, 2025,

At March 31, 2026,

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 September 30, 2025, there was $39.7 million

As of March 31, 2026, there was $40 million

of available funds under this line of credit.

9 unchanged sentences

The Company expects to renew 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.

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

At March 31, 2026,

Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank,

that allowed for the financing of operations for Artesian Water, with up to $10

million of this line available for the operations of Artesian Water

As of March 31, 2026, there

was $20 million of available funds under this line of credit.

In April 2026, the agreement for this line of

credit was amended to allow for the financing of operations by Artesian Water,

Artesian Water Maryland, and Artesian Wastewater Management, Inc., individually

or collectively, subject to the $20-million limit.

The interest rate for borrowings under this

line is 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, 2026.

Artesian Water expects

to renew this line of credit .

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

5 unchanged sentences

State revolving fund loans (principal and interest)

Promissory note (principal and interest)

Promissory notes (principal and interest)

Asset purchase contractual obligation (principal and interest)

6 unchanged sentences

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

As of March 31, 2026, 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.

1 unchanged sentence

The state revolving fund loan obligation and promissory note obligation have an amortizing mortgage payment payable over a 20-year period.

The first mortgage bonds, the state revolving fund loan and the promissory note have certain financial covenant provisions, the violation of which could result in default and require the obligation to be immediately repaid, including all interest.

The first mortgage bonds, the state revolving fund loan and the promissory notes have certain financial covenant provisions, the violation of which could result in default and require the obligation to be immediately repaid, including all interest.

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

On March 13, 2026, Artesian

Water Maryland and CoBank entered into a Master Loan Agreement, or the MLA, and

supplement to the MLA, in which CoBank will make a single loan to Artesian

Water Maryland in a principal amount not to exceed $10 million.

Artesian Water Maryland agrees to pay

interest on the unpaid principal balance of the loans at 6.14% per annum.

Interest shall be calculated and paid

quarterly in arrears on the thirtieth (30th) day of each of March, June,

September and December.

Artesian Water Maryland

agrees to repay the loan in eighty consecutive quarterly installments, each due

on the thirtieth (30th) day of each March, June, September, and December, with

the first installment due on June 30, 2026, and the last installment due on

March 13, 2046.

The amount of each

installment shall be the same principal amount that would be required to be

repaid if the loan was scheduled to be repaid in level installments of

principal and interest and such schedule was calculated utilizing 6.14% as the

rate accruing on the loan;

provided, however, that the last installment of the

loan shall be in an amount equal to the then unpaid principal balance of the

Closing on the debt financing was

approved by the Maryland Public Service Commission on March 2, 2026.

The asset purchase

12 unchanged sentences

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

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

In August 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.

Pursuant to the agreement, the

expected total expenditure for the three years is $2.5 million.

In order to control

2 unchanged sentences

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

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.

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.

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

The fixed rate was increased

5.5% starting in November 2025.

fixed rate electric supply contracts are for normal purchases and are not

derivative instruments.

Critical Accounting Estimates;

3 unchanged sentences

Actual amounts or results could differ from those based on such assumptions and estimates.

Our critical accounting estimates are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2024.

Management has reviewed our

financial policies and determined that there are no critical accounting

estimates requiring disclosure, as further described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2025.

There have been no changes in our critical accounting estimates.

1 unchanged sentence

Information concerning our implementation and the impact of recent accounting pronouncements issued by the FASB is included in the notes to our 2025 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2025 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 nine 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 three months of 2026 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