Financial Analysis

The following table shows the Companys 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 …

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NOTE 8 STOCK COMPENSATION PLANS On October 30, 2025, the Companys stockholders approved the 2025 Equity Compensation Plan, or the 2025 Plan, that replaced the 2015 Equity Compensation Plan, or the 2015 Plan. 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 September 16, 2025, 5,000 shares of Class A Stock were granted as restricted stock awards. The fair value per share was $32.08, the closing price of the Class A Stock as record …

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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. Long-term Financial Liabilities As of September 30, 2025 and December 31, 2024, all of the Companys outstanding long-term debt interest rates were a fixed rate. The fair value of the Companys 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) September 30, 2025 December 31, 2024 Carrying amount $ 176,885 $ 178,676 Estimated fair value 157,065 1 …

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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 condensed consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Companys 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 ap …

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NOTE 15 - LEGAL PROCEEDINGS Periodically, we are involved in other proceedings or litigation arising in the ordinary course of business. We do not believe that the ultimate resolution of these matters will materially affect our business, financial position or results of operations. However, we cannot ensure that we will prevail in any litigation and, regardless of the outcome, may incur significant litigation expense and may have significant diversion of management attention. Several of the water systems of Artesian Resources subsidiaries are claimants in four multi-district litigation, or MDL, class action settlements designed to resolve claims for per- and polyfluoroalkyl substances, or PFAS, contamination in Public Water Systems Drinking Water, as those terms are defined in the respective Agreements (the Settlements), which are with four groups of settling defendants on behalf of: (1) the 3M Company (3M); (2) E.I. Du Pont de Nemours and Company (n/k/a Eidp, Inc.), DuPont de Nemours Inc., The Chemours Company, The Chemours Company FC, LLC, and Corteva, Inc. (collectively, DuPont); (3) Tyco Fire Products LP and Chemguard, Inc. ( collectively, the Tyco Defendants); and (4) BASF Corporation (BASF). Claims Forms have been submitted on behalf of Artesian Resources eligible systems in each of the Settlements. In October 2025, the Company received its first payment from 3M in the amount of $2.3 million with an anticipated total net settlement of approximately $12.6 million to be p …

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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 disc …

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NOTE 3 REVENUE RECOGNITION Background Artesians 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 mete …

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NOTE 16 - BUSINESS SEGMENT INFORMATION The Companys operating segments are comprised of its businesses which generate revenues and incur expenses, for which separate operational financial information is available and is regularly evaluated by management for the purpose of making operating decisions, assessing performance, and allocating resources. The Company operates its businesses primarily through one reportable segment, the Regulated Utility segment. The Regulated Utility segment is the largest component of the Companys business and includes an aggregation of our five regulated utility subsidiaries that are in the business of providing regulated water and wastewater services on the Delmarva Peninsula. Our regulated water utility services include treating, distributing, and selling water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware and in Cecil County, Maryland and to a residential community in Chester County, Pennsylvania. Our regulated wastewater utility services include the treatment and disposal of wastewater for customers in Sussex County, Delaware. The Company is subject to regulations as to its rates, services, and other matters by the states of Delaware, Maryland and Pennsylvania with respect to utility service within these states. The Chief Operating Decision Maker, or CODM, is the Executive Committee led by the Chief Executive Officer and includes the Chief Financial Officer. The CODM uses …

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