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Item 1. Financial Statements

2026-08-12 compared with 2026-05-08 · 617 added, 331 removed, 664 unchanged (59% of the section changed)

3 unchanged sentences

(In thousands)

ASSETS March 31, 2026 December 31, 2025

ASSETS June 30, 2026 December 31, 2025

Utility plant, at original cost (less accumulated depreciation - 2026- $ 208,603 ;

36 unchanged sentences

Customer and other deposits 3,758 3,474

Reserve for customer refund 2,248 394

Other 2,630 1,976

14 unchanged sentences

(In thousands, except per share amounts)

For the Three Months Ended

For the Three Months Ended For the Six Months Ended

June 30, June 30,

2026 2025 2026 2025

Operating revenues

11 unchanged sentences

Operating income 8,615 7,855 14,890 13,400

Other income, net

Allowance for funds used during construction (AFUDC) 260 619 759 1,186

Miscellaneous income 1,388 1,489

Miscellaneous (expense) income 44 ( 29 ) 1,431 1,459

Income before interest charges 8,919 8,445 17,080 16,045

12 unchanged sentences

(In thousands)

For the Three Months Ended

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

21 unchanged sentences

Accrued expenses 972 ( 1,272 )

Reserve for customer refund 1,854 -

Accrued interest 25 ( 37 )

20 unchanged sentences

(In thousands)

For the Three Months Ended

NET INCREASE IN CASH AND CASH EQUIVALENTS $ 4,203 $ 2,560

For the Six Months Ended

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS $ 9,752 $ ( 798 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 52 1,147

1 unchanged sentence

Supplemental Disclosures of Cash Flow Information:

For the Three Months Ended

For the Six Months Ended

Non-cash Investing and Financing Activity:

Utility plant received as construction advances and contributions in aid of construction $ 4,388 $ 4,774

Contractual amounts of contributions in aid of construction due from developers included in accounts receivable and due from class action settlement funds included in other deferred assets (See Note 15 – Legal Proceedings) $ 1,835 $ 216

Utility plant received as contributions in aid of construction $ 7,681 $ 7,111

Contractual amounts of contributions in aid of construction due from developers included in accounts receivable and class action settlement funds included in accounts receivable and other deferred assets (See Note 15 – Legal Proceedings) $ 171 $ -

Change in amounts included in accounts payable, accrued payables and other related to capital expenditures $ ( 814 ) $ ( 2,335 )

7 unchanged sentences

(In thousands)

Common Shares Outstanding Common Shares Outstanding $ 1 Par Value $1 Par Value

Class A Non-Voting (1) (3) (4) Class B Voting (2) Class A Non-Voting Class B Voting Additional Paid-in Capital Retained Earnings Total

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

7 unchanged sentences

Balance as of March 31, 2025 9,422 881 $ 9,422 $ 881 $ 144,047 $ 87,300 $ 241,650

Common Shares Outstanding Common Shares Outstanding $1 Par Value $1 Par Value

Class A Non-Voting (1) (3) (4) Class B Voting (2) Class A Non-Voting Class B Voting Additional Paid-in Capital Retained Earnings Total

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

Balance as of December 31, 2025 9,435 881 $ 9,435 $ 881 $ 144,492 $ 95,114 $ 249,922

7 unchanged sentences

Balance as of March 31, 2026 9,437 881 $ 9,437 $ 881 $ 144,668 $ 97,812 $ 252,798

At March 31, 2026 and March 31, 2025, Class A Non-Voting Stock had 15,000,000 shares authorized.

Net income - - - - - 6,575 6,575

Cash dividends declared - -

Common stock - - - - - ( 3,302 ) ( 3,302 )

Issuance of common stock

Dividend reinvestment plan 3 - 3 - 85 - 88

Employee stock options and awards(4) 6 - 6 - 71 - 77

Employee Retirement Plan(3) - - - - - - -

Balance as of June 30, 2026 9,446 881 $ 9,446 $ 881 $ 144,824 $ 101,085 $ 256,236

At June 30, 2026 and June 30, 2025, Class A Non-Voting Stock had 15,000,000 shares authorized.

For the same periods, shares issued, inclusive of 28,970

1 unchanged sentence

respectively.

At March 31, 2026 and March 31, 2025, Class B Voting Stock had 1,040,000 shares authorized and 881,452 shares issued.

At June 30, 2026 and June 30, 2025, Class B Voting Stock had 1,040,000 shares authorized and 881,452 shares issued.

Artesian Resources Corporation registered 200,000 shares of Class A Non-Voting Stock, subsequently adjusted for stock splits, available for purchase through the Company’s 401(k) retirement plan.

6 unchanged sentences

2025 Plan replaces the 2015 Plan, and outstanding grants under the 2015 Plan

shall continue in effect according to their terms, consistent with the 2015 Plan.

Includes stock compensation expense for March 31, 2026 and March 31, 2025.

shall continue in effect according to their terms, consistent with the 2015

Includes stock compensation expense for June 30, 2026 and June 30, 2025.

See Note 8 – Stock Compensation Plans .

2 unchanged sentences

NOTE 1 – GENERAL

Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all our wholly-owned subsidiaries.

The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.

Artesian Resources

Corporation, or Artesian Resources, includes income from the earnings of all 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, our principal subsidiary,

distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware.

Artesian Water Company, Inc., or Artesian Water, our principal subsidiary, 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.

Artesian Wastewater

Management, Inc., or Artesian Wastewater, operates as the

parent holding company of Tidewater Environmental Services, Inc.

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.

In July 2026, Artesian

Wastewater filed a Certificate of Ownership and Merger with the Secretary of

State of the State of Delaware, pursuant to which TESI was merged with and into

Artesian Wastewater.

This internal

corporate restructuring had no effect on the condensed consolidated financial

statements of the Company, as the accounts of both entities were already fully

consolidated in the Company's financial reporting.

MARYLAND REGULATED UTILITY SUBSIDIARIES

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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 mgd.

The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.

Artesian Utility currently

operates three wastewater treatment facilities with a combined capacity of up to

approximately 3.8 mgd for the Town of Middletown, in southern New Castle

County, Delaware, or Middletown, under a 20 -year contract that expires in July

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

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The unaudited 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 March 31, 2026, the results of its operations for the three-month periods ended March 31, 2026 and March 31, 2025, its cash flows for the three-month periods ended March 31, 2026 and March 31, 2025 and the changes in stockholders’ equity for the three month-periods ended March 31, 2026 and March 31, 2025.

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 June 30, 2026, the results of its operations for the three and six-month periods ended June 30, 2026 and June 30, 2025, its cash flows for the six-month periods ended June 30, 2026 and June 30, 2025 and the changes in stockholders’ equity for the three and six-month periods ended June 30, 2026 and June 30, 2025.

The December 31, 2025 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2025 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.

Reclassification

Certain accounts in the

prior year financial statements have been reclassified for comparative purposes

to conform with the presentation in the current year financial statements.

These reclassifications had no effect on net

income or stockholders' equity.

Regulated Utility Accounting

15 unchanged sentences

subsidiaries account for the majority of our operating revenue.

See Note 16 – Business Segment Information to our Unaudited Condensed Consolidated Financial Statements for a full description of our segment information.

of Estimates in the Preparation of Unaudited Condensed Consolidated Financial Statements

The unaudited 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.

See Note 16 –

Business Segment Information to our Unaudited Condensed Consolidated Financial

Statements for a full description of our segment information.

of Estimates in the Preparation of

Unaudited Condensed Consolidated Financial Statements

The unaudited 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, reserve for revenues associated

with temporary rates expected to be refunded, accounting for income taxes, credit losses and reserves for bad debt, lease agreements, goodwill and contingent assets and liabilities.

Management makes certain estimates and

assumptions regarding unbilled revenues, reserve for revenues associated with temporary

rates expected to be refunded, accounting for income taxes, credit losses and

reserves for bad debt, lease agreements, goodwill and contingent assets and

Utility Plant

20 unchanged sentences

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 1.91 % and 1.91 % for March 31, 2026 and December 31, 2025, respectively.

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.

Composite depreciation rates for water utility plant were 1.91 %, and 1.91 % for June 30, 2026 and December 31, 2025, respectively.

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.

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

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.

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.

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

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.

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.

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 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

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:

previous year’s consumption in the same period, the previous billing period’s

consumption, or averaging.

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

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,

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

Artesian generates revenue

from metered wastewater services provided to customers in Sussex County,

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

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.

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.

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

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.

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.

15 unchanged sentences

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.

refund of revenue associated with temporary rates will occur, a reserve is recorded reducing revenue from temporary rates.

The DEPSC approved and Artesian Water

implemented temporary rate increases effective June 3, 2025 and November 6,

As of March 31, 2026, approximately $ 1.0 million of

the revenue from the November 6, 2025 temporary rate increase was recorded as a

reserve for refund and is included in other current

liabilities in the Condensed Consolidated Balance Sheets.

Temporary rates that

were previously effective as of November 28, 2023 were replaced with final

rates approved by the DEPSC effective June 12, 2024, with no reserve or

reduction to previously recorded revenue.

As of June 30, 2026, approximately

$ 2.2 million of the revenue from the November 6, 2025 temporary rate increase

was recorded as a reserve for customer refund in the Condensed Consolidated Balance Sheets.

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.

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

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.

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.

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.

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

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.

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.

Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract.

1 unchanged sentence

These services are invoiced at the end of every month based on incurred costs to date.

As of December 31, 2025, there is no associated contract asset or liability.

As of June 30, 2026, there is no associated contract asset or liability.

There is no provision for expected credit loss or bad debt expense associated with this revenue.

10 unchanged sentences

all revenues are generated within a similar geographical location:

For the Three Months

Ended March 31,

For the Three Months For the Six Months

Ended June 30, Ended June 30,

(in thousands) 2026 2025 2026 2025

3 unchanged sentences

Service charges 228 178 382 359

DSIC - 235 - 534

Metered wastewater services 203 213 345 400

11 unchanged sentences

Our contract assets and liabilities consist of the following:

(in thousands) March 31, 2026 December 31, 2025

(in thousands) June 30, 2026 December 31, 2025

Contract Assets – Tariff $ 4,041 $ 3,265

3 unchanged sentences

Total Deferred Revenue $ 2,285 $ 2,171

For the three months ended March 31, 2026, the Company recognized revenue of $ 1.6 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $ 0.4 million from amounts that were included in Deferred Revenue – Non-Tariff at the beginning of the year.

For the six months ended June 30, 2026, the Company recognized revenue of $ 1.6 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $ 0.4 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 March 31, 2026 and December 31, 2025, Deferred Revenue – Tariff is recorded

As of June 30, 2026 and December 31, 2025, Deferred Revenue – Tariff is recorded

partially within Unbilled operating revenues net against contract assets

3 unchanged sentences

which are expected to be satisfied and associated revenue recognized in the

next three months .

As of March 31, 2026 and December 31, 2025, 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.

next six months .

As of June 30, 2026 and December 31, 2025, 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 six months , approximately four years and one year , respectively.

NOTE 4 – ACCOUNTS RECEIVABLE

2 unchanged sentences

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

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.

settlement receivable as of March 31, 2026 includes the short-term portion of multi-district litigation, MDL, reimbursements as further discussed in Note 15 - Legal Proceedings .

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.

The reduction in the water

customer accounts receivable balance as of December 31, 2025 is the result of a

one-time bill credit that was applied to Artesian Water’s customer bills in

December 2025 related to MDL settlement funds received as further discussed in

Note 15 – Legal Proceedings.

(in thousands) March 31, 2026 December 31, 2025 December 31, 2024

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.

The settlement receivable as of June 30,

2026 includes the short-term portion of multi-district litigation, MDL,

reimbursements as further discussed in Note 15 - Legal Proceedings.

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.

The reduction in the water customer accounts receivable balance as of

December 31, 2025 is the result of a one-time bill credit that was applied to

Artesian Water’s customer bills in December 2025 related to MDL settlement

funds received as further discussed in Note 15 – Legal Proceedings.

(in thousands) June 30, 2026 December 31, 2025 December 31, 2024

Customer accounts receivable – water $ 8,333 $ 4,366 $ 6,824

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The Company leases land and office equipment under operating leases from non-related parties.

Our leases have remaining lease terms of 2 years to 71 years, one of which includes options to automatically extend the leases for up to 66 years and is included as part of the lease liability and right-of-use assets as we expect to exercise the options.

Payments made under operating leases are recognized in the condensed consolidated statement of operations on a straight-line basis over the period of the lease.

The annual lease payment for the 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.

Our leases have remaining lease terms of 2 years to 70 years, one of which includes

options to automatically extend the leases for up to 66 years and is included

as part of the lease liability and right-of-use assets as we expect to exercise

Payments made under

operating leases are recognized in the condensed consolidated statement of

operations on a straight-line basis over the period of the lease.

The annual lease payment for the 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.

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.

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Rent expense for all operating leases, except those with terms of 12 months or less, comprises:

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

(in thousands) 2026 2025 2026 2025

Three Months Ended Three Months Ended

March 31, 2026 March 31, 2025

Minimum rentals $ 2 $ 2 $ 4 $ 4

Contingent rentals - - - -

$ 2 $ 2 $ 4 $ 4

Supplemental cash flow information related to leases is as follows:

(in thousands)

Three months ended Three months ended

March 31, 2026 March 31, 2025

Six months ended Six months ended

June 30, 2026 June 30, 2025

Cash paid for amounts included in the measurement of lease liabilities:

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(in thousands, except lease term and discount rate)

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Operating Leases:

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Operating leases 5.0 % 5.0 %

Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2026 are as follows:

Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2026 are as follows:

(in thousands)

4 unchanged sentences

Total lease liabilities recognized $ 412

As of March 31, 2026, we have not entered into operating or finance leases that will commence at a future date.

As of June 30, 2026, we have not entered into operating or finance leases that will commence at a future date.

NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS

2 unchanged sentences

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 Level 1.

Under the fair value hierarchy, the fair value of such financial instruments is classified as a Level 1.

Other Deferred Assets

deferred assets associated with the MDL class action settlement reimbursements,

as further discussed in Note 15 – Legal Proceedings, has a carrying amount of

$ 2.6 million as of both March 31, 2026

and December 31, 2025, which approximates fair value, and was

recorded at amortized cost using an estimated market discount rate.

The fair value of this non-current receivable

is classified as Level 3.

The other deferred assets

associated with the MDL class action settlement reimbursements, as further discussed

in Note 15 – Legal Proceedings, has a carrying amount of $ 2.1 million as of June

30, 2026 and $ 2.6 million as of December 31, 2025, which approximates fair

value, and was recorded at amortized cost using an estimated market discount

The fair value of this non-current

receivable is classified as Level 3.

Long-term Financial Liabilities

As of March 31, 2026 and December 31, 2025, all of the Company’s outstanding long-term debt interest rates were a fixed rate.

As of June 30, 2026 and December 31, 2025, 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.

4 unchanged sentences

(in thousands)

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Carrying amount $ 185,076 $ 176,408

5 unchanged sentences

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 unaudited 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

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 unaudited 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

The Company establishes

reserves for uncertain tax positions based upon management's judgment as to the

sustainability of these positions.

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of its income tax expense.

For the full year 2025, the Company accrued approximately $ 22 thousand in penalties and interest related to positions taken on the 2022 and 2024 corporate income tax return.

For the three months ended March 31, 2026, the Company has accrued approximately $ 6 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 2025 .

For the full year 2025, the

Company accrued approximately $ 22 thousand in penalties and interest related to

positions taken on the 2022 and 2024 corporate income tax return.

months ended June 30, 2026, the Company has accrued approximately $ 12 thousand

in penalties and interest related to positions taken on the 2022 and 2024

corporate income tax return.

remains subject to examination by federal and state authorities for the tax

years 2022 through 2025 .

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.

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The 2025 Plan is

administered and interpreted by the Compensation Committee of the Board of

Directors, or the Committee.

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.

directors of the Company are also eligible to receive grants under the 2025

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.

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 May 5, 2026, 4,000 shares

of Class A Non-Voting Stock were granted as restricted stock awards.

The fair value per share was $ 31.41 , the

closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global

Select Market on May 5, 2026.

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 September 16, 2025,

1 unchanged sentence

The fair value per share was $ 32.08 , the

closing price of the Class A Non-Voting 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

On July 1, 2025, 1,000 shares of Class A Non-Voting Stock were granted as a restricted stock award.

The fair value per share was $ 33.96 , the closing price of the Class A Non-Voting 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.

On May 5, 2025, 4,000 shares

of Class A Non-Voting Stock were granted as

restricted stock awards.

The fair value

per share was $ 34.27 , the closing price of the Class A Non-Voting Stock as recorded on the

closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global

Select Market on September 16, 2025.

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 Non-Voting Stock were granted as a restricted stock

The fair value per share was $ 33.96 ,

the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq

Global Select Market on July 1, 2025.

This restricted stock award was fully vested and released May 5,

On May 5, 2025, 4,000

shares of Class A Non-Voting Stock were granted as restricted stock

The fair value per share was

$ 34.27 , the closing price of the Class A Non-Voting 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

On April 11, 2025, 1,000 shares of Class A Non-Voting Stock were granted as a restricted stock award.

The fair value per share was $ 33.51 , the closing price of the Class A Non-Voting 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.

Compensation expense of approximately

$ 92 thousand, related to the April, May, July and September 2025 issue of

restricted stock awards, was recorded for the three months ended March 31, 2026.

Compensation expense of approximately $ 46

thousand, related to the May 2024 issue of restricted stock awards, was

recorded for the three months ended March 31, 2025.

These restricted stock awards were fully vested and released one year

after the grant date.

On April 11, 2025, 1,000

shares of Class A Non-Voting Stock were granted as a restricted stock

The fair value per share was

$ 33.51 , the closing price of the Class A Non-Voting Stock as recorded on the

Nasdaq Global Select Market on April 11, 2025.

This restricted stock award was fully vested and released one year

after the grant date.

Compensation expense of

approximately $ 77 thousand and $ 169 thousand, was recorded for the three and

six months ended June 30, 2026, respectively, for restricted awards issued in

April, May, July, September 2025 and May 2026.

Compensation expense of approximately $ 47 thousand and $ 92 thousand was

recorded for the three and six months ended June 30, 2025, respectively, for

restricted stock awards issued in May 2024, April 2025, and May 2025.

Costs were determined based on the fair value

2 unchanged sentences

There was no stock compensation cost capitalized as part of an asset.

There were no options exercised during the three months ended March 31, 2026.

There were no unvested option shares outstanding under the 2025 Plan during the three months ended March 31, 2026.

As of March 31, 2026, there were no unrecognized expenses related to non-vested option shares granted under the 2025 Plan.

As of March 31, 2026, there was approximately $ 91 thousand total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2025 Plan.

There were no options exercised during the six months ended June 30, 2026.

There were no unvested option shares outstanding under the 2025 Plan during the six months ended June 30, 2026.

As of June 30, 2026, there were no unrecognized expenses related to non-vested option shares granted under the 2025 Plan.

As of June 30, 2026, there was approximately $ 140 thousand total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2025 Plan.

The cost will be recognized over 0.69 years, the remaining vesting period for the restricted stock awards.

1 unchanged sentence

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 March 31, 2026, Artesian Water was serving approximately 99,500 customers, Artesian Water Maryland was serving approximately 2,700 customers and Artesian Water Pennsylvania was serving approximately 40 customers.

As of June 30, 2026, Artesian Water was serving approximately 100,000 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 March 31, 2026, Artesian Wastewater and TESI were serving approximately 9,300 customers combined, including one large industrial customer.

As of June 30, 2026, Artesian Wastewater and TESI were serving approximately 9,400 customers combined, including one large industrial customer.

NOTE 10 – OTHER DEFERRED ASSETS

3 unchanged sentences

underlying long-term debt agreements .

settlement agreement receivable is related to the long-term portion of MDL class action settlement reimbursements, as

further discussed in Note 15 - Legal Proceedings, and is recorded at amortized

cost, with the difference between the carrying amount and the amortized cost

recognized as CIAC.

(in thousands) March 31, 2026 December 31, 2025

settlement agreement receivable is related to the long-term portion of MDL

class action settlement reimbursements, as further discussed in Note 15 - Legal

Proceedings, and is recorded at amortized cost, with the difference between the

carrying amount and the amortized cost recognized as CIAC.

(in thousands) June 30, 2026 December 31, 2025

Investment in CoBank $ 7,351 $ 6,889

3 unchanged sentences

NOTE 11 - REGULATORY ASSETS

ASC 980, Regulated Operations, stipulates generally accepted accounting principles for companies whose rates

are established or subject to approvals by a third-party regulatory

ASC 980, Regulated

Operations, stipulates generally accepted accounting principles for companies

whose rates are established or subject to approvals by a third-party regulatory

Certain expenses are recoverable

3 unchanged sentences

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.

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.

15 unchanged sentences

the third quarter of 2024.

expenses amortized on a straight-line basis are noted below:

Regulatory expenses amortized on a straight-line basis are noted below:

Years Amortized

12 unchanged sentences

(in thousands)

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Deferred contract costs and other $ 151 $ 109

11 unchanged sentences

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.

ASC 980, Regulated

Operations, stipulates generally accepted accounting principles for companies

whose rates are established or subject to approvals by a third-party regulatory

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 income taxes

17 unchanged sentences

(in thousands)

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Utility plant retirement cost obligation $ 174 $ 107

7 unchanged sentences

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.

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.

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

Any DSIC rate in effect will

be reset to zero upon implementation of a temporary increase in base rates

charged to customers.

temporary increase is permitted sixty days after the rate case filing date up

to the lesser of $ 2.5 million on an annual basis or 15 % of gross water

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.

Effective July 13, 2026, temporary rate regulation in Delaware changed for

public utilities replacing the two temporary rates with three as follows:

days after the filing date, temporary rates are allowed up to the lesser of

$ 2.5 million on an annual basis or 15 % of gross water sales;

(2) seven months

after the filing date, temporary rates are allowed at 50 % of the proposed rate

change, up to 15 % of gross water sales;

(3) twelve months after the filing date,

temporary rates are allowed at 75 % of the proposed rate change, up to 15 % of

gross water sales.

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.

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.

On April 4, 2025, Artesian

1 unchanged sentence

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

Supplemental and rebuttal

filings were subsequently filed, reducing the

requested increase to 10.2 %, or approximately $ 9.0 million, on an annualized

The actual effective increase would be less than 10.2 % if the requested

increase is granted in full by the DEPSC since Artesian Water has been

permitted to recover specific investments made in infrastructure through the

assessment of a 1.66 % DSIC rate, which rate is set to zero once temporary rates

are placed into effect.

Temporary rates

were placed into effect as noted below.

Supplemental and rebuttal filings

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

approximately $ 9.0 million, on an annualized basis.

The actual effective

increase would be less than 10.2 % if the requested increase is granted in full

by the DEPSC since Artesian Water has been permitted to recover specific

investments made in infrastructure through the assessment of a 1.66 % DSIC rate, which rate is set to zero once temporary rates are

placed into effect.

Temporary rates were

placed into effect as noted below.

The new proposed rates are designed to

8 unchanged sentences

Also, as permitted by law, on

November 6, 2025 Artesian Water placed into effect a second step of temporary rates

designed to generate an increase in annual operating revenue of approximately

6.82 %, or $ 5.8 million, on an annualized basis, until permanent rates are

determined by the DEPSC.

As of March 31, 2026, a pproximately

$ 1.0 million of the revenue from the second step of temporary rates was recorded

as a reserve for refund and is included in Other current

liabilities in the Condensed Consolidated Balance Sheets.

November 6, 2025, Artesian Water placed into effect a second step of temporary

rates designed to generate an increase in annual operating revenue of

approximately 6.82 %, or $ 5.8 million, on an annualized basis, until permanent

rates are determined by the DEPSC.

As of June 30, 2026,

approximately $ 2.2 million of the revenue from the

second step of temporary rates was recorded as a reserve for refund.

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 applications with the DEPSC to collect DSIC rates and (2) rate upon which each eligible plant improvement was based:

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 applications with the DEPSC to collect DSIC

rates and (2) rate upon which each eligible plant improvement was based:

Application Date 11/22/2024

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infrastructure through the assessment of a 1.66 % DSIC.

The January 1, 2025 DSIC rate is still subject

to audit by the DEPSC.

The January 1,

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placed into effect on June 3, 2025.

For the three months ended March 31, 2026, we

did no t report any earnings in DSIC revenue.

For the three months ended March

31, 2025, we earned approximately $ 0.3 million in DSIC revenue.

For the three and six months ended June 30,

2026, we did not report any earnings in DSIC revenue.

For the three and six

months ended June 30, 2025, we earned approximately $ 0.2 million and $ 0.5

million, respectively, in DSIC revenue.

NOTE 14 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

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The following table summarizes the shares used in computing basic and diluted net income per share:

For the Three Months Ended

(in thousands)

Three Months Ended Six Months Ended

June 30, June 30,

2026 2025 2026 2025

(in thousands) (in thousands)

Weighted average common shares outstanding during the period for basic computation 10,325 10,308 10,321 10,305

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Weighted average common shares outstanding during the period for diluted computation 10,330 10,310 10,327 10,308

the three months ended March 31, 2026, no shares of restricted stock awards

were excluded from the calculations of diluted net income per share.

For the three months

ended March 31, 2025, no stock options were excluded from the calculations of

diluted net income per share.

the three and six months ended June 30, 2026, no shares of restricted stock

awards were excluded from the calculations of diluted net income per share.

For the three and six

months ended June 30, 2025, 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 Non-Voting Stock and 1,040,000 authorized shares of Class B Voting Stock.

As of March 31, 2026, 9,436,952 shares of Class A Non-Voting Stock and 881,452 shares of

Class B Voting Stock were issued and outstanding.

As of March 31, 2025, 9,421,542 shares

of Class A Non-Voting Stock and 881,452 shares of Class B Voting Stock were

issued and outstanding.

As of June 30, 2026, 9,445,658 shares of Class A Non-Voting Stock and 881,452 shares of Class B Voting Stock were issued and outstanding.

As of June 30, 2025, 9,429,077 shares of Class A Non-Voting Stock and 881,452 shares of Class B Voting Stock were issued and outstanding.

The par value for both classes is $ 1.00 per share.

Equity per common share was $ 24.50 and $ 24.24 at March 31, 2026 and December 31, 2025, respectively.

These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on March 31, 2026 and December 31, 2025, 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.

Periodically, we are

involved in other proceedings or litigation arising in the ordinary course of

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 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”);

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,

systems of Artesian Resources’ subsidiaries are claimants in four 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

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,

(collectively, “DuPont”);

(3) Tyco Fire Products LP and Chemguard, Inc.

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approximately $ 5.1 million to be paid over eight years .

In December 2025, the

Company received the full DuPont settlement award payment of approximately $ 1.3

In December 2025, the Company received the

full DuPont settlement award payment of approximately $ 1.3 million.

In April 2026, the Company received

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$ 0.5 million in settlement payments from BASF.

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.

DEPSC approved the return of $ 7.2 million received from 3M to Artesian Water’s

customers through a one-time bill credit, which was applied to customers’ bills

in December 2025.

The DEPSC also

approved the regulatory treatment of the settlement amounts for DuPont, the

Tyco Defendants and BASF and the remaining settlement amounts for 3M to be

In June 2026, the Company received the next scheduled payment due from

3M in the amount of $ 2.0 million.

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 approved the return of $ 7.2 million received from 3M to

Artesian Water’s customers through a one-time bill credit, which was applied to

customers’ bills in December 2025.

DEPSC also approved the regulatory treatment of the settlement amounts for DuPont,

the Tyco Defendants and BASF and the remaining settlement amounts for 3M to be

recorded as CIAC.

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 consisting mainly of $ 2.7 million in unabsorbed office overhead, $ 0.1 million in end-of-job direct costs and $ 0.6 million in change

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.

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

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 consisting mainly of $ 2.7 million in unabsorbed office overhead, $ 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

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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 consolidated amounts as of March 31, 2026 and March 31, 2025.

Three Months Ended March 31,

These amounts in our non-utility business are negligible and account for approximately less than 1% of consolidated amounts as of June 30, 2026 and June 30, 2025.

Three Months Ended June 30,

Regulated Utility Total Regulated Utility Total

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Consolidated operating income $ 8,615 $ 7,855

Six Months Ended June 30,

Regulated Utility Total Regulated Utility Total

Regulated Utility Revenues $ 54,409 $ 54,409 $ 50,768 $ 50,768

Reconciliation of revenue

Other revenues 4,152 (a) 3,795 (a)

Inter-segment elimination ( 124 ) ( 128 )

Consolidated revenues $ 58,437 $ 54,435

Payroll and Benefits (c) 13,418 12,394

Supply and Delivery (d) 8,122 7,521

Administrative (e) 5,173 5,043

Depreciation and Amortization 6,946 6,745

Income Taxes 3,785 3,450

Property and other taxes 3,114 3,253

Regulated Utility Operating Income $ 13,851 $ 13,851 $ 12,362 $ 12,362

Reconciliation of operating income

Other profit 1,039 (a) 1,038 (a)

Consolidated operating income $ 14,890 $ 13,400

June 30, 2026 December 31, 2025

Regulated Utility Total Regulated Utility Total

Regulated Utility Assets $ 870,603 $ 870,603 $ 846,820 $ 846,820

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– This category includes purchased power, purchased water, chemicals, infrastructure maintenance and repair costs, and wastewater disposal fees

(e) Administration expense:

(e) Administrative:

– This category includes computer systems maintenance and subscription fees, audit and legal fees, insurance, customer billing, and other general and administrative expenses

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and related disclosures.

In December 2025, the FASB

issued guidance to enhance, clarify, and streamline interim disclosure

requirements, emphasizing events and material changes that have occurred since

the most recent annual reporting period.

The amendments are effective for the Company for interim reporting

periods within annual reporting periods beginning after December 15, 2027, with

early adoption permitted.

The Company is

required to apply the amendments in its interim reporting starting with the

first quarter of fiscal year 2028.

guidance may be adopted prospectively or retrospectively.

The Company is currently evaluating the

impact of this new guidance, which may alter the structure of our interim

financial statement disclosures.

2025, the FASB issued guidance to enhance, clarify, and streamline interim

disclosure requirements, emphasizing events and material changes that have

occurred since the most recent annual reporting period.

The amendments are effective for the Company

for interim reporting periods within annual reporting periods beginning after

December 15, 2027, with early adoption permitted.

The Company is required to apply the

amendments in its interim reporting starting with the first quarter of fiscal

The guidance may be adopted

prospectively or retrospectively.

Company is currently evaluating the impact of this new guidance, which may

alter the structure of our interim financial statement disclosures.

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

What changed 10-Q

Item 1. Financial Statements