What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-05 compared with 2022-05-05 · 205 added, 170 removed, 641 unchanged (37% of the section changed)

3 unchanged sentences

(In thousands)

March 31, 2022

June 30, 2022

December 31, 2021

27 unchanged sentences

Current portion of long-term debt

Dividends payable

Accounts payable

19 unchanged sentences

(In thousands, except per share amounts)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Operating revenues

12 unchanged sentences

Allowance for funds used during construction (AFUDC)

Miscellaneous income

Miscellaneous (expense) income

Income before interest charges

8 unchanged sentences

(In thousands)

For the Three Months

Ended March 31,

For the Six Months

Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

26 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings (repayments) under lines of credit agreements

Net (repayments) under lines of credit agreements

Deferred debt issuance cost

Increase (decrease) in overdraft payable

Increase in overdraft payable

Net advances and contributions in aid of construction

Net proceeds from issuance of common stock

Issuance of long-term debt

Dividends paid

Principal repayments of long-term debt

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET INCREASE IN CASH AND CASH EQUIVALENTS

8 unchanged sentences

Income taxes paid

Preliminary purchase price of allocation of investment in acquisitions:

Utility plant

Future contractual obligation payable to seller

Contributions in aid of construction

Cash paid for acquisition

Cash received from acquisition

Net cash paid for acquisition

See notes to the condensed consolidated financial statements.

15 unchanged sentences

Balance as of March 31, 2021

Cash dividends declared

Issuance of common stock

Dividend reinvestment plan

Employee stock options and awards (4)

Employee Retirement Plan (3)

Balance as of June 30, 2021

Common Shares Outstanding Class A Non-Voting (1) (3) (4)

11 unchanged sentences

Balance as of March 31, 2022

At March 31, 2022, and March 31, 2021, Class A Common Stock had 15,000,000 shares authorized.

Cash dividends declared

Issuance of common stock

Dividend reinvestment plan

Employee stock options and awards (4)

Employee Retirement Plan (3)

Balance as of June 30, 2022

At June 30, 2022 and June 30, 2021, Class A Common Stock had 15,000,000 shares authorized.

For the same periods,

shares issued, inclusive of treasury shares, were 8,606,597 and 8,548,106 , respectively.

At March 31, 2022, and March 31, 2021, Class B Common Stock had 1,040,000 shares authorized and 881,452 shares issued.

At June 30, 2022 and June 30, 2021, Class B Common Stock had 1,040,000 shares authorized and 881,452 shares issued.

Artesian Resources Corporation registered 200,000 shares of Class A Common Stock, subsequently adjusted

for stock splits, available for purchase through the Artesian Retirement Plan and the Artesian Supplemental Retirement Plan.

for stock splits, available for purchase through the Company’s 401(k) retirement plan.

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 Common 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 March 31, 2022 and March 31, 2021, see Note 5-Stock Compensation Plans.

Includes stock compensation expense for June 30, 2022, and June 30, 2021, see Note 5-Stock Compensation Plans.

See notes to the condensed consolidated financial statements

7 unchanged sentences

municipal and utility customers throughout the State of Delaware.

In addition, Artesian Water provides services to other water utilities, including operations and billing functions, and has contract operation agreements with private and municipal

water providers.

In addition, Artesian Water provides services to other water utilities, including operations and billing functions, 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.

On May 26, 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, a Delaware

municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System.

The total purchase price was $ 5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System.

Artesian Wastewater Management, Inc., or Artesian Wastewater, began providing wastewater services in Sussex County, Delaware in July 2005.

Wastewater is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Delaware as a regulated public wastewater service company.

In January 2022, Artesian Wastewater acquired Tidewater Environmental Services, Inc.

Artesian Wastewater operates as the parent holding company of Tidewater

Environmental Services, Inc.

In January 2022, Artesian Wastewater acquired Tidewater Environmental Services,

Artesian Wastewater operates as the parent holding company of Tidewater Environmental Services, Inc.

dba Artesian Wastewater, or TESI.

TESI was incorporated in 2004 and is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Sussex County,

Delaware as a regulated public wastewater service company.

Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company, or Middlesex, for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million

note due from Middlesex.

This acquisition more than doubled the number of wastewater customers served in Sussex County, Delaware and included all residents within the Town of Milton.

TESI was incorporated in 2004 and is a regulated entity that owns wastewater collection and treatment

infrastructure and provides wastewater services to customers in Sussex County, Delaware as a regulated public wastewater service company.

Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company, or Middlesex, for $ 6.4 million in cash and other consideration, including forgiveness of a $ 2.1 million note due from Middlesex.

This acquisition more than doubled the

number of wastewater customers served by Artesian’s Delaware wastewater subsidiaries in Sussex County, Delaware and included all residents within the Town of Milton.

MARYLAND REGULATED SUBSIDIARIES

Artesian Water Maryland, Inc.

began operations in August 2007.

Artesian Water

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

Artesian Wastewater Maryland, Inc.

was incorporated on June 3, 2008 and is able

to provide regulated wastewater services to customers in the State of Maryland.

Artesian Water Maryland, Inc., or Artesian Water Maryland, began operations in August 2007.

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, was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in the State of Maryland.

It is currently not providing these services.

PENNSYLVANIA REGULATED SUBSIDIARY

Artesian Water Pennsylvania, Inc.

began operations in 2002.

It provides water

service to a residential community in Chester County, Pennsylvania.

Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, began operations in 2002.

It provides water service to a residential community in Chester County, Pennsylvania.

OTHER SUBSIDIARIES

11 unchanged sentences

a 20 -year contract that expires in July 2039.

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

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

24 unchanged sentences

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the

Company's balance sheet position as of March 31, 2022, the results of its operations for the three-month periods ended March 31, 2022 and March 31, 2021, its cash flows for the three-month periods ended March 31, 2022 and March 31, 2021 and the changes

in stockholders’ equity for the three-month periods ended March 31, 2022 and March 31, 2021.

The December 31, 2021 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2021 audited consolidated financial statements, but

does not include all disclosures and notes normally provided in annual financial statements.

Company's balance sheet position as of June 30, 2022, the results of its operations for the three and six-month periods ended June 30, 2022 and June 30, 2021, its cash flows for the six-month periods ended June 30, 2022 and June 30, 2021 and the

changes in stockholders’ equity for the three and six-month periods ended June 30, 2022 and June 30, 2021.

The December 31, 2021 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2021 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.

5 unchanged sentences

All additions to utility plant are recorded at cost.

Business combinations pursuant to ASC Topic 805 may result in a purchase price allocation and the

acquired assets are required to be evaluated by the applicable regulatory agency.

Artesian Wastewater acquired TESI in January 2022.

As of March 31, 2022, the accounting for the transaction was preliminary.

Management’s preliminary determination

of fair value of the tangible assets acquired using the cost method requires management to make significant estimates and assumptions related to economic lives of the assets, replacement costs, and physical characteristics of the tangible assets

A third party valuation specialist will assist with the valuation of the assets acquired.

The purchase price allocation is expected to be finalized once the valuation of assets acquired has been completed, no later than one year after the

acquisition date.

Business combinations pursuant to ASC Topic 805 may result in a purchase price

allocation and the acquired assets are required to be evaluated by the applicable regulatory agency.

Artesian Wastewater acquired TESI in January 2022 and Artesian Water purchased substantially all of the water operating assets from the Town of

Clayton in May 2022.

As of June 30, 2022, the accounting for these transactions was preliminary.

Management’s preliminary determination of fair value of the tangible assets acquired using the cost method requires management to make significant

estimates and assumptions related to economic lives of the assets, replacement costs, and physical characteristics of the tangible assets acquired.

Third-party valuation specialists are assisting with the valuation of the assets acquired.

purchase price allocations are expected to be finalized once the valuations of assets acquired have been completed, no later than one year after the acquisition date in each case.

Reclassification

98 unchanged sentences

contracts, which consist primarily of monthly operation and maintenance services, over time as customers receive and consume the benefits of such services performed.

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 these revenues.

An allowance for doubtful

accounts 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 allowance for

doubtful accounts and associated bad debt expense has not been significant.

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.

operation contract that was paid in advance resulting in a contract liability for services that have not yet been provided.

An allowance for doubtful accounts 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 allowance for doubtful accounts 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

2 unchanged sentences

incurred costs to date.

As of March 31, 2022, there is no associated contract asset or liability.

As of June 30, 2022, there is no associated contract asset or liability.

There is no allowance for doubtful accounts or bad debt expense associated with this revenue.

12 unchanged sentences

(in thousands)

Three months ended March 31, 2022

Three months ended March 31, 2021

Three months ended

June 30, 2022

Three months ended

June 30, 2021

Six months ended

June 30, 2022

Six months ended

June 30, 2021

Tariff Revenue

15 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

4 unchanged sentences

Total Deferred Revenue

For the three months ended March 31, 2022, the Company recognized revenue of $ 1.2

For the six months ended June 30, 2022, the Company recognized revenue of $ 1.2

million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $ 0.3 million from amounts that

2 unchanged sentences

Remaining Performance Obligations

As of March 31, 2022 and December 31, 2021, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining

As of June 30, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our

SLP Plan services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months and one year for the SLP Plan revenue and inspection fee revenue, respectively.

As of June 30, 2022 and December 31, 2021, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our

SLP Plan services, wastewater inspections and one operation contract, which are expected to be satisfied and associated revenue recognized within the next three months, one year and seven years for the SLP Plan revenue, inspection fee revenue and

contract operations revenue, respectively.

NOTE 4 – LEASES

18 unchanged sentences

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

Minimum rentals

2 unchanged sentences

(in thousands)

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

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

5 unchanged sentences

except lease term and discount rate)

March 31, 2022

June 30, 2022

December 31, 2021

8 unchanged sentences

Operating leases

Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2022 are as follows:

Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2022 are as follows:

(in thousands)

3 unchanged sentences

Total lease liabilities recognized

As of March 31, 2022, we have not entered into

As of June 30, 2022, we have not entered into

operating or finance leases that will commence at a future date.

11 unchanged sentences

eligible for grants under the 2015 Plan.

Compensation expense of $ 49,000 , related to the

May 2021 issue of restricted stock awards, was recorded for the three months ended March 31, 2022.

Compensation expense of $ 43,000 was recorded

for the three months ended March 31, 2021 for restricted stock awards issued in May 2020.

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

Compensation expense, for the three and six months ended June 30, 2022 of approximately $ 55,000 and $ 104,000 , respectively, was recorded for restricted stock

awards issued in May 2021 and May 2022.

Compensation expense, for the three and six months ended June 30, 2021 of approximately $ 49,000 and $ 91,000 , respectively, was recorded for restricted stock awards issued in May 2020 and May 2021.

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.

4 unchanged sentences

Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

On May 4, 2021, 5,000 shares of Class A Common

Stock, or Class A Stock, were granted as restricted stock awards.

The fair value per share was $ 40.11 , the closing price of the Class A Stock as

recorded on the Nasdaq Global Select Market on May 4, 2021.

Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for

the three months ended March 31, 2022:

the six months ended June 30, 2022:

Restricted Awards

4 unchanged sentences

Outstanding Restricted Stock Awards

Weighted Average Grant Date Fair

Weighted Average

Plan options/restricted stock awards

2 unchanged sentences

Expired/cancelled

Outstanding at March 31, 2022

Exercisable/vested at March 31, 2022

The total intrinsic value of options exercised during the three months ended March 31, 2022 was approximately $ 600,000 .

There were no unvested option shares outstanding under the 2015 Plan during the three months ended March 31, 2022.

As of March 31, 2022, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan.

As of March 31, 2022, there was $ 18,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.

Outstanding at June 30, 2022

Exercisable/vested at June 30, 2022

The total intrinsic value of options exercised during the six months ended June 30, 2022 was approximately $ 905,000 .

There were no unvested option shares outstanding under the 2015 Plan during the six months ended June 30, 2022.

As of June 30, 2022, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan.

As of June 30, 2022, there was $ 191,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.

The cost will be recognized over 0.84 years, the remaining vesting period for the restricted stock awards.

NOTE 6 – OTHER DEFERRED ASSETS

The investment in 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 investment in 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

Other deferred assets is primarily associated with the acquisition of TESI in January 2022 based on the preliminary purchase price allocation.

The purchase price allocation will be finalized once the

valuation of assets acquired has been completed, no later than one year after the acquisition date.

The purchase price allocation will be finalized once the valuation of assets acquired has been

completed, no later than one year after the acquisition date.

In addition, other deferred assets includes the Mountain Hill Water Company acquisition.

March 31, 2022

June 30, 2022

December 31, 2021

23 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

20 unchanged sentences

January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $ 22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date.

This audit is currently underway by the DEPSC, with no final ruling yet made.

MDPSC has not issued a final order on the regulatory liability amount of $ 0.6 million regarding the effects of the TCJA on Maryland customers.

In May 2022, the Company received a rate order from the DEPSC instructing the

Company to continue amortizing the liability over a period of 49.5 years, subject to review in the Company’s next base rate filing.

has not issued a final order on the regulatory liability amount of $ 0.6 million regarding the effects of the TCJA on Maryland customers.

Regulatory liabilities comprise:

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

7 unchanged sentences

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

For the Three Months Ended March 31,

For the Three Months Ended

For the Six Months Ended

(in thousands)

2 unchanged sentences

Weighted average common shares outstanding during the period for Diluted computation

For the three months ended March 31, 2022 and

2021, no shares of restricted stock awards were excluded from the calculations of diluted net income per share.

For the three and six months ended June 30, 2022

and 2021, no shares of

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

The Company has 15,000,000 authorized shares of

Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock.

As of March 31, 2022, 8,556,970 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding.

As of March 31, 2021 , 8,502,122

As of June 30, 2022, 8,577,620 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding.

As of June 30, 2021 , 8,519,129

shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding.

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

Equity per common share was $ 19.16 and $ 18.94 at March 31, 2022 and December 31, 2021 , respectively.

These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on March 31, 2022

and December 31, 2021 , respectively.

Equity per common share was $ 19.17 and $ 18.94 at June 30, 2022 and December 31, 2021 , respectively.

These amounts were computed by dividing common stockholders' equity by the number of weighted average shares

of common stock outstanding on June 30, 2022 and December 31, 2021 , respectively.

N OTE 10 - REGULATO RY PROCEEDINGS

Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state public service commissions through

a rate setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the requested level of rates by the Company.

a rate-setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the Company's requested level of rates.

We are subject to regulation by the following state regulatory commissions:

40 unchanged sentences

The DSIC rate effective January 1, 2021 is still subject to audit by the DEPSC at a later date.

For each of the three months ended March 31, 2022 and March 31, 2021, we earned approximately $ 1.2 million in DSIC revenue.

For the three and six months ended June 30, 2022, we earned approximately $ 1.3 million and $ 2.5 million in DSIC revenue, respectively.

three and six months ended June 30, 2021, we earned approximately $ 1.3 million and $ 2.5 million in DSIC revenue, respectively.

NOTE 11 – INCOME TAXES

13 unchanged sentences

would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known.

The statute of limitations for the 2017 Corporate tax returns lapsed during the fourth quarter of 2021, which resulted in the

reversal of the reserve in the amount of approximately $ 26,000 .

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.

The Company has accrued approximately $ 5,000 in penalties and interest for the three months ended March 31, 2022 .

The Company remains subject to examination

by federal and state authorities for the tax years 2018 through 2021 .

The statute of limitations for the 2017 tax returns lapsed during the fourth quarter of 2021, which resulted in the reversal

of the reserve in the amount of approximately $ 26,000 .

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.

The Company has accrued approximately $ 10,000 in penalties and interest for the six months ended June 30, 2022 .

The Company remains subject to examination by federal and state authorities for the

tax years 2018 through 2021 .

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

6 unchanged sentences

Long-term Financial Liabilities

All of Artesian Resources’ outstanding lo ng-term debt as of March 31, 2022 and December 31, 2021 was fixed-rate.

All of Artesian Resources’ outstanding lo ng-term debt as of June 30, 2022 and December 31, 2021 was fixed-rate.

The fair value of the Company’s long-term debt is

6 unchanged sentences

The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

March 31, 2022

June 30, 2022

December 31, 2021

15 unchanged sentences

the Company utilized the services of MNAT in 2021 for various regulatory, real estate and public policy matters.

Approximately $ 13,000 was paid

to MNAT during the three months ended March 31, 2021, for legal and director related services.

Approximately $ 58,000 and $ 71,000 was paid to MNAT during the three and six months ended June 30, 2021, respectively, for legal services and director related services.

As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related

13 unchanged sentences

consisting of $ 3.1 million paid at closing.

This acquisition

more than doubled the number of wastewater customers served in Sussex County, Delaware.

This acquisition more

than doubled the number of wastewater customers served by Artesian in Sussex County, Delaware.

The acquisition is being accounted for as a business combination under ASC Topic 805, “Business Combinations,” in accordance with the acquisition

10 unchanged sentences

The TESI acquisition was approved by the DEPSC on October 27, 2021, subject to the DEPSC determining the appropriate ratemaking

treatment of the acquisition price and the assets acquired in Artesian Wastewater Management’s next base rate case.

The Company reflected revenue of $ 0.7 million for the three months ended March 31, 2022 in its condensed consolidated statement of operations

related to the acquisition.

The pro forma revenue for the three months ended March 31, 2022 is estimated to be approximately $ 0.7 million.

The Company anticipates the pro forma effects of revenue for the three months ended March 31, 2022 to be approximately the same given there

has not been any changes in the rates.

The pro forma information is not necessarily indicative of the Company’s future results.

Any pro forma effects of earnings is not practicable, as we continue to integrate TESI operations and adjust the

operating cost structure as it relates to operating expenses reflective of synergies of the combined operations, and therefore would not present an accurate comparison.

The table below sets forth the preliminary purchase price allocation of this acquisition as of March 31, 2022.

treatment of the acquisition price and the assets acquired in Artesian Wastewater’s next base rate case.

The Company reflected revenue of $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2022 , respectively, in its condensed consolidated statement of operations related to the acquisition.

The pro forma revenue for the three and six months ended June

30, 2022 is estimated to be approximately $ 0.7 million and $ 1.4 million, respectively.

The Company anticipates the pro forma effects of revenue for the three and six months ended June 30, 2021 to be approximately the same given there has not been any changes in the rates.

pro forma information is not necessarily indicative of the Company’s future results.

Any pro forma effects of earnings is not practicable, as we continue to integrate TESI operations and adjust the operating cost structure as it relates to operating

expenses reflective of synergies of the combined operations, and therefore would not present an accurate comparison.

The table below sets forth the preliminary purchase price allocation of this acquisition as of June 30, 2022.

The preliminary purchase price allocation is provisional and there could be material changes to the estimates below.

3 unchanged sentences

Net cash purchase price

Additionally, as part of the Company’s growth strategy, on February 16, 2022,

Artesian Water signed an agreement, or the Asset Purchase Agreement, to purchase from the Town of Clayton, a Delaware municipality, or Clayton, substantially all of the operating assets of Clayton’s water system, including Clayton’s exclusive

franchise territory and the right to provide water service to Clayton’s existing customers, or the Water System.

Pursuant to the terms of the Asset Purchase Agreement, Clayton shall transfer to Artesian Water all of Clayton’s right, title and

interest in and to substantially all of the municipal water utility, plant and equipment, associated real property, contracts, easements and permits possessed by Clayton at closing related to the Water System.

The total purchase price is $ 5.0 million, less the current payoff amount of any secured debt or debt

associated with the Water System.

Closing on this transaction is expected in the second quarter of 2022, pending due diligence.

The DEPSC approved the transfer of Clayton’s exclusive franchise territory on April 20, 2022.

Additionally, as part of the Company’s growth strategy, on May 26, 2022,

Artesian Water completed its purchase of substantially all of the water system operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and

the right to provide water service to Clayton’s existing customers, or the Clayton Water System.

The total purchase price was $ 5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System.

At closing, Artesian Water paid approximately $ 3.4 million of the total purchase price.

The remaining $ 1.6 million is payable in five equal annual installments on the anniversary date of the closing date.

Each annual installment

is payable with interest at an annual rate of 2.0 % .

acquisition was accounted for as a business combination under ASC Topic 805.

The preliminary purchase price allocation is $ 8.9

million of utility plant assets offset by $ 3.8 million of CIAC.

This preliminary purchase price allocation will be finalized once the

valuation of assets acquired has been completed, no later than one year after the acquisition date.

This transfer of Clayton’s exclusive franchise territory was approved by the

DEPSC on April 20, 2022.

The DEPSC will determine the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Water’s next base rate case.

The pro forma effects of the business acquired are not material to

the Company’s financial position or results of operations based on estimated annual revenue related to customers acquired.

NOTE 15 – GEOGRAPHIC CONCENTRATION OF CUSTOMERS

2 unchanged sentences

MDPSC and the PAPUC.

As of March 31, 2022, Artesian Water was serving approximately 92,000 customers, Artesian Water Maryland was serving

As of June 30, 2022, Artesian Water was serving approximately 94,000 customers, Artesian Water Maryland was serving

approximately 2,600 customers and Artesian Water Pennsylvania was serving approximately 40 customers.

Artesian Wastewater provides wastewater utility service to customers within its established service territory in Sussex County, Delaware pursuant to rates

filed with and approved by the DEPSC.

As of March 31, 2022, Artesian Wastewater was serving approximately 3,400 customers, including one large industrial customer.

Effective January 14, 2022, following the acquisition of TESI, the number of wastewater customers served more than doubled.

All wastewater customers are located in Sussex County, Delaware.

Artesian Wastewater and TESI provide wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant

to rates filed with and approved by the DEPSC.

The number of wastewater customers served more than doubled following the acquisition of TESI in January 2022.

As of June 30, 2022, Artesian Wastewater combined with TESI were serving approximately 7,300 customers, including one large industrial

NOTE 16 – IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued new guidance that provides optional guidance for a limited period of time to ease the

potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as the market transitions from reference rates that are expected to be discontinued, such as the London Inter-bank Offered Rate, or LIBOR.

The guidance was effective upon issuance and may be applied prospectively to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued, evaluated on or before December 31, 2022,

beginning during the reporting period in which the guidance has been elected.

It is expected that the LIBOR rate will no longer be published for most currencies as of December 31, 2021, however, publication for USD currency should continue through

June 30, 2023.

LIBOR is expected to be phased out completely by June 30, 2023.

As a result, it is possible that, in the future, the LIBOR rate may become unavailable or may no longer be deemed an appropriate reference rate upon which to determine the

interest rate on LIBOR Rate Loans.

The guidance is optional and may be elected over time as reference rate reform activities occur.

In light of this eventuality, one of the banks with which we have a line of credit arrangement, currently has

initiatives underway to identify new or alternative reference rates to be used in place of the LIBOR rate.

The Company is evaluating the impact of the new guidance on our financial position, results of operations and cash flows.

There was no new guidance issued by the FASB during the six months ended June 30, 2022 that is applicable to the

NOTE 17 – SUBSEQUENT EVENT

On April 29, 2022, Artesian Water and CoBank, ACB, or CoBank, entered into a Bond Purchase Agreement, or the

Agreement, relating to the issue and sale by Artesian Water to CoBank of a $ 30 million principal amount First Mortgage Bond, Series W, or the

Bond, due April 30, 2047, or the Maturity Date.

The Bond was issued pursuant to Artesian Water’s Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Fifth Supplemental Indenture

dated as of April 29, 2022, or the Supplemental Indenture, from Artesian Water to Wilmington Trust Company, as Trustee.

The Supplemental Indenture is a first mortgage lien against substantially all of Artesian Water’s utility plant.

The proceeds from

the sale of the Bond shall be used to pay down outstanding lines of credit of the Company and a loan payable to Artesian Resources, with any additional proceeds used to fund future capital investments in Artesian Water.

The Delaware Public Service

Commission approved the issuance of the Bond on April 20, 2022.

The Bond carries an annual interest rate of 4.43 %

through but excluding the Maturity Date.

Interest is payable on June 30th, September 30th, December 30th and March 30th in each year and on the Maturity Date, beginning June 30, 2022, until Artesian Water’s obligation with respect to the payment of

principal, premium (if any) and interest shall be discharged.

Overdue payments shall bear interest as provided in the Supplemental Indenture.

The term of the Bond also includes certain limitations on Artesian Water’s indebtedness.

On July 19, 2022, final judgment was entered by the United States District Court, or Court, for a Consent Decree

between the Delaware Sand and Gravel Remedial Trust, or Trust, and the United States Environmental Protection Agency, or USEPA, that governs the implementation of Amendment No 2 to the USEPA’s 1988 Record of Decision for the Delaware Sand & Gravel

Landfill Superfund Site, or Site, located in New Castle County, Delaware, issued on December 12, 2017, or ROD Amendment No.

2, confirming, among other things, the terms and conditions set forth in a Settlement Agreement upon which The Chemours Company

FC, LLC, Hercules, LLC, Waste Management of Delaware, Inc., SC Holdings, Inc., Cytec Industries, Inc., Zeneca Inc., and Bayer CropScience Inc., collectively the Percentage Settlors, and the Trust, on one hand, and Artesian Water, on the other hand,

have agreed to resolve certain of Artesian Water’s claims and issues relating to releases of contaminants from the Site.

ROD Amendment No.

2 sets forth the remedy for the contamination existing at and emanating from the Site, or the

Remedy, to address a release of contaminants of concern and of emerging concern, or COC’s, from the Site into groundwater.

Artesian Water has found in groundwater that Artesian Water uses for public potable water supply certain COC’s that the Remedy

is designed to address, as a result of which Artesian has incurred, and potentially will incur additional, capital and operating costs to treat the groundwater to meet applicable drinking water standards.

The Remedy includes requirements that are

directly linked to Artesian’s continued operation of the treatment plant associated with groundwater around the Site.

As set forth in the Settlement Agreement, Artesian Water shall have access to financial assurances that the Percentage Settlors have provided, or will

provide, to the USEPA in connection with the Consent Decree governing the implementation of the Remedy.

In addition, the Trust shall reimburse Artesian Water for past capital and operating costs, totaling approximately $ 10.0 million, with approximately $ 2.5 million due

by August 18, 2022, within 30 days after the Court’s July 19, 2022 approval of the Consent Decree.

The remaining $ 7.5 million will be payable in three equal

installments annually on the anniversary date of the Court’s approval of the Consent Decree.

In addition, the Trust shall reimburse Artesian Water for documented reasonable and necessary capital and operating costs after July 1, 2021 that Artesian

Water incurs to treat Site-related COC’s.

Any reimbursements Artesian Water receives from the Trust shall be subject to final determination by the DEPSC as to the appropriate regulatory rate-making treatment.

The Trust’s reimbursement of such costs

shall end if and when, based upon testing information from the Trust’s Remedy facilities and Artesian Water’s facilities, treatment of Site-related COC’s is no longer necessary for Artesian Water to meet the treatment levels that Artesian Water chooses

to not exceed in water it distributes to the general public throughout its service territory to provide a margin of safety in complying with applicable drinking water standards.

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

What changed 10-Q

Item 1. Financial Statements