UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 000-18516

ARTESIAN RESOURCES CORPORATION

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(Exact name of registrant as specified in its charter)

Delaware	51-0002090
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(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

664 Churchmans Road, Newark, Delaware 19702

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(Address of principal executive offices)

(302) 453 – 6900

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(Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ARTNA	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑

Yes

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑

Yes

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.

Large Accelerated Filer ☐

Accelerated Filer ☐

Non-Accelerated Filer ☑

Smaller Reporting Company ☑

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐

Yes

☑

As of November 5, 2025, 9,431,693 shares of Class A Non-Voting Common Stock and 881,452 shares of Class B Common Stock were outstanding.

TABLE OF CONTENTS

ARTESIAN RESOURCES CORPORATION

FORM 10-Q

Part I	-	Financial Information:

Item 1	-	Financial Statements	Page(s)

		Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 (unaudited)	3

		Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 (unaudited)	4

		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited)	5 – 6

		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine-month periods ended September 30, 2025 and 2024 (unaudited)	7 – 8

		Notes to the Condensed Consolidated Financial Statements	9– 26

Item 2	-	Management's Discussion and Analysis of Financial Condition and Results of Operations	27– 34

Item 3	-	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4	-	Controls and Procedures	35

Part II	-	Other Information	36

Item 1	-	Legal Proceedings	36

Item 1A	-	Risk Factors	36

Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3	-	Defaults Upon Senior Securities	36

Item 4	-	Mine Safety Disclosures	36

Item 5	-	Other Information	36

Item 6	-	Exhibits	37

Signatures

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands)

ASSETS		September 30, 2025		December 31, 2024
Utility plant, at original cost (less accumulated depreciation - 2025 - $199,048; 2024 - $192,253)	$	788,318	$	747,186
Current assets
Cash and cash equivalents		705		1,147
Accounts and other receivables (less provision for expected credit loss 2025 - $406; 2024 - $343)		8,161		11,339
Income tax receivable		185		624
Unbilled operating revenues		2,573		1,861
Materials and supplies		4,041		4,278
Prepaid property taxes		186		2,188
Prepaid expenses and other		3,726		3,091
Total current assets		19,577		24,528
Other assets
Non‑utility property (less accumulated depreciation - 2025 - $1,130; 2024 - $1,116)		3,584		3,603
Other deferred assets		6,979		6,525
Goodwill		1,939		1,939
Operating lease right-of-use assets		409		414
Total other assets		12,911		12,481
Regulatory assets, net		13,102		14,428
Total Assets	$	833,908	$	798,623

LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock	$	10,313	$	10,300
Preferred stock		-		-
Additional paid-in capital		144,316		143,920
Retained earnings		94,214		84,969
Total stockholders' equity		248,843		239,189
Long-term debt, net of current portion		174,660		176,509
		423,503		415,698
Current liabilities
Lines of credit		309		-
Current portion of long-term debt		2,225		2,167
Accounts payable		12,212		11,228
Accrued expenses		6,712		5,336
Overdraft payable		35		31
Accrued interest		1,343		930
Income taxes payable		631		500
Customer and other deposits		3,480		3,347
Other		2,025		2,054
Total current liabilities		28,972		25,593

Commitments and contingencies

Deferred credits and other liabilities
Net advances for construction		1,369		1,582
Operating lease liabilities		399		404
Regulatory liabilities		26,725		30,267
Deferred investment tax credits		398		409
Deferred income taxes		53,753		52,265
Total deferred credits and other liabilities		82,644		84,927

Net contributions in aid of construction		298,789		272,405
Total Liabilities and Stockholders' Equity	$	833,908	$	798,623

See notes to the condensed consolidated financial statements.

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In thousands, except per share amounts)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
		2025			2024			2025		2024
Operating revenues
Water sales	$	24,837		$	24,092		$	68,608	$	66,419
Other utility operating revenue		3,780			3,358			10,777		9,661
Non-utility operating revenue		1,874			1,692			5,541		5,022
Total Operating Revenues		30,491			29,142			84,926		81,102

Operating expenses
Utility operating expenses		13,431			12,125			38,261		36,261
Non-utility operating expenses		1,265			1,213			3,396		3,474
Depreciation and amortization		3,497			3,287			10,268		10,177
State and federal income taxes		2,473			2,355			6,488		5,982
Property and other taxes		1,206			1,572			4,494		4,700
Total Operating Expenses		21,872			20,552			62,907		60,594

Operating income		8,619			8,590			22,019		20,508

Other income, net
Allowance for funds used during construction (AFUDC)		584			474			1,771		1,126
Miscellaneous (expense) income		(48	)		(58	)		1,411		1,450

Income before interest charges		9,155			9,006			25,201		23,084

Interest charges		2,193			2,193			6,514		6,535

Net income applicable to common stock	$	6,962		$	6,813		$	18,687	$	16,549

Income per common share:
Basic	$	0.68		$	0.66		$	1.81	$	1.61
Diluted	$	0.68		$	0.66		$	1.81	$	1.61

Weighted average common shares outstanding:
Basic		10,312			10,297			10,308		10,293
Diluted		10,314			10,298			10,309		10,294

Cash dividends per share of common stock	$	0.3074		$	0.2955		$	0.9162	$	0.8807

See notes to the condensed consolidated financial statements.

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In thousands)

	For the Nine Months Ended
	September 30,
		2025			2024
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	18,687		$	16,549
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,268			10,177
Amortization of debt expense		264			265
Amortization of deferred income tax regulatory liability		(974	)		(592	)
Provision for expected credit loss		161			153
Deferred income taxes, net		1,477			1,558
Stock compensation		152			172
AFUDC, equity portion		(1,216	)		(772	)

Changes in assets and liabilities, net of acquisitions:
Accounts and other receivables		3,017			2,062
Income tax receivable		439			1,608
Unbilled operating revenues		(712	)		(342	)
Materials and supplies		237			1,524
Income tax payable		131			330
Prepaid property taxes		2,002			(1,017	)
Prepaid expenses and other		(635	)		117
Other deferred assets		(480	)		1,944
Regulatory assets		112			(283	)
Regulatory liabilities		(2,777	)		(2,734	)
Accounts payable		(521	)		175
Accrued expenses		(444	)		(184	)
Accrued interest		413			(919	)
Customer deposits and other, net		280			330
NET CASH PROVIDED BY OPERATING ACTIVITIES		29,881			30,121

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)		(40,513	)		(30,933	)
Proceeds from sale of assets		118			620
NET CASH USED IN INVESTING ACTIVITIES		(40,395	)		(30,313	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayments under lines of credit agreements		(2,034	)		-
Borrowings under lines of credit agreements		2,343			-
Increase in overdraft payable		4			3,909
Proceeds from contributions in aid of construction and advances		22,734			15,652
Payouts for contributions in aid of construction and advances		(1,999	)		(1,410	)
Net proceeds from issuance of common stock		257			260
Issuance of long–term debt		-			758
Dividends paid		(9,442	)		(9,065	)
Principal repayments of long-term debt		(1,791	)		(1,714	)
NET CASH PROVIDED BY FINANCING ACTIVITIES	$	10,072		$	8,390

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED

Unaudited

(In thousands)

	For the Nine Months Ended
	September 30,
		2025			2024

NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS	$	(442	)	$	8,198

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,147			2,505

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	705		$	10,703

Supplemental Disclosures of Cash Flow Information:

	For the Nine Months Ended
	September 30,
		2025		2024

Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions	$	9,232	$	7,475

Change in amounts included in accounts payable, accrued payables and other related to capital expenditures	$	3,149	$	1,888

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	5,837	$	7,188
Income taxes paid	$	5,459	$	4,452
Income taxes refunded	$	50	$	701

See notes to the condensed consolidated financial statements.

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Unaudited

(In thousands)

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)	Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings			Total

Balance as of December 31, 2023	9,404	881	$	9,404	$	881	$	143,369	$	76,743		$	230,397

Net income	-	-		-		-		-		4,411			4,411
Cash dividends declared
Common stock	-	-		-		-		-		(2,980	)		(2,980	)
Issuance of common stock
Dividend reinvestment plan	3	-		3		-		87		-			90
Employee stock options and awards(4)	-	-		-		-		68		-			68
Employee Retirement Plan(3)	-	-		-		-		-		-			-
Balance as of March 31, 2024	9,407	881		9,407		881		143,524		78,174			231,986
Net income	-	-		-		-		-		5,325			5,325
Cash dividends declared										-
Common stock	-	-		-		-		-		(3,042	)		(3,042	)
Issuance of common stock
Dividend reinvestment plan	3	-		3		-		87		-			90
Employee stock options and awards(4)	5	-		5		-		52		-			57
Employee Retirement Plan(3)	-	-		-		-		-		-			-
Balance as of June 30, 2024	9,415	881		9,415		881		143,663		80,457			234,416
Net income	-	-		-		-		-		6,813			6,813
Cash dividends declared
Common stock	-	-		-		-		-		(3,043	)		(3,043	)
Issuance of common stock
Dividend reinvestment plan	2	-		2		-		78		-			80
Employee stock options and awards(4)	-	-		-		-		48		-			48
Employee Retirement Plan(3)	-	-		-		-		-		-			-
Balance as of September 30, 2024	9,417	881	$	9,417	$	881	$	143,789	$	84,227		$	238,314

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)	Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings			Total

Balance as of December 31, 2024	9,419	881	$	9,419	$	881	$	143,920	$	84,969		$	239,189

Net income	-	-		-		-		-		5,435			5,435
Cash dividends declared
Common stock	-	-		-		-		-		(3,104	)		(3,104	)
Issuance of common stock
Dividend reinvestment plan	3	-		3		-		82		-			85
Employee stock options and awards(4)	-	-		-		-		45		-			45
Employee Retirement Plan(3)	-	-		-		-		-		-			-
Balance as of March 31, 2025	9,422	881		9,422		881		144,047		87,300			241,650
Net income	-	-		-		-		-		6,290			6,290
Cash dividends declared										-			-
Common stock	-	-		-		-		-		(3,169	)		(3,169	)
Issuance of common stock
Dividend reinvestment plan	3	-		3		-		84		-			87
Employee stock options and awards(4)	5	-		5		-		42		-			47
Employee Retirement Plan(3)	-	-		-		-		-		-			-
Balance as of June 30, 2025	9,430	881		9,430		881		144,173		90,421			244,905
Net income	-	-		-		-		-		6,962			6,962
Cash dividends declared
Common stock	-	-		-		-		-		(3,169	)		(3,169	)
Issuance of common stock
Dividend reinvestment plan	2	-		2		-		83		-			85
Employee stock options and awards(4)	-	-		-		-		60		-			60
Employee Retirement Plan(3)	-	-		-		-		-		-			-
Balance as of September 30, 2025	9,432	881	$	9,432	$	881	$	144,316	$	94,214		$	248,843

(1)

At September 30, 2025 and September 30, 2024, Class A Stock had 15,000,000 shares authorized. For the same periods, shares issued, inclusive of treasury shares, were 9,460,651 and 9,445,316, respectively.

(2)

At September 30, 2025 and September 30, 2024, Class B Stock had 1,040,000 shares authorized and 881,452 shares issued.

(3)

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

(4)

Under the Equity Compensation Plan, effective December 9, 2015, or the 2015 Plan, Artesian Resources Corporation authorized up to 331,500 shares of Class A Stock for issuance of grants in the form of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the 2015 Plan. Includes stock compensation expense for September 30, 2025 and September 30, 2024. See Note 8 – Stock Compensation Plans.

See notes to the condensed consolidated financial statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL

Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all of our wholly-owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.

DELAWARE REGULATED UTILITY SUBSIDIARIES

Artesian Water Company, Inc., or Artesian Water, distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware. In addition, Artesian Water provides services to other water utilities, including operations, and has contract operation agreements with private, municipal and state water providers. Artesian Water also provides water for public and private fire protection to customers in our service territories.

Artesian Wastewater Management, Inc., or Artesian Wastewater, operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI. Artesian Wastewater and TESI are regulated entities that own wastewater collection and treatment infrastructure and provide wastewater services to customers in Sussex County, Delaware as regulated public wastewater service companies.

MARYLAND REGULATED UTILITY SUBSIDIARIES

Artesian Water Maryland, Inc., or Artesian Water Maryland, distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland.

Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, is authorized and able to provide regulated wastewater services to customers in the State of Maryland. It is currently not providing these services.

PENNSYLVANIA REGULATED UTILITY SUBSIDIARY

Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, provides water service to a residential community in Chester County, Pennsylvania.

OTHER NON-UTILITY SUBSIDIARIES

We have two other subsidiaries, neither of which are regulated. They are Artesian Utility Development, Inc., or Artesian Utility, and Artesian Development Corporation, or Artesian Development.

Artesian Utility designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions. Artesian Utility may also evaluate land parcels and provide recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities. Artesian Utility also contracts with developers and government agencies for design and construction of wastewater infrastructure throughout the Delmarva Peninsula.

Artesian Utility currently operates wastewater treatment facilities for the Town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039. Artesian Utility currently operates three wastewater treatment systems with a combined capacity of up to approximately 3.8 million gallons per day. The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.

Artesian Utility also offers three protection plans to customers, the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan (collectively, SLP Plan or SLP Plans). The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up to an annual limit. The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit. The ISLP Plan enhances available coverage to include water and wastewater lines within customers' residences up to an annual limit.

Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware.

NOTE 2 – BASIS OF PRESENTATION

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information provided not misleading. Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes thereto in the Company's annual report on Form 10-K for fiscal year 2024 as filed with the SEC on March 26, 2025.

The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly-owned subsidiaries, including its principal operating company, Artesian Water. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of September 30, 2025, the results of its operations for the three and nine-month periods ended September 30, 2025 and September 30, 2024, its cash flows for the nine-month periods ended September 30, 2025 and September 30, 2024 and the changes in stockholders’ equity for the three and nine-month periods ended September 30, 2025 and September 30, 2024. The December 31, 2024 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2024 audited consolidated financial statements but does not include all disclosures and notes normally provided in annual financial statements.

The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods.

Regulated Utility Accounting

The accounting records of Artesian Water, Artesian Wastewater, and TESI are maintained in accordance with the uniform system of accounts as prescribed by the Delaware Public Service Commission, or the DEPSC. The accounting records of Artesian Water Pennsylvania are maintained in accordance with the uniform system of accounts as prescribed by the Pennsylvania Public Utility Commission, or the PAPUC. The accounting records of Artesian Water Maryland, and Artesian Wastewater Maryland, are maintained in accordance with the uniform system of accounts as prescribed by the Maryland Public Service Commission, or the MDPSC. All these subsidiaries follow the provisions of Accounting Standards Codification, or ASC, 980, Regulated Operations, which provides guidance for companies in regulated industries. These regulated subsidiaries account for the majority of our operating revenue. See Note 16 – Business Segment Information to our Condensed Consolidated Financial Statements for a full description of our segment information.

Use of Estimates

The condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S., which require management to make certain estimates and assumptions that could impact the Company’s financial condition, results of operations and cash flows. Actual results could differ from management's estimates. Management makes certain estimates and assumptions regarding unbilled revenues, accounting for income taxes, credit losses and reserves for bad debt, lease agreements, goodwill and contingent assets and liabilities at the date of the condensed consolidated financial statements.

Utility Plant

All additions to utility plant are recorded at cost. Business combinations pursuant to ASC 805, Business Combinations, may result in a purchase price allocation and the acquired assets are required to be evaluated by the applicable regulatory agency.

Depreciation and Amortization

For financial reporting purposes, depreciation is recorded using the straight-line method at rates based on estimated economic useful lives, which range from 5 to 85 years. Composite depreciation rates for water utility plant were 1.92%, and 1.93% for September 30, 2025 and December 31, 2024, respectively. In a rate order issued by the DEPSC, the Company was directed, effective June 12, 2024, to begin using revised depreciation rates for utility plant in Artesian Water, which are based on the estimated useful life years. Artesian Water offsets depreciation recorded on utility plant by depreciation on utility property funded by Contributions in Aid of Construction, or CIAC, and Advances for Construction, or Advances. This reduction in depreciation expense is also netted against outstanding CIAC and Advances on the Condensed Consolidated Balance Sheet. Regulatory assets are amortized using the straight-line method over future periods, which range from 5 to 80 years.

NOTE 3 – REVENUE RECOGNITION

Background

Artesian’s operating revenues are primarily derived from contract services based upon regulated tariff rates approved by the DEPSC, the MDPSC, and the PAPUC. Regulated tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent standalone selling prices. Our non-tariff contract revenues, which are primarily non-utility revenues, are derived from SLP Plan fees, water and wastewater contract operations, design and installation contract services, and wastewater inspection fees. Other regulated operating revenue is primarily derived from developer guarantee contributions for wastewater and rental income for antenna agreements, which are not considered in the scope of ASC 606, Revenue from Contracts with Customers.

Tariff Contract Revenues

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory. We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period. As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.

Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware. We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred. These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue. The contract also provides for a minimum required volume of wastewater flow to our facility. At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue. Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year. Any estimated revenue amounts are recorded as unbilled operating revenue (contract asset) through the end of the accounting period and will be billed at each year end for any shortfall of the actual volume from the required minimal volume.

Artesian generates revenue from metered wastewater services provided to customers in Sussex County, Delaware. We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of the last meter reading to the end of the accounting period. As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s volume in the same period, the previous billing period’s volume, or averaging. While actual volume for individual customers may differ from the estimate based on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of these wastewater customers are billed for the volume of wastewater transferred on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next quarterly cycle.

Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer requests service in our territory. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service. These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis. For contract services billed in arrears, we record unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle. For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. This deferred revenue is netted against unbilled operating revenue on the Condensed Consolidated Balance Sheet.

Artesian generates service charges primarily from non-payment fees, such as water shut-off and reconnection fees and finance charges. These fees are billed and recognized as revenue at the point in time when our tariff indicates the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed. There is no contract asset or liability associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements. This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period. This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement. Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed-fee revenue.

Artesian generates revenue from interim temporary rates. In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis, pending resolution of an application for a base rate increase by the DEPSC. Temporary rate revenue is calculated as a percentage increase on tariff rates. We recognize this revenue based on the same guidelines as noted above depending on whether the additional rate was applied to consumption revenue or fixed-fee revenue. Until final rates are determined by the DEPSC, if it is probable that a refund of revenue associated with temporary rates will occur, a reserve would be recorded reducing revenue from temporary rates.

As of September 30, 2025 and September 30, 2024, no such reserve or reduction to revenue was recorded. Temporary rates that were previously effective as of November 28, 2023 were replaced with final rates effective June 12, 2024, with no reserve or reduction to previously recorded revenue, as approved by the DEPSC. The DEPSC approved and Artesian Water implemented a temporary rate increase effective June 3, 2025.

Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing. A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant.

Non-tariff Contract Revenues

Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customer’s residence, up to an annual limit. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services. These contract services are billed in advance on a monthly or quarterly basis. As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing. A provision for expected credit loss is calculated as a percentage of total SLP Plan contract revenue. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant.

Artesian generates contract operation revenue from water and wastewater operation services provided to customers. We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services, over time as customers receive and consume the benefits of such services performed. The majority of these services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with most of these revenues. We have one operation contract that was paid in advance resulting in a contract liability for services that have not yet been provided. A provision for expected credit loss is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness. The related provision for expected credit loss and associated bad debt expense has not been significant.

Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract. We recognize revenue from these services over time as services are performed using the percentage-of-completion method based on an input method of incurred costs (cost-to-cost). These services are invoiced at the end of every month based on incurred costs to date. As of September 30, 2025, there is no associated contract asset or liability. There is no provision for expected credit loss or bad debt expense associated with this revenue.

Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities. These fees are paid by developers in advance when a service is requested for a new phase of a development. Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed. As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected. There are no accounts receivable, provision for expected credit loss or bad debt expense associated with inspection fee contracts.

Sales Tax

The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax. Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax. Therefore, no sales tax is collected on revenues.

Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
(in thousands)		2025		2024		2025		2024
Tariff Revenue
Consumption charges	$	17,131	$	16,747	$	45,607	$	44,232
Fixed fees		9,725		9,156		28,325		27,578
Service charges		186		186		544		565
DSIC		-		67		534		67
Metered wastewater services		229		253		629		598
Industrial wastewater services		532		467		1,464		1,390
Total Tariff Revenue	$	27,803	$	26,876	$	77,103	$	74,430
Non-Tariff Revenue
Service line protection plans	$	1,643	$	1,468	$	4,889	$	4,323
Contract operations		255		255		757		760
Design and installation		4		2		11		61
Inspection fees		246		120		561		331
Total Non-Tariff Revenue	$	2,148	$	1,845	$	6,218	$	5,475

Other Operating Revenue	$	540	$	421	$	1,605	$	1,197

Total Operating Revenue	$	30,491	$	29,142	$	84,926	$	81,102

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)		September 30, 2025		December 31, 2024

Contract Assets – Tariff	$	3,717	$	3,030

Deferred Revenue
Deferred Revenue – Tariff	$	1,428	$	1,385
Deferred Revenue – Non-Tariff		622		714
Total Deferred Revenue	$	2,050	$	2,099

For the nine months ended September 30, 2025, the Company recognized revenue of $1.4 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.5 million from amounts that were included in Deferred Revenue – Non-Tariff at the beginning of the year.

The changes in Contract Assets and Deferred Revenue are primarily due to normal timing differences between our performance and customer payments.

Remaining Performance Obligations

As of September 30, 2025 and December 31, 2024, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months.

As of September 30, 2025 and December 31, 2024, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services, contract water operation services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months, approximately four years and one year, respectively.

NOTE 4 – ACCOUNTS RECEIVABLE

Accounts receivable are recorded at the invoiced amounts. As set forth in a settlement agreement, Artesian Water received reimbursements from the Delaware Sand and Gravel Remedial Trust, or Trust, for Artesian Water’s past capital and operating costs, totaling approximately $10.0 million, related to the treatment costs associated with the release of contaminants from the Delaware Sand & Gravel Landfill Superfund Site, or Site, in groundwater that Artesian Water uses for public potable water supply. The full amount of $10.0 million has been paid to us, in four installments of approximately $2.5 million each, in August 2022, July 2023, July 2024 and July 2025. In addition, from July 1, 2021 onward the Trust shall reimburse Artesian Water for documented reasonable and necessary capital and operating costs that Artesian Water incurs to treat contaminants of concern and of emerging concern.

A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current and reasonable projections based upon expected economic conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant. The following table summarizes the changes in the Company’s accounts receivable balance:

(in thousands)		September 30, 2025		December 31, 2024		December 31, 2023

Customer accounts receivable – water	$	6,706	$	6,824	$	6,573
Customer accounts receivable – wastewater		749		928		869
Customer accounts receivable – SLP Plan		457		470		409
Settlement agreement receivable – short term		-		2,523		2,747
Developer receivable		518		837		2,089
Miscellaneous accounts receivable		137		100		471
		8,567		11,682		13,158
Less: provision for expected credit loss		406		343		328
Net accounts receivable	$	8,161	$	11,339	$	12,830

NOTE 5 – LEASES

The Company leases land and office equipment under operating leases from non-related parties. Our leases have remaining lease terms of 2.5 years to 71 years, some of which include options to automatically extend the leases for up to 66 years and are included as part of the lease liability and right-of-use assets as we expect to exercise the options. One of the leases for land was terminated in its entirety effective October 10, 2024. The remaining lease liability and right-of-use asset for the terminated lease was removed in the fourth quarter of 2024. The difference between the carrying amounts of the right-of-use asset and the lease liability was recorded in the income statement. Payments made under operating leases are recognized in the consolidated statement of operations on a straight-line basis over the period of the lease. The annual lease payment for the remaining land operating lease increases each year by the most recent increase in the Consumer Price Index and includes a provision to periodically adjust the annual lease payment based on the fair market value of the parcel of land. None of the operating leases contain contingent rent provisions. The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment. The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.

Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right-of-use asset and liability amounts for the operating leases. As our leases do not provide an implicit rate, we use our incremental borrowing rates for long-term and short-term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments.

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)		2025		2024		2025		2024
Minimum rentals	$	2	$	4	$	6	$	13
Contingent rentals		-		-		-		-
Rent expenses	$	2	$	4	$	6	$	13

Supplemental cash flow information related to leases is as follows:

(in thousands)

		Nine months ended		Nine months ended
		September 30, 2025		September 30, 2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6	$	13
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	409	$	499

Supplemental balance sheet information related to leases is as follows:

(in thousands, except lease term and discount rate)

		September 30, 2025		December 31, 2024
Operating Leases:
Operating lease right-of-use assets	$	409	$	414

Other current liabilities	$	8	$	8
Operating lease liabilities		399		404
Total operating lease liabilities	$	407	$	412

SEC Form 10-Q filed by Artesian Resources Corporation