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 June 30, 2026

☐ 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

--------------------------------------------------------------

(Exact name of registrant as specified in its charter)

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

664 Churchmans Road, Newark, Delaware 19702

------------------------------------------------------------------

(Address of principal executive offices)

(302) 453 – 6900

-----------------------------------------------------------

(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 August 10, 2026, 9,445,669 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 June 30, 2026 and December 31, 2025 (unaudited)	3

		Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025 (unaudited)	4

		Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025 (unaudited)	5 – 6

		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six-month periods ended June 30, 2026 and 2025 (unaudited)	7 – 8

		Notes to Unaudited Condensed Consolidated Financial Statements	9 – 25

Item 2	-	Management's Discussion and Analysis of Financial Condition and Results of Operations	26– 34

Item 3	-	Quantitative and Qualitative Disclosures about Market Risk	34

Item 4	-	Controls and Procedures	35

Part II	-	Other Information	35

Item 1	-	Legal Proceedings	35

Item 1A	-	Risk Factors	35

Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3	-	Defaults Upon Senior Securities	35

Item 4	-	Mine Safety Disclosures	35

Item 5	-	Other Information	35

Item 6	-	Exhibits	36

Signatures

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands)

ASSETS		June 30, 2026		December 31, 2025
Utility plant, at original cost (less accumulated depreciation - 2026- $208,603; 2025 - $202,077)	$	825,816	$	801,694
Current assets
Cash and cash equivalents		9,804		52
Accounts and other receivables (less provision for expected credit loss 2026 - $368; 2025 - $340)		10,491		9,489
Income tax receivable		222		769
Unbilled operating revenues		2,788		1,910
Materials and supplies		3,659		3,716
Prepaid property taxes		1		1,808
Prepaid expenses and other		3,874		3,673
Total current assets		30,839		21,417
Other assets
Non‑utility property (less accumulated depreciation - 2026 - $1,179; 2025 - $1,146)		3,524		3,541
Other deferred assets		9,468		9,571
Goodwill		1,939		1,939
Operating lease right-of-use assets		411		414
Total other assets		15,342		15,465
Regulatory assets, net		12,015		12,653
Total Assets	$	884,012	$	851,229

LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock	$	10,327	$	10,316
Preferred stock		-		-
Additional paid-in capital		144,824		144,492
Retained earnings		101,085		95,114
Total stockholders' equity		256,236		249,922
Long-term debt, net of current portion		182,551		174,276
		438,787		424,198
Current liabilities
Lines of credit		-		5,719
Current portion of long-term debt		2,525		2,132
Accounts payable		9,512		14,018
Accrued expenses		7,289		4,601
Overdraft payable		7		103
Accrued interest		941		916
Income taxes payable		1,478		389
Customer and other deposits		3,758		3,474
Reserve for customer refund		2,248		394
Other		2,630		1,976
Total current liabilities		30,388		33,722

Commitments and contingencies

Deferred credits and other liabilities
Net advances for construction		344		374
Operating lease liabilities		403		407
Regulatory liabilities		25,719		26,301
Deferred investment tax credits		388		395
Deferred income taxes		55,409		54,756
Total deferred credits and other liabilities		82,263		82,233

Net contributions in aid of construction		332,574		311,076
Total Liabilities and Stockholders' Equity	$	884,012	$	851,229

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 Six Months Ended
	June 30,					June 30,
		2026		2025			2026		2025
Operating revenues
Water sales	$	24,429	$	23,083		$	46,621	$	43,771
Other utility operating revenue		4,221		3,639			7,787		6,997
Non-utility operating revenue		2,014		1,827			4,029		3,667
Total Operating Revenues		30,664		28,549			58,437		54,435

Operating expenses
Utility operating expenses		13,436		12,505			26,589		24,830
Non-utility operating expenses		1,293		1,009			2,507		2,131
Depreciation and amortization		3,520		3,414			6,972		6,771
State and federal income taxes		2,262		2,163			4,322		4,015
Property and other taxes		1,538		1,603			3,157		3,288
Total Operating Expenses		22,049		20,694			43,547		41,035

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

Other income, net
Allowance for funds used during construction (AFUDC)		260		619			759		1,186
Miscellaneous (expense) income		44		(29	)		1,431		1,459

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

Interest charges		2,344		2,155			4,571		4,320

Net income applicable to common stock	$	6,575	$	6,290		$	12,509	$	11,725

Net income per common share:
Basic	$	0.64	$	0.61		$	1.21	$	1.14
Diluted	$	0.64	$	0.61		$	1.21	$	1.14

Weighted average common shares outstanding:
Basic		10,325		10,308			10,321		10,305
Diluted		10,330		10,310			10,327		10,308

Cash dividends per share of common stock	$	0.3199	$	0.3074		$	0.6335	$	0.6088

See notes to the condensed consolidated financial statements.

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In thousands)

	For the Six Months Ended
	June 30,
		2026			2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	12,509		$	11,725
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,972			6,771
Amortization of debt expense		177			176
Amortization of deferred income tax regulatory liability		(649	)		(649	)
Provision for expected credit loss		110			103
Deferred income taxes, net		646			458
Stock compensation		169			92
AFUDC, equity portion		(539	)		(807	)

Changes in assets and liabilities, net of acquisitions:
Accounts and other receivables		(4,266	)		234
Income tax receivable		547			512
Unbilled operating revenues		(878	)		(809	)
Materials and supplies		57			(265	)
Income tax payable		1,089			805
Prepaid property taxes		1,807			2,187
Prepaid expenses and other		(201	)		(531	)
Other deferred assets		(382	)		(478	)
Regulatory assets		(91	)		30
Regulatory liabilities		(78	)		(103	)
Accounts payable		(1,800	)		614
Accrued expenses		972			(1,272	)
Reserve for customer refund		1,854			-
Accrued interest		25			(37	)
Customer deposits and other, net		761			139
NET CASH PROVIDED BY OPERATING ACTIVITIES		18,811			18,895

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)		(25,858	)		(26,259	)
Proceeds from sale of assets		85			88
NET CASH USED IN INVESTING ACTIVITIES		(25,773	)		(26,171	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayments under lines of credit agreements		(10,933	)		(357	)
Borrowings under lines of credit agreements		5,214			2,343
Deferred debt issuance costs		(45	)		-
(Decrease) increase in overdraft payable		(96	)		31
Proceeds from contributions in aid of construction and advances		21,220			13,223
Payouts for contributions in aid of construction and advances		(950	)		(1,336	)
Net proceeds from issuance of common stock		174			172
Issuance of long–term debt		10,000			-
Dividends paid		(6,538	)		(6,273	)
Principal repayments of long-term debt		(1,332	)		(1,325	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		16,714			6,478

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED

Unaudited

(In thousands)

	For the Six Months Ended
	June 30,
		2026		2025

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

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	9,804	$	349

Supplemental Disclosures of Cash Flow Information:

	For the Six Months Ended
	June 30,
		2026			2025

Non-cash Investing and Financing Activity:
Utility plant received as contributions in aid of construction	$	7,681		$	7,111

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

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

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	4,369		$	4,181
Income taxes paid	$	2,842		$	2,937
Income taxes refunded	$	165		$	50

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, 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


	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, 2025	9,435	881	$	9,435	$	881	$	144,492	$	95,114		$	249,922

Net income	-	-		-		-		-		5,934			5,934
Cash dividends declared													-
Common stock	-	-		-		-		-		(3,236	)		(3,236	)
Issuance of common stock
Dividend reinvestment plan	2	-		2		-		84		-			86
Employee stock options and awards(4)	-	-		-		-		92		-			92
Employee Retirement Plan(3)	-	-		-		-		-		-			-
Balance as of March 31, 2026	9,437	881	$	9,437	$	881	$	144,668	$	97,812		$	252,798
Net income	-	-		-		-		-		6,575			6,575
Cash dividends declared										-			-
Common stock	-	-		-		-		-		(3,302	)		(3,302	)
Issuance of common stock
Dividend reinvestment plan	3	-		3		-		85		-			88
Employee stock options and awards(4)	6	-		6		-		71		-			77
Employee Retirement Plan(3)	-	-		-		-		-		-			-
Balance as of June 30, 2026	9,446	881	$	9,446	$	881	$	144,824	$	101,085		$	256,236

(1)

At June 30, 2026 and June 30, 2025, Class A Non-Voting Stock had 15,000,000 shares authorized. For the same periods, shares issued, inclusive of 28,970 treasury shares, were 9,474,635 and 9,458,054, respectively.

(2)

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

(3)

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

(4)

Under the Equity Compensation Plan, effective December 9, 2015, or the 2015 Plan, and the 2025 Equity Compensation Plan, effective October 31, 2025, or the 2025 Plan, Artesian Resources Corporation authorized up to 331,500 shares and 263,932, respectively, of Class A Non-Voting 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 Plan. The 2025 Plan replaces the 2015 Plan, and outstanding grants under the 2015 Plan shall continue in effect according to their terms, consistent with the 2015 Plan. Includes stock compensation expense for June 30, 2026 and June 30, 2025. See Note 8 – Stock Compensation Plans.

See notes to the condensed consolidated financial statements.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL

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

DELAWARE REGULATED UTILITY SUBSIDIARIES

Artesian Water Company, Inc., or Artesian Water, our principal subsidiary, distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware. 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. In July 2026, Artesian Wastewater filed a Certificate of Ownership and Merger with the Secretary of State of the State of Delaware, pursuant to which TESI was merged with and into Artesian Wastewater. This internal corporate restructuring had no effect on the condensed consolidated financial statements of the Company, as the accounts of both entities were already fully consolidated in the Company's financial reporting.

MARYLAND REGULATED UTILITY SUBSIDIARIES

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 also evaluates land parcels, provides 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 and operates water and wastewater facilities in Delaware for municipal and governmental agencies. Artesian Utility also contracts with developers and government agencies for design and construction of wastewater infrastructure throughout the Delmarva Peninsula.

Artesian Utility currently operates three wastewater treatment facilities with a combined capacity of up to approximately 3.8 mgd for the Town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039. 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 the following protection plans to customers, the Water Service Line Protection Plan, or WSLP Plan, and the Sewer Service Line Protection Plan, or SSLP 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 Company also maintains the Internal Service Line Protection Plan, or ISLP Plan, in which the Company discontinued enrolling new customers effective January 2026. For customers that were previously enrolled, 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 unaudited 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 2025 as filed with the SEC on March 16, 2026.

The unaudited condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly-owned subsidiaries, including its principal operating company, Artesian Water. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of June 30, 2026, the results of its operations for the three and six-month periods ended June 30, 2026 and June 30, 2025, its cash flows for the six-month periods ended June 30, 2026 and June 30, 2025 and the changes in stockholders’ equity for the three and six-month periods ended June 30, 2026 and June 30, 2025. The December 31, 2025 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2025 audited consolidated financial statements but does not include all disclosures and notes normally provided in annual financial statements.

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

Reclassification

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements. These reclassifications had no effect on net income or stockholders' equity.

Regulated Utility Accounting

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 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. 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. 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 Unaudited Condensed Consolidated Financial Statements for a full description of our segment information.

Use of Estimates in the Preparation of Unaudited Condensed Consolidated Financial Statements

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

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. Cost includes direct labor, materials, AFUDC (see description below) and indirect charges for such capitalized items as transportation, supervision, pension, medical, and other fringe benefits related to employees engaged in construction activities. When depreciable units of utility plant are retired, the historical costs of plant retired is charged to accumulated depreciation. Any cost associated with retirement, less any salvage value or proceeds received, is charged to the regulated retirement liability. Maintenance, repairs, and replacement of minor items of utility plant are charged to expense as incurred.

Allowance for Funds Used during Construction, or AFUDC, is a non-cash credit to income with a corresponding charge to utility plant that represents the cost of borrowed funds or a return on equity funds devoted to plant under construction.

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 1.91%, and 1.91% for June 30, 2026 and December 31, 2025, respectively. Artesian Water offsets depreciation recorded on utility plant by depreciation on utility property funded by Contributions in Aid of Construction, or CIAC, and Advances for Construction, or Advances. 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. 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 is recorded reducing revenue from temporary rates. The DEPSC approved and Artesian Water implemented temporary rate increases effective June 3, 2025 and November 6, 2025. As of June 30, 2026, approximately $2.2 million of the revenue from the November 6, 2025 temporary rate increase was recorded as a reserve for customer refund in the Condensed Consolidated Balance Sheets.

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

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 June 30, 2026, there is no associated contract asset or liability. There is no provision for expected credit loss or bad debt expense associated with this revenue.

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 Six Months
	Ended June 30,				Ended June 30,
(in thousands)		2026		2025		2026		2025
Tariff Revenue
Consumption charges	$	17,055	$	15,454	$	31,367	$	28,476
Fixed fees		9,485		9,335		19,450		18,600
Service charges		228		178		382		359
DSIC		-		235		-		534
Metered wastewater services		203		213		345		400
Industrial wastewater services		398		500		1,026		932
Total Tariff Revenue	$	27,369	$	25,915	$	52,570	$	49,301
Non-Tariff Revenue
Service line protection plans	$	1,793	$	1,614	$	3,591	$	3,245
Contract operations		261		249		509		501
Design and installation		-		3		-		7
Inspection fees		175		144		309		316
Total Non-Tariff Revenue	$	2,229	$	2,010	$	4,409	$	4,069

Other Operating Revenue	$	1,066	$	624	$	1,458	$	1,065

Total Operating Revenue	$	30,664	$	28,549	$	58,437	$	54,435

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

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

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

Deferred Revenue
Deferred Revenue – Tariff	$	1,507	$	1,598
Deferred Revenue – Non-Tariff		778		573
Total Deferred Revenue	$	2,285	$	2,171

For the six months ended June 30, 2026, the Company recognized revenue of $1.6 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.4 million from amounts that were included in Deferred Revenue – Non-Tariff at the beginning of the year.

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

Remaining Performance Obligations

As of June 30, 2026 and December 31, 2025, Deferred Revenue – Tariff is recorded partially within Unbilled operating revenues net against contract assets representing our remaining performance obligations for our fixed fee water services and partially within Other current liabilities representing our remaining performance obligations for our fixed fee wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next six months.

As of June 30, 2026 and December 31, 2025, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services, contract water operation services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next six months, approximately four years and one year, respectively.

NOTE 4 – ACCOUNTS RECEIVABLE

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. The settlement receivable as of June 30, 2026 includes the short-term portion of multi-district litigation, MDL, reimbursements as further discussed in Note 15 - Legal Proceedings.

A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current and reasonable projections based upon expected economic conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant. The following table summarizes the changes in the Company’s accounts receivable balance. The reduction in the water customer accounts receivable balance as of December 31, 2025 is the result of a one-time bill credit that was applied to Artesian Water’s customer bills in December 2025 related to MDL settlement funds received as further discussed in Note 15 – Legal Proceedings.

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

Customer accounts receivable – water	$	8,333	$	4,366	$	6,824
Customer accounts receivable – wastewater		1,008		706		928
Customer accounts receivable – SLP Plan		492		371		470
Settlement receivable – short term		562		2,023		2,523
Developer receivable		361		2,249		837
Miscellaneous accounts receivable		103		114		100
		10,859		9,829		11,682
Less: provision for expected credit loss		368		340		343
Net accounts receivable	$	10,491	$	9,489	$	11,339

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 years to 70 years, one of which includes options to automatically extend the leases for up to 66 years and is included as part of the lease liability and right-of-use assets as we expect to exercise the options. Payments made under operating leases are recognized in the condensed consolidated statement of operations on a straight-line basis over the period of the lease. The annual lease payment for the land operating lease increases each year by the most recent increase in the Consumer Price Index and includes a provision to periodically adjust the annual lease payment based on the fair market value of the parcel of land. None of the operating leases contain contingent rent provisions. The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment. The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.

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 June 30,				For the Six Months Ended June 30,
(in thousands)		2026		2025		2026		2025
Minimum rentals	$	2	$	2	$	4	$	4
Contingent rentals		-		-		-		-
	$	2	$	2	$	4	$	4

Supplemental cash flow information related to leases is as follows:

(in thousands)

		Six months ended		Six months ended
		June 30, 2026		June 30, 2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4	$	4
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	-	$	410

Supplemental balance sheet information related to leases is as follows:

(in thousands, except lease term and discount rate)

		June 30, 2026			December 31, 2025
Operating Leases:
Operating lease right-of-use assets	$	411		$	414

Other current liabilities	$	9		$	9
Operating lease liabilities		403			407
Total operating lease liabilities	$	412		$	416


Weighted Average Remaining Lease Term
Operating leases		68 years			68 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

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


		(in thousands)
		Operating Leases
Year
2026	$	29
2027		27
2028		21
2029		21
2030		21
Thereafter		1,337
Total undiscounted lease payments	$	1,456
Less effects of discounting		(1,044	)
Total lease liabilities recognized	$	412

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

NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Current Assets and Liabilities

For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments. Under the fair value hierarchy, the fair value of such financial instruments is classified as a Level 1.

Other Deferred Assets

The other deferred assets associated with the MDL class action settlement reimbursements, as further discussed in Note 15 – Legal Proceedings, has a carrying amount of $2.1 million as of June 30, 2026 and $2.6 million as of December 31, 2025, which approximates fair value, and was recorded at amortized cost using an estimated market discount rate. The fair value of this non-current receivable is classified as Level 3.

Long-term Financial Liabilities

As of June 30, 2026 and December 31, 2025, all of the Company’s outstanding long-term debt interest rates were a fixed rate. The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with ASC 825, Financial Instruments. Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements. Level 2 is valued using observable inputs other than quoted prices. The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates. The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

(in thousands)

		June 30, 2026		December 31, 2025
Carrying amount	$	185,076	$	176,408
Estimated fair value		163,786		156,980

The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts. Refund payments are based on the water sales to new customers in the particular development constructed. The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing.

NOTE 7 – INCOME TAXES

Deferred income taxes are provided in accordance with ASC 740, Income Taxes, on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the unaudited condensed consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated subsidiaries recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate. Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.

Under ASC 740, Income Taxes, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known. The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense. For the full year 2025, the Company accrued approximately $22 thousand in penalties and interest related to positions taken on the 2022 and 2024 corporate income tax return. For the six months ended June 30, 2026, the Company has accrued approximately $12 thousand in penalties and interest related to positions taken on the 2022 and 2024 corporate income tax return. The Company remains subject to examination by federal and state authorities for the tax years 2022 through 2025.

Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets.

On July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, was signed into law, which includes several changes to U.S. tax and related laws, including the temporary and permanent extension of expiring provisions of the Tax Cuts and Jobs Act of 2017, or TCJA. The Company has evaluated the impact that the OBBBA may have on its consolidated financial condition and results of operations and determined there is no material impact on our business, financial position or results of operations.

NOTE 8 – STOCK COMPENSATION PLANS

On October 30, 2025, the Company’s stockholders approved the 2025 Equity Compensation Plan, or the 2025 Plan, that replaced the 2015 Equity Compensation Plan, or the 2015 Plan. The 2025 Plan provides for the issuance of 263,932 shares of Class A Non-Voting Stock. Outstanding grants under the 2015 Plan shall continue in effect according to their terms, consistent with the 2015 Plan. No further grants will be made under the 2015 Plan after the approval date of the 2025 Plan. The 2025 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2025 Plan is administered and interpreted by the Compensation Committee of the Board of Directors, or the Committee. The Committee has the authority to determine the individuals to whom grants will be made under the 2025 Plan, determine the type, size and terms of the grants, determine the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2025 Plan) and deal with any other matters arising under the 2025 Plan. All of the employees of the Company and its subsidiaries are eligible for grants under the 2025 Plan. Non-employee directors of the Company are also eligible to receive grants under the 2025 Plan.

On May 5, 2026, 4,000 shares of Class A Non-Voting Stock were granted as restricted stock awards. The fair value per share was $31.41, the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select Market on May 5, 2026. These restricted stock awards will be fully vested and released one year after the grant date and, prior to their vesting date, are subject to forfeiture in the event of the recipient’s termination of service.

On September 16, 2025, 5,000 shares of Class A Non-Voting Stock were granted as restricted stock awards. The fair value per share was $32.08, the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select Market on September 16, 2025. These restricted stock awards will be fully vested and released one year after the grant date and, prior to their vesting date, are subject to forfeiture in the event of the recipient’s termination of service.

On July 1, 2025, 1,000 shares of Class A Non-Voting Stock were granted as a restricted stock award. The fair value per share was $33.96, the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select Market on July 1, 2025. This restricted stock award was fully vested and released May 5, 2026.

On May 5, 2025, 4,000 shares of Class A Non-Voting Stock were granted as restricted stock awards. The fair value per share was $34.27, the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select Market on May 5, 2025. These restricted stock awards were fully vested and released one year after the grant date.

On April 11, 2025, 1,000 shares of Class A Non-Voting Stock were granted as a restricted stock award. The fair value per share was $33.51, the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select Market on April 11, 2025. This restricted stock award was fully vested and released one year after the grant date.

Compensation expense of approximately $77 thousand and $169 thousand, was recorded for the three and six months ended June 30, 2026, respectively, for restricted awards issued in April, May, July, September 2025 and May 2026. Compensation expense of approximately $47 thousand and $92 thousand was recorded for the three and six months ended June 30, 2025, respectively, for restricted stock awards issued in May 2024, April 2025, and May 2025. Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards.

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

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

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

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

As of June 30, 2026, there was approximately $140 thousand total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2025 Plan. The cost will be recognized over 0.69 years, the remaining vesting period for the restricted stock awards.

NOTE 9 - GEOGRAPHIC CONCENTRATION OF CUSTOMERS

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide regulated water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC. As of June 30, 2026, Artesian Water was serving approximately 100,000 customers, Artesian Water Maryland was serving approximately 2,700 customers and Artesian Water Pennsylvania was serving approximately 40 customers.

Artesian Wastewater and TESI provide regulated wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. As of June 30, 2026, Artesian Wastewater and TESI were serving approximately 9,400 customers combined, including one large industrial customer.

NOTE 10 – OTHER DEFERRED ASSETS

The investment in CoBank, ACB, or CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements. The settlement agreement receivable is related to the long-term portion of MDL class action settlement reimbursements, as further discussed in Note 15 - Legal Proceedings, and is recorded at amortized cost, with the difference between the carrying amount and the amortized cost recognized as CIAC.

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

Investment in CoBank	$	7,351	$	6,889
Settlement receivable-long term		2,117		2,596
Other deferred assets		-		86
	$	9,468	$	9,571

NOTE 11 - REGULATORY ASSETS

ASC 980, Regulated Operations, stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC.

The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed.

Debt related costs include debt issuance costs and other debt related expense. The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations.

Affiliated interest agreement deferred costs relate to the regulatory and administrative costs resulting from efforts necessary to secure water allocations in Artesian Water Pennsylvania’s territory for the provision of service to the surrounding area and interconnection to Artesian Water Pennsylvania’s affiliate regulated water utility Artesian Water. These costs were specifically included for cost recovery pursuant to an Affiliated Interest Agreement between Artesian Water and Artesian Water Pennsylvania and were approved for recovery by the PAPUC. Amortization of these deferred costs began in the fourth quarter of 2023.

Deferred acquisition adjustments represent the excess payment for purchases of utility plant from Delaware municipalities over the determined original cost net of depreciation. Deferred acquisition costs represent the closing cost associated with the acquisitions. Costs are being amortized over the periods noted in the table below and recovered in customer rates as approved by the DEPSC. Amortization of these deferred costs began in the third quarter of 2024.

Unrecovered reserve for depreciation is the result of the implementation of a change in depreciation methods for certain general plant assets that are being amortized over five years and recovered in customer rates as approved by the DEPSC. Amortization of these deferred costs began in the third quarter of 2024.

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

Expense	Years Amortized
Deferred contract costs and other	5
Rate case studies	5
Delaware rate proceedings	3
Debt related costs	15 to 30 (based on term of related debt)
Deferred costs affiliated interest agreement	20
Goodwill (Mountain Hill Water Company acquisition in 2008)	50
Deferred acquisition and franchise costs - Maryland	20 – 80
Deferred acquisition costs – Delaware	20
Deferred acquisition adjustments - Delaware	36 – 62
Unrecovered reserve for depreciation (general plant assets)	5

Regulatory assets, net of amortization, comprise:

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

Deferred contract costs and other	$	151	$	109
Rate case studies		114		105
Delaware rate proceedings		287		312
Deferred income taxes		392		403
Debt related costs		3,485		3,617
Deferred costs affiliated interest agreement		970		998
Goodwill		240		243
Deferred acquisition and franchise costs - Maryland		334		352
Deferred acquisition costs – Delaware		213		219
Deferred acquisition adjustments – Delaware		3,252		3,288
Unrecovered reserve for depreciation		2,577		3,007
	$	12,015	$	12,653

NOTE 12 – REGULATORY LIABILITIES

ASC 980, Regulated Operations, stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC. Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties. As authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability. The annual amortization currently authorized by the DEPSC could be adjusted in future rate applications.

Deferred income taxes primarily represent tax benefits that will be returned to regulated utility customers through an approved rate making process, as described below. These tax benefits resulted from the TCJA. The TCJA required the Company to remeasure its deferred income tax balances to reflect the reduction in the corporate income tax rate from 34% to 21%. This remeasurement adjustment made to deferred income taxes was substantially offset by the recognition of a regulatory liability for excess accumulated deferred income taxes, or EADIT, and reflects the benefits customers will receive in future approved rates. Pursuant to a DEPSC rate order, Artesian Water is amortizing $24.3 million of the EADIT balance. The DEPSC has not issued a final order on the TCJA regulatory liability amount of $0.6 million for wastewater customers, and the MDPSC has not issued a final order on the TCJA regulatory liability amount of $0.6 million for Maryland customers.

Regulatory liabilities comprise:

(in thousands)

June 30, 2026

December 31, 2025

Utility plant retirement cost obligation

Deferred income taxes (related to TCJA)