ARTNA 10-K & 10-Q changes, risk factors and insider trading

While we maintain an extensive qualification and performance review system to control risk associated with such reliance on third parties, failure of suppliers or independent contractors to meet commitments could adversely affect construction and maintenance schedules and our results of operations and financial condition. We have been affected and could continue to be further affected, by supplier delays and increased costs, due to the impacts of inflation, tariffs, recession, wars and international conflicts, and/or other macroeconomic factors, which are outside of our control and could affect our results of operations. We are also dependent on the availability of electricity and purchased water at affordable prices. While our electricity costs and purchased water costs are at fixed prices under contracts, after the expiration of these contracts, we may be required to pay higher electricity costs and purchased water costs.

As a regulated utility, we are subject to regulation at the federal, state and local level. We have made significant capital expenditures to adhere to regulations imposed by such authorities and expect to continue to make capital expenditures in the future to adhere to such regulations. Changes in local, state or federal administrative policy or priorities could affect the possible interpretation of existing regulations or such authorities may impose new rules and regulatory requirements. New administrations could also eliminate proposed rules and reverse final policies of prior administrations, which could lead to conflict between federal and state regulations and regulatory uncertainty, which could cause us to reevaluate our strategic priorities and capital expenditures or otherwise impact our business operations. The impact of any regulatory requirement changes areis unpredictable, and could materially and adversely affect our business, financial position and results of operations.

We may be adversely affected by global climate changevariability or by regulatory, legal or market responses to such change.

WeClimate variability may experience substantialcause negative impacts to our business if an unexpectedly severe weather event or natural disaster damages our facilities and/or operations or those of our suppliers or independent contractors in our service areas, or from the unintended consequences of regulatory changes that directly or indirectly impose substantial restrictions on our activities or adaptation requirements. Potential climate variability challenges include the following: increased frequency and duration of droughts, increased precipitation and flooding, increased frequency and severity of storms and other weather events, potential degradation of water quality, unexpected changes in temperature, possible increases in ocean levels, disruptions in water or wastewater services to our customers, decreases in available water supply, extreme changes in water usage patterns,patterns and related revenue, increases in expenditures to repair any damages, increases in costs to reduce risks associated with significant weather events or natural disasters, and increases in costs to improve the reliability of our water and wastewater systems and facilities. Due to the uncertainty of weather volatility related to climate variability, we cannot predict its potential impact on our financial condition, results of operations, cash flows and liquidity. Although some or all potential expenditures and costs with respect to our regulated businesses could be recovered through rates we charge to our customers, there can be no assurance that the applicable regulatory authority would authorize recovery of such costs, in whole or in part, for any of these impacts.

We rely on governmental approvals in the States of Delaware and Maryland and the Commonwealth of Pennsylvania, as wellsuch as approvals from the Delaware River Basin Commission and Susquehanna River Basin Commission for applicable water allocation, water appropriation and water capacity permits. In addition, we rely on governmental approvals in the State of Delaware for applicable wastewater collection, treatment and disposal permits for the operation of our wastewater facilities.

We are subject to various federal, state, and local laws and regulations relating to environmental protection, including the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes. Our water and wastewater services are governed by various federal and state environmental protection and health and safety laws and regulations, including, among others, the federal Safe Drinking Water Act, the Clean Water Act, the LCRLead and Copper Rule and other federal and state laws. These federal and state regulations are issued by the EPA and state environmental regulatory agencies. Pursuant to these laws and regulations, we are required to obtain various water allocation permits and environmental permits for our operations. The water allocation permits control the amount of water that can be drawn from water resources. New or stricter water allocation regulations can adversely affect our ability to meet the demands of our customers. While we have budgeted for future capital and operating expenditures to maintain compliance with these laws and our permits, it is possible that new or stricter standards would be imposed that will raise our operating costs and capital expenditures. Thus, we can provide no assurances that our costs of complying with, or discharging liability under, current and future environmental and health and safety laws will not adversely affect our business, results of operations or financial condition.

We could be adversely impacted by macroeconomic factors outside of our control, including but not limited to inflation, interest rates, tariffs, trade wars, wars and international conflicts, and/or recession.

We have been affected and could continue to be affected by increased costs for items such as, among others, materials for capital expenditures, fuel, and treatment chemicals, due to the impacts of inflation. If inflation increases significantly, as a result of increased interest rates, tariffs, trade wars, wars and international conflicts, or otherwise, we may seek to increase our rates charged to customers. We can provide no assurances that any future rate increase request will be approved by the applicable regulatory authority, and if approved, we cannot guarantee that any rate increase will be granted in a timely manner and/or will be sufficient in amount to cover costs for which we initially sought the rate increase. The impact of such inflationary pressure could adversely affect our results of operations, financial position or cash flows.

We also may experience risks relating to the challenges and costs of closing a transaction and the risk that an announced transaction may not close. Completion of certain acquisition transactions are conditioned upon, among other things, the receipt of approvals, including from certain state public utilities commissions. The timeliness and outcome of those state public utilities commissionscommissions' decisions could hinder future acquisitions and any failure to complete a pending transaction would prevent us from realizing the anticipated benefits. We would also remain liable for significant transaction costs, including legal and accounting fees, whether or not the transaction is completed.

Our Company from time to time could be partiesparty to or our operations targets of, lawsuits, claims, investigations and proceedings, including system failure, injury, contract, environmental, health and safety and employment matters, which are handled and defended in the ordinary course of business. The results of any future litigation or settlement of such lawsuits and claims are inherently unpredictable, but such outcomes could also materially and adversely affect our business, financial position and results of operations.

We rely on our information technology systems to manage operation of our business. Specifically, our business relies on various technology systems, including but not limited to those associated with customer information, financial reporting, asset and inventory management, facility operations and monitoring ,monitoring, human resources and accounts receivable. Such systems require periodic modifications, upgrades or replacement that subject us to inherent costs and risks, including substantial capital expenditures, additional administration and operating expenses, and other risks and costs of delays in transitioning to new systems or of integrating new systems into our current systems. Our computer and communications systems and operations could be damaged or interrupted by natural disasters, power loss, telecommunications failures, human error orerror, acts of war orwar, terrorism, international conflict, sabotage, theft or similar events or disruptions. A loss of these systems or major problems with the operation of these systems could affect our operations and have a material adverse effect on our business and results of operations.

Cyberattacks on utility companies have been increasing in recent years, with recent reports that at least one U.S. water utility has experienced widespread outages as a result of such an attack.years. To date, there have been no risks identified from cybersecurity threats or previous cybersecurity incidents that have materially affected or are reasonably likely to materially affect the company. Despite our efforts, a cyberattack, if it occurred, could cause water or wastewater system operational complications, disrupt service to our customers, compromise important data or systems or result in an unintended release of customer or other confidential information. Possible impacts associated with a cyberattack could also include remediation costs related to lost, stolen, or compromised data, repairs to information technology and data processing systems, increased cyber security protection costs, adverse effects on our compliance with regulatory and environmental laws and regulations, including standards for water and wastewater utility providers, and litigation. We feel we have adequate cybersecurity insurance coverage to mitigate the cost of any such cyberattack; however, a possible cyberattack could affect our operations and have a material adverse effect on our business and results of operations. We have implemented, and will continue to internally monitor and manage, business processes to support our cybersecurity program. For additional information concerning the Company’s cybersecurity program, see Item 1C - Cybersecurity.

There is a risk that our employees or independent contractors engage in misconduct that adversely affects our business. Misconduct could subject us to regulatory investigations, legal liabilities or penalties and we could suffer harm to our reputation, financial position, and the trading price of our common stock. We also face the risk that our employees engage in work placeworkplace misconduct, despite our implementation of policies and training to prevent and detect misconduct. Such misconduct could negatively harm our reputation or impair our ability to attract and retain qualified, skilled employees. If our employees engage in misconduct, our business could be materially adversely affected.

Artesian Utility provides contract water and wastewater operation services to private, municipal, and governmental institutions. Artesian Utility also offers three protection plans to customers: the WSLP Plan, the SSLP Plan, and the ISLP Plan. SLP Plan customers are billed a flat monthly or quarterly rate, which contributes to providing a revenue stream unaffected by weather. There has been consistent customer growth over the years. As of December 31, 2024,2025, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 3.1%,4.1%, 4.0%2.0% and 2.2%,5.7%, respectively, compared to December 31, 2023.2024. The Company discontinued enrolling new customers in the ISLP Plan, effective January 2026.

In our regulated wastewater subsidiaries, we foresee significant growth opportunities and will continue to seek strategic partnerships and relationships with developers and governmental agencies to complement existing agreements for the provision of wastewater service on the Delmarva Peninsula. There are numerous locations in Sussex County where Artesian Wastewater’s and Sussex County’s facilities are connected or integrated to allow for the movement and disposal of wastewater generated by one or the other’s system in a manner that most efficiently and cost effectively manages wastewater transmission, treatment and disposal. In addition, Artesian Wastewater plans to utilize our larger regional wastewater facilities to expand service areas to new customers while transitioning our smaller treatment facilities into regional pump stations in order to gain additional efficiencies in the treatment and disposal of wastewater. 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 continue 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 ControlDNREC 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 bewas completed byin the thirdfirst quarter of 2025.2026. In February 2026, Artesian Wastewater received a permit from DNREC for construction of the next phase of an additional 625,000 gallon per day regional wastewater treatment facility.

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, sewerwater and internalsewer 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 utility operating revenue increased approximately $0.9$1.5 million, or 7.7%,11.2%, for the year ended December 31, 20242025 compared to the year ended December 31, 2023. 2024. This increase is primarily due to an increase in wastewater revenue associated with ancustomer increase in the number of customers served.growth.

Non-utility operating revenue increased approximately $0.1 $0.7 million, or 1.7%,10.2%, for the year ended December 31, 20242025 compared to the same period in 2023, 2024, primarily due to an increase in SLP Plan revenue, partiallyprimarily offsetthe byresult aof decreasean increase in contractrates servicethat revenuewere relatedplaced into toeffect aon contractDecember for1, 2024 and increase in the design and constructionnumber of wastewatercustomers infrastructure that was mostly completed participating in priorthe years.SLP Plans.

Operating expenses, excluding depreciation and amortization and income taxes, increased $4.1$2.7 million, or 7.3%,4.4%, for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024.

Utility operating expenses increased $3.6$2.6 million, or 7.8%.5.3%. The increase in utility operating expenses consists of a $1.1 million increase in supply and treatment costs, a $0.9 million increase in payroll and employee benefits benefit costs, a $0.5 $0.8 million increase in eachadministrative ofcosts, transmission,a distribution$0.4 million increase in purchased power costs, a $0.4 million increase in supply and collection system costs and administrativetreatment costs, and a $0.3 million increase in purchasedtransmission, power costsdistribution and collection system costs. The increase in utility operating expenses is partially offset by a $0.2$0.1 million increasedecrease in purchased water costs.

Property and other taxes increased $0.2$0.1 million, or 3.6%,1.2%, primarily due to ana increasereassessment and tax rate changes in New Castle County, Delaware taxpartially ratesoffset on utility plant,by an increase in utility plant subject to taxation and an increase in payroll taxes.taxation. Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.hydrants.

The ratio of operating expense, excluding depreciation and amortization and income taxes, to total revenue was 56.4%56.2% for the year ended December 31, 2024,2025, compared to 57.4% 56.4% for the year ended December 31, 2023.2024.

Depreciation and amortization expense increased $0.3$0.2 million, or 2.2%,1.3%, 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.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.

Federal and state income tax expense increased $1.0$0.5 million, or 15.2%,7.1%, primarily due to higher pre-tax income, lowerpartially stateoffset net operating loss valuation allowance, andby higher regulatory deferred income tax amortization in 20242025 compared to 2023.2024.

Other income decreased $0.4increased $0.7 million, primarily due to aan decreaseincrease in allowance for funds used during construction, or AFUDC, as a result of lowerhigher long-term construction activity subject to AFUDC for the twelve months ended December 31, 2024 compared to the same period in 2023.AFUDC.

Interest charges decreased $0.4$0.1 million, primarily due to a decrease in short-termlong-term debt interest related to lower borrowing levels on the Company’s lines of credit.levels.

Our net income applicable to common stock increased $3.7 $2.4 million, or 22.1%.11.9%. Total revenue increased $5.0 million, other income increased $9.1$0.7 millionmillion, and interest charges decreased $0.4 $0.1 million, offset by a $5.4$3.4 million increase in total operating expenses and $0.4 million decrease in other income.expenses.

One of our primary sources of liquidity for the year ended December 31, 20242025 was $36.8$40.3 million provided by cash flow from operating activities, compared to $31.9$36.8 million for the year ended December 31, 2023.2024. The increase in cash flows from operating activities is primarily due to changes in net income, materialsaccounts receivable, and supplies,accounts and income tax receivable.payable. Cash flows from operating activities is primarily provided by our utility operations and is impacted by the timeliness and adequacy of rate increases and changes in water consumption as a result of year-to-year variations in weather conditions, particularly during the summer. A significant part of our ability to maintain and meet our financial objectives is to ensure that our investments in utility plant and equipment are recovered in the rates charged to customers. As such, from time to time, we file rate increase requests to recover increases in operating expenses and investments in utility plant and equipment. See Note 13 – Regulatory Proceedings. 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.

The primary focus of our investment in 20242025 was to continue to provide high high quality, reliable service to ourcustomers growingand to grow service territory. Capital expenditures during 20242025 were $45.9$58.8 million compared to $62.2$45.9 million invested during the same period in 2023.2024. During 2024,2025, these investments include relocation of facilities as a result of government mandates, renewals associated with the rehabilitation of aging infrastructure, installation of new mains, upgrading elevated storage tanks, purchase of new transportation equipment, upgrading and replacing our meter reading equipment, construction of a new wastewater treatment plantplant, upgrading elevated storage tanks, upgrading and replacing our meter reading equipment, and upgrading existing pumping stationsand treatment stations, including PFAS treatment upgrades, to better serve our customers.

The following chart summarizes our investment in plant and systems over the past three fiscal years as well as our projected capital expenditures for the year 2026.

OurThese investments are intended to improve efficiency, upgrade aging systems, accommodate growing populations, upgrade treatment capacity, apply advanced technologies, address environmental challenges and enhance resiliency. The actual amount and timing of our projected capital expenditures and other investments are subject to periodic review, and revision to reflect changes in economic conditionsconditions, project and otherscheduling, factors.continued The Company's investment for 2025 is expected to be offset by contributions in aidrefinement of constructionproject ofscope $16.2and millioncosts forand a net investment of $46.4 million in 2025.other factors. The Company believes the net investment in utility plant will continue to be recovered through rates charged to customers.

For the year ended December 31, 2024,2025, cash flows provided by financing activities were $7.1$17.3 million, compared to $31.4$7.1 million for the year ended December 31, 2023.2024. Our primary source of liquidity from financing activities was $20.4$26.1 million in net contributions and advances from developers and $0.8$5.7 million fromin the issuancelines of long-termcredit debt.borrowings. Cash flows provided by financing activities decreased increased due to the net proceeds from the issuance of Class A Non-Voting Stock in May 2023 and June 2023 as well as decreasedhigher contributions in aid of construction and borrowings on lines of credit. We have several sources of liquidity to finance our investment in utility plant and other fixed assets. We estimate that future investments will be financed by our operations and external sources. We expect to fund our activities for the next twelve months using our projected cash generated from operations, bank credit lines, 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 cash generated from the foregoing activities will provide adequate resources to fund our short-term and long-term capital, operating and financing needs. However, there is no assurance that we will be able to secure funding on terms acceptable to us, or at all. Our cash flows from operations are primarily derived from water sales revenues and may be materially affected by changes in water sales due to weather and the timing and extent of increases in rates approved by state public service commissions.

At December 31, 2024,2025, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all subsidiaries of Artesian Resources. As of December 31, 2024,2025, there was $40.0$34.3 million of available funds under this line of credit. The interest rate is a one-month Daily Secured Overnight Financing Rate, or SOFR, plus 10 basis points, or Term SOFR, plus an applicable margin of 0.85%, which was increased to 1.10% effective August 3, 2023.1.10%. Term SOFR cannot be less than 0.00%. This is a demand line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time. The term of this line of credit expires on the earlier of May 19,18, 20252026 or any date on which Citizens demands payment. The Company expects to renew this line of credit.

In AprilAugust 2021,2025, Artesian Water entered into a 3-yearnew, three-year agreement with Worldwide Industries Corporation Corporation, effective JulySeptember 1, 20212025, to paint elevated water storage tanks. Pursuant to the agreement, the expected total expenditure for the three years wasis $1.2$2.5 million. In September 2022, this agreement was amended to paint an additional elevated water storage tank and to extend the term of the agreement for an additional year. Pursuant to the amended agreement, the total expenditure for the four years is $2.2 million.

Statements in this Quarterly Report on Form 10-Q that express our "belief," "anticipation" or "expectation," as well as other statements that are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act and the Private Securities Litigation Reform Act of 1995. Statements regarding our goals, priorities, growth and expansion plans and expectation for our water and wastewater subsidiaries and non-regulated subsidiaries, customer base growth opportunities in Delaware and Cecil County, Maryland, our belief regarding the timing and results of our rate requests, our belief regarding our capacity to provide water services for the foreseeable future to our customers, our belief relating to our compliance and the cost to achieve compliance with relevant governmental regulations, including per- and polyfluoroalkyl substances (“PFAS”) regulations, our belief concerning class action settlements designed to resolve claims for PFAS contamination and any related outcome, and the Lead and Copper Rule Improvements, our expectation of the timing of decisions by regulatory authorities, our belief regarding the success of any rate increase request, the impact of weather on our operations and the execution of our strategic initiatives, our expectation of the timing for construction on new projects, our expectation relating to the adoption of recent accounting pronouncements, contract operations opportunities, legal proceedings, our properties, deferred tax assets, adequacy of our available sources of financing, the expected recovery of expenses related to our long-term debt, our expectation to be in compliance with financial covenants in our debt instruments, our ability to refinance our debt as it comes due, our ability to adjust our debt level, interest rate, maturity schedule and structure, the timing and terms of renewals of our lines of credit, plans to increase our wastewater treatment operations, engineering services and other revenue streams less affected by weather, expected future contributions to our postretirement postretirement benefit plan, anticipated growth in our non-regulated division, the impact of recent acquisitions on our ability to expand and foster relationships, relationships, anticipated investments in certain of our facilities and systems and the sources of funding for such investments, and the sufficiency of internally internally generated funds and credit facilities to provide working capital and our our liquidity needs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from those projected. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "projects", "forecasts", "may", "should", variations of such words and similar expressions are intended to identify such forward-looking statements. Certain factors as discussed under Item 1A - Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2025, and this Quarterly Report on Form 10-Q for the quarter ended MarchJune 31,30, 2026, such as changes in weather, changes in our contractual obligations, changes in government policies, changes in tax laws, including, without limitation, the One Big Beautiful Bill Act, the timing and and results of our rate requests, failure to receive regulatory approvals, changes changes in economic and market conditions generally, and other matters could cause cause results to differ materially from those in the forward-looking statements. While the Company may elect to update forward-looking statements, we specifically disclaim any obligation to do so and you should not rely on any forward-looking statement as a representation of the Company's 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 MARCHJUNE 31,30, 2026

Our profitability is primarily attributable to the sale of water and wastewater services in our regulated utility business. Our regulated utility segment comprised 92.5%92.9% of total operating revenues for the threesix months ended MarchJune 31,30, 2026 and 92.7%93.0% for the threesix months ended MarchJune 31,30, 2025. Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature. In the event temperatures during the typically warmer months are cooler than expected or rainfall is greater than expected, the demand for water may decrease and our revenues may be adversely affected. We believe these effects of weather are short term and do not materially affect the execution of our strategic initiatives. Our wastewater services provide a revenue stream that is not affected by these changes in weather patterns. 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, water, sewerwater and internalsewer 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 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.

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water service to residential, commercial, industrial, governmental, municipal and utility customers. Increases in the number of customers contribute to increases, or help to offset any intermittent decreases, in our operating revenue. As of MarchJune 31,30, 2026, the number of metered water customers in Delaware increased approximately 1.8% compared to MarchJune 31,30, 2025. The number of metered water customers in Maryland increased approximately 1.5% compared compared to MarchJune 31,30, 2025. The number of metered water customers in Pennsylvania remained consistent compared to MarchJune 30, 31, 2025. For the threesix months ended MarchJune 30, 31, 2026, approximately 2.04.3 billion gallons of water were distributed in our Delaware systems and approximately 109.6221.2 million gallons of water were distributed in our Maryland systems.

Artesian Wastewater and TESI ownowns wastewater collection and treatment infrastructure and provide provides regulated wastewater services to customers in Sussex County, Delaware. Artesian Wastewater Maryland is able to provide regulated wastewater services to customers in Maryland. It is not currently providing these services in Maryland. The majority of our residential and commercial wastewater customers are billed a flat monthly fee, and our large industrial wastewater customer is billed monthly based on wastewater flow, which contributes to providing a revenue stream unaffected by weather. As of MarchJune 31,30, 2026, the number number of Delaware wastewater customers increased approximately 6.4% 6.6% compared to March 31,June 30, 2025.

Artesian Utility provides contract water and wastewater operation services to private, municipal, and governmental institutions. Artesian Utility also offers protection plans to customers: the WSLP Plan and the SSLP Plan. SLP 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 MarchJune 31,30, 2026, the the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan Plan increased 5.4%,13.0%, 7.3% and 0.7%, respectively,collectively, compared to MarchJune 31,30, 2025. The Company also maintains the ISLP Plan, in which the Company discontinued enrolling new customers effective January 2026.

As required by the Safe Drinking Water Act, the U.S. Environmental Protection Agency, or EPA, establishes maximum contaminant levels, or MCLs, for various substances found in drinking water to ensure that the water is safe for human consumption. On April 10, 2024, the EPA established MCLs for certain per- and polyfluoroalkyl substances, or PFAS, in drinking water. Under these regulations, water utilities will be required to complete initial monitoring for PFAS by 2027 and to conduct ongoing compliance monitoring. 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, 2026. To2026.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. The Company has installed treatment for PFAS at several wellfields to date and plans 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 commission. The Company is participating in the multi-district litigation class action settlements with certain manufacturers of PFAS seeking reimbursement of costs incurred and that will continue to be incurred. See Note 15 – Legal Proceedings.

Results of Operations – Analysis of the Three Months Ended MarchJune 31,30, 2026 Compared to the Three Months Ended MarchJune 31,30, 2025.

Revenues totaled $27.8$30.7 million for the three months ended MarchJune 31,30, 2026, $1.9$2.1 million, or 7.3%,7.4%, more than revenues for the three months ended MarchJune 31,30, 2025.

Water sales revenue increased increased $1.5$1.3 million, or 7.3%,5.8%, for the three months ended MarchJune 31,30, 2026 from the 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 set to zero. 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%79.7% and 79.9%80.9% of our total operating revenue for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively, from the sale of water.

Other utility operating revenue revenue increased approximately $0.2$0.6 million, or 6.2%,16.0%, for the three months ended March 31,June 30, 2026 compared to the three months ended MarchJune 31,30, 2025. This increase is primarily primarily due to an increase in revenue related to industrial wastewater treatment 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%,10.2%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This increase is2025, primarily due to an increase in SLP Plan revenue, primarilyresulting the result offrom an increase in fees that were placed into effect on January 1, 2026 and 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.Plans.

Operating expenses, excluding depreciation and income taxes, increased $0.9$1.2 million, or 5.7%,7.6%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025.

Utility operating expenses increased $0.8$0.9 million, or 6.7%,7.4%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The increase in utility operating expenses primarily consists of a $0.6$0.5 million increase in payroll and employee benefit costs, a $0.2 million increase in supply and treatment costs, and a $0.1$0.2 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.

The ratio ofNon-utility operating expenses,expenses excludingincreased depreciation$0.3 andmillion, incomeor taxes,28.1%, for the three months ended June 30, 2026 compared to total revenue was 57.6% for the three months ended MarchJune 31,30, 2025, 2026,primarily compareddue to 58.5%an forincrease in plumbing repair costs associated with the SLP three months ended March 31, 2025.Plans.

Other income decreased $0.2$0.3 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 to common stock increased $0.5$0.3 million, or 9.2%.4.5%. Total operating revenues increased $1.9$2.1 million, offset by a $1.2$1.4 million increase in total operating expenses, a $0.2 million increase in interest charges, and a decrease of $0.2$0.3 million in other income.

Our primary sources of liquidity for the threesix months ended MarchJune 31,30, 2026 were $8.6$18.8 million of cash provided by operating activities, $10.0 million from the issuance of long-term debt, and $8.1$20.3 million in net contributions and advances from developers. We depend on the availability of capital for expansion, construction and maintenance. We rely on our sources of liquidity for investments in our utility plant and to meet our various payment obligations.

One of our primary sources of liquidity for the threesix months ended MarchJune 31,30, 2026 was $8.6$18.8 million provided provided by cash flow from operating activities, compared to $11.0$18.9 million for the three six months ended MarchJune 31,30, 2025. The decrease in cash flows from operating activities is primarily from lower accounts accounts receivable and accounts payable, partially offset by higher materialsaccrued expenses and supplies,reserves, net income, and customer deposits and other, net income, deferred income taxes, and accrued expenses.other. 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, conditions, particularly during the summer. A significant part of our ability to maintain and meet our financial objectives objectives is to ensure that our investments in utility plant and equipment are recovered recovered in the rates charged to customers. As such, from time to time, we file rate increase requests to recover increases in operating expenses and investments in utility plant and equipment. See Note 13 – Regulatory Proceedings. 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.

The primary focus of our investments is to continue to provide high quality reliable service to our growing service territory. Capital expenditures during the first threesix months of 2026 were $13.1$25.9 million compared to to $10.4$26.3 million during the same period in 2025. During the first threesix 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, installationrehabilitation of water treatment facilities, construction of new wastewater treatment forceplants, mains, upgrading existing pumping and treatment stations, including PFAS treatment upgrades, and constructionupgrading ofand newreplacing wastewaterour treatmentmeter plants,reading equipment to better serve our customers.

For the threesix months ended MarchJune 31,30, 2026, cash flows provided by financing activities were $8.7$16.7 million, compared to $2.0$6.5 million for the threesix months ended MarchJune 31,30, 2025. Our primary sources of liquidity from financing activities for the threesix months ended MarchJune 31,30, 2026 were $10.0$20.3 million from the issuance of long-term debt and $8.1 million in net contributions and advances from developers.developers and $10.0 million from the issuance of long-term debt. The cash flows flows provided by financing activities increased due to higher issuance of long-term debt and an increase in net contributions and advances from developers developers,and higher issuance of long-term debt, partially offset by an increase in repayments of lines of creditcredit, and ahigher decreasedividend in overdraft payables.payments. We have several sources of liquidity to finance our investment in utility plant and other fixed assets. We estimate that future investments will be financed by our operations and external sources. 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 cash generated from the foregoing activities will provide adequate resources to fund our short-term and long-term capital, operating and financing needs. However, there is no assurance that we will be able to secure funding on terms acceptable to us, or at all. Our cash flows from operations are primarily derived from water sales revenues and may be materially affected by changes in water sales due to weather and the timing and extent of increases in rates approved by state public service commissions.

At MarchJune 31,30, 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 MarchJune 31,30, 2026, there was $40 million of of available funds under this line of credit. The interest rate is a one-month Daily Secured Overnight Financing Rate, or SOFR, plus 10 basis points, or Term SOFR, plus an applicable margin of 1.10%. Term SOFR cannot be less than 0.00%. This is a demand line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time. The term of this line of credit expires on the earlier of May 17, 2027, or any date on which Citizens demands payment. The Company expects to renew this line of credit.

At MarchJune 31,30, 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 Maryland.Maryland, and Artesian Wastewater. As of June March 31,30, 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.

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 MarchJune 31,30, 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. One first mortgage bond is subject to redemption in a principal amount equal to $150,000 plus interest per calendar quarter. The state revolving fund loan obligation and promissory notenotes obligation have an amortizing mortgage payment payable over a 20-year period. 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, inunder which CoBank will makemade a single loan to Artesian Water Water Maryland in athe principal amount not to exceedof $10 million. Artesian Water Maryland agreesagreed 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 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 duepaid 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 loan. Closing on the debt financing was approved by the Maryland Public Service Commission on March 2, 2026.

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 threesix months of 2026 that had a material impact on our financial condition, liquidity or results of operations.