What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-05-05 · 165 added, 111 removed, 220 unchanged (56% of the section changed)

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foreseeable future to our customers, our belief relating to our compliance and the cost to achieve compliance with relevant governmental regulations, our expectation of the timing of decisions by regulatory authorities, the impact of weather on our

operations and the execution of our strategic initiatives, our expectation of the timing for construction on new projects, our expectations regarding the closing of our transaction with TESI, our expectation relating to the adoption of recent

accounting pronouncements, contract operations opportunities, legal proceedings, our properties, deferred tax assets, adequacy of our available sources of financing, the expected recovery of expenses related to our long-term debt, our expectation to be

in compliance with financial covenants in our debt instruments, our ability to refinance our debt as it comes due, our ability to adjust our debt level, interest rate, maturity schedule and structure, the timing and terms of renewals of our lines of

credit, plans to increase our wastewater treatment operations, engineering services and other revenue streams less affected by weather, expected future contributions to our postretirement benefit plan, anticipated growth in our non-regulated division,

the impact of recent acquisitions on our ability to expand and foster relationships, anticipated investments in certain of our facilities and systems and the sources of funding for such investments, and the sufficiency of internally generated funds and

credit facilities to provide working capital and our liquidity needs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ

materially from those projected.

Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "projects", "forecasts", "may", "should", variations of such words and similar expressions are intended to identify such

operations and the execution of our strategic initiatives, our expectation of the timing for construction on new projects, our expectation relating to the adoption of recent accounting pronouncements, contract operations opportunities, legal

proceedings, our properties, deferred tax assets, adequacy of our available sources of financing, the expected recovery of expenses related to our long-term debt, our expectation to be in compliance with financial covenants in our debt instruments, our

ability to refinance our debt as it comes due, our ability to adjust our debt level, interest rate, maturity schedule and structure, the timing and terms of renewals of our lines of credit, plans to increase our wastewater treatment operations,

engineering services and other revenue streams less affected by weather, expected future contributions to our postretirement benefit plan, anticipated growth in our non-regulated division, the impact of recent acquisitions on our ability to expand and

foster relationships, anticipated investments in certain of our facilities and systems and the sources of funding for such investments, and the sufficiency of internally generated funds and credit facilities to provide working capital and our liquidity

needs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from those projected.

Words such as "expects",

"anticipates", "intends", "plans", "believes", "seeks", "estimates", "projects", "forecasts", "may", "should", variations of such words and similar expressions are intended to identify such forward-looking statements.

Certain factors as discussed

under Item 1A -Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2021, and this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, such as changes in weather, changes in our contractual obligations, changes

in government policies, the timing and results of our rate requests, failure to receive regulatory approval, changes in economic and market conditions generally, and other matters could cause results to differ materially from those in the

forward-looking statements.

Certain factors as discussed under Item 1A -Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2021, and this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, such as changes

in weather, changes in our contractual obligations, changes in government policies, the timing and results of our rate requests, failure to receive regulatory approval, changes in economic and market conditions generally, and other matters could cause

results to differ materially from those in the forward-looking statements.

Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic.

While the Company may elect to

update forward-looking statements, we specifically disclaim any obligation to do so and you should not rely on any forward-looking statement as a representation of the Company's views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2022

While the Company may elect to update forward-looking statements, we

specifically disclaim any obligation to do so and you should not rely on any forward-looking statement as a representation of the Company's views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2022

Our profitability is primarily attributable to the sale of water.

Gross water sales composed 81.8% of total operating revenues for the three months ended

March 31, 2022.

Gross water sales composed 80.2% of total operating revenues for the six months ended June

Our profitability is also attributed to the various contract operations, water, sewer and internal SLP Plans, wastewater services and other services we provide.

Water sales are subject to seasonal fluctuations, particularly during

summer when water demand may vary with rainfall and temperature.

In the event temperatures during the typically warmer months are cooler than expected, or rainfall is greater than expected, the demand for water may decrease and our revenues may be

adversely affected.

Water sales are subject to seasonal fluctuations, particularly during summer

when water demand may vary with rainfall and temperature.

In the event temperatures during the typically warmer months are cooler than expected, or rainfall is greater than expected, the demand for water may decrease and our revenues may be adversely

We believe the effects of weather are short term and do not materially affect the execution of our strategic initiatives.

Our wastewater services, contract operations, SLP Plans and other services provide a revenue stream that is

not affected by changes in weather patterns.

Our wastewater services, contract operations, SLP Plans and other services provide a revenue stream that is not

affected by changes in weather patterns.

While water sales are our primary source of revenues, we continue to seek growth opportunities to provide wastewater services in Delaware and the

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COVID-19 Pandemic

As of March 31, 2022, the Company’s financial results and business operations have not been materially adversely

As of June 30, 2022, the Company’s financial results and business operations have not been materially adversely

affected by the coronavirus, or COVID-19, outbreak, which was declared a pandemic in March 2020.

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Increases in the number of customers contribute to increases, or help to offset any intermittent decreases, in our operating revenue.

31, 2022, the number of metered water customers in Delaware increased approximately 1.6% compared to March 31, 2021.

The number of metered water customers in Maryland increased approximately 2.2% compared to March 31, 2021 .

The number of metered water customers in Pennsylvania remained consistent compared to March 31, 2021.

For the three months ended March 31, 2022, approximately 1.9 billion

gallons of water were distributed in our Delaware systems and approximately 29.0 million gallons of water were distributed in our Maryland systems.

30, 2022, the number of metered water customers in Delaware increased approximately 3.3% compared to June 30, 2021.

The number of metered water customers in Maryland

increased approximately 2.0% compared to June 30, 2021 .

The number of metered water customers in Pennsylvania remained consistent compared to June 30, 2021.

For the six months ended June 30, 2022, approximately 4.0 billion gallons of water

were distributed in our Delaware systems and approximately 65.1 million gallons of water were distributed in our Maryland systems.

Wastewater Division

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stream unaffected by weather.

The number of Delaware wastewater customers more than doubled compared to March 31, 2021, following the acquisition of Tidewater Environmental Services, Inc., or TESI .

The number of Artesian’s Delaware wastewater customers more than doubled compared to June 30, 2021, following the acquisition of Tidewater Environmental Services, Inc., or TESI .

This acquisition agreement is discussed further in the “Strategic Direction” section below.

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There has been consistent customer growth over the years.

As of March 31, 2022, the eligible customers

enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 4.5%, 1.2% and 28.1%, respectively, compared to March 31, 2021.

As of June 30, 2022, the eligible customers

enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 3.4%, 1.3% and 14.6%, respectively, compared to June 30, 2021.

The non-utility customers enrolled in one of our three protections plans increased 1.8%.

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years, we completed seven acquisitions including asset purchase agreements with municipal and developer/homeowner association operated systems.

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 Delaware Public Service Commission approved the transfer of Clayton’s exclusive franchise territory on April 20, 2022.

We believe that Delaware's generally lower cost of living in the region, availability of development sites in relatively close proximity to the Atlantic

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Substantial portions of Delaware currently are not served by a public water system, which could also assist in an increase to our customer base as systems are added.

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.

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

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

In our regulated wastewater division, we foresee significant growth

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In addition, since closing the

transaction with TESI noted below, Artesian Wastewater is the sole regional regulated wastewater utility in Delaware, which we believe will enable us to increase efficiencies in the treatment and disposal of wastewater and provide additional

opportunities to expand our wastewater operations.

transaction with TESI noted below, Artesian’s Delaware wastewater subsidiaries are the sole regional regulated wastewater utilities in Delaware, which we believe will enable us to increase efficiencies in the treatment and disposal of wastewater and

provide additional opportunities to expand our wastewater operations.

On January 14, 2022, Artesian Wastewater acquired TESI, a wholly-owned subsidiary of Middlesex Water Company, or Middlesex, that provides regulated

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This acquisition more than

doubled the number of wastewater customers served in Sussex County, Delaware and included all residents in the Town of Milton.

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

Artesian Wastewater began operating its Sussex Regional Recharge Facility in

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contract work related to the design, installation, maintenance and repair services associated with existing or proposed storm water management systems in Delaware and the surrounding areas.

Results of Operations – Analysis of the Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021.

Results of Operations – Analysis of the Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021.

Operating Revenues

Revenues totaled $22.2 million for the three months ended March 31, 2022, $1.5 million, or 7.5%, more than revenues for the three months ended March 31, 2021 .

Water sales revenue increased $0.3 million, or 1.8%, for the three months ended March 31, 2022 from the corresponding period in 2021, primarily due to an increase in

fixed fee revenue related to added customers and an increase in overall water consumption revenue.

We realized 81.8% and 86.4% of our total operating revenue for the three months ended March 31, 2022 and March 31, 2021, respectively, from the sale of

Other utility operating revenue increased approximately $1.1 million for the three months ended March 31, 2022 compared to the three months ended March 31,

This increase is primarily due to an increase in wastewater revenue related to residential customer growth resulting from the acquisition of TESI in January 2022, industrial wastewater service revenue increased related to process wastewater

operations that started in June 2021, and added residential customers.

Non-utility operating revenue increased approximately $0.1 million, or 5.6%, for the three months ended March 31, 2022 compared to the three months ended

March 31, 2021.

The increase is primarily due to an increase in Service Line Protection Plan revenue.

Revenues totaled $25.0 million for the three months ended June 30, 2022, $2.5 million, or 11.3%, more than revenues for the three months ended June 30, 2021 .

Other utility operating revenue increased approximately $1.9 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

increase is primarily due to an increase in wastewater revenue associated with industrial wastewater services that started in June 2021, residential customer growth resulting from the acquisition of TESI in January 2022 and organic residential customer

Non-utility operating revenue increased approximately $1.0 million for the three months ended June 30, 2022 compared to the three months ended June 30,

This increase is primarily due to an increase in contract service revenue related to a contract for the design and construction of wastewater infrastructure and an increase in Service Line Protection Plan revenue.

Water sales revenue decreased $0.4 million, or 1.8%, for the three months ended June 30, 2022 from the corresponding period in 2021, primarily due to a

decrease in overall water consumption, partially offset by an increase in fixed fee revenue related to added customers.

We realized 78.9% and 89.4% of our total operating revenue for the three months ended June 30, 2022 and June 30, 2021,

respectively, from the sale of water.

Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $1.5

$1.1million, or 9.3%, fo r the three months ended March 31, 2022, compared to the same period in 2021.

Utility operating expenses increased $1.0 million and property

and other taxes increased $0.1 million.

million, or 12.8%, fo r the three months ended June 30, 2022, compared to the same period in 2021.

Non-utility operating expenses increased $1.0 million, utility

operating expenses increased $0.4 million and property and other taxes increased $0.1 million.

Non-utility operating expenses increased $1.0 million primarily due to an increase in costs associated with the wastewater infrastructure design and

construction contract and an increase in plumbing services related to Service Line Protection Plan repairs.

Utility operating expenses increased $0.4 million,

or 10.4%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

or 4.2%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

The net increase is primarily related to the following.

Repair and maintenance costs increased $0.5 million, related to an increase in maintenance costs primarily

associated with water treatment facilities and equipment, including an increase in water treatment filter replacements, an increase in tank painting costs under contract, and an increase in fuel costs.

In addition, overall maintenance costs

increased related to the TESI acquisition.

Repair and maintenance costs increased $0.4 million, primarily related to an increase in tank painting

costs under contract, an increase in water and wastewater treatment costs, an increase in overall maintenance costs associated with the TESI acquisition and an increase in fuel costs.

Administrative costs

increased $0.3 million, primarily due to an adjustment made in June 2021 to reduce the additional bad debt reserve from 2020 associated with the COVID-19 pandemic.

Payroll and employee benefit costs increased $0.2 million, primarily related to an increase in overall

compensation.

Administrative costs increased $0.2 million, primarily related to an increase in outside services and

contractual services associated with the TESI acquisition.

Purchased power costs increased $0.1 million, primarily due to an increase in usage related to the

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minimum amount of water required to be purchased was reduced.

Property and other taxes increased $0.1 million, or 5.8%, primarily due to an increase in utility plant subject to taxation.

Property taxes are assessed on

land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.

Property and other taxes increased $0.1 million, or 5.4%, primarily due to an increase in payroll taxes, related to increased payroll related expenses.

addition, utility plant subject to taxation increased.

Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.

The ratio of operating expense, excluding depreciation and income taxes, to

total revenue was 58.3% for the three months ended March 31, 2022, compared to 57.4% fo r the three months ended March 31, 2021.

total revenue was 53.5% for the three months ended June 30, 2022, compared to 52.8% fo r the three months ended June 30, 2021.

Depreciation and amortization expense increased $0.1 million, or 2.7%, primarily due to continued investment in utility plant providing supply, treatment,

storage and distribution of water to customers and service to our wastewater customers.

Federal and state income tax expense increased $0.1 million, primarily due to higher pre-tax income in 2022 compared to 2021.

Federal and state income tax expense increased $0.2 million, or 11.9%, primarily due to higher pre-tax income in 2022 compared to 2021.

Interest Charges

Long-term debt interest increased $0.2 million, primarily related to an

increase in long-term debt interest associated with the Series W First Mortgage Bond issued on April 29, 2022 .

Our net income applicable to common stock increased $0.5 million, or 12.0%.

Total operating revenues increased $2.5 million, mostly offset by a $1.9 million

increase in total operating expenses.

increase in total operating expenses and $0.2 million increase in interest charges.

Results of Operations – Analysis of the Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021.

Operating Revenues

Revenues totaled $47.2 million for the six months ended June 30, 2022, $4.1 million, or 9.5%, more than revenues for the six months ended June 30, 2021 .

Other utility operating revenue increased approximately $3.0 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

increase is primarily due to an increase in wastewater revenue associated with residential customer growth resulting from the acquisition of TESI in January 2022, industrial wastewater services that started in June 2021, as well as organic residential

customer growth.

Non-utility operating revenue increased approximately $1.1 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Water sales revenue remained consistent for the six months ended June 30, 2022 from the corresponding period in 2021.

Overall water consumption decreased,

partially offset by an increase in fixed fee revenue related to added customers.

We realized 80.2% and 87.9% of our total operating revenue for the six months ended June 30, 2022 and June 30, 2021, respectively, from the sale of water.

Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $2.6

million, or 11.1%, fo r the six months ended June 30, 2022, compared to the same period in 2021.

Utility operating expenses increased $1.4 million, non-utility

expenses increased $1.1 million and property and other taxes increased $0.1 million.

Utility operating expenses increased $1.4 million,

or 7.3%, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The net increase is primarily related to the following.

Repair and maintenance costs increased $1.0 million, related to an increase in maintenance costs primarily

In addition, overall maintenance costs increased related to the TESI acquisition.

Administrative costs

increased $0.5 million, primarily due to an adjustment made in June 2021 to reduce the additional bad debt reserve from 2020 associated with the COVID-19 pandemic.

In addition, outside contract services for wastewater treatment associated

with the TESI acquisition increased.

Payroll and employee benefit costs increased $0.5 million, primarily related to an increase in overall

compensation.

Purchased power costs increased $0.2 million, primarily due to an increase in usage related to the

additional operational costs associated with the TESI acquisition and upgraded wastewater treatment facilities, in addition to an increase in overall water operations.

Purchased water costs decreased $0.8 million, related to a decrease of water purchased under a new

contract, effective January 2022, in which the minimum amount of water required to be purchased was reduced.

Non-utility operating expenses increased $1.1 million primarily due to an increase in costs associated with the wastewater infrastructure design and

construction contract and an increase in plumbing services related to Service Line Protection Plan repairs.

Property and other taxes increased $0.1 million, or 5.5%, primarily due to an increase in payroll taxes, related to increased payroll related expenses.

addition, utility plant subject to taxation increased.

Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.

The ratio of operating expense, excluding depreciation and income taxes, to

total revenue was 55.8% for the six months ended June 30, 2022, compared to 55.0% fo r the six months ended June 30, 2021.

Depreciation and amortization expense increased $0.1 million, or 2.5%, primarily due to continued investment in utility plant providing supply, treatment,

storage and distribution of water to customers and service to our wastewater customers.

Federal and state income tax expense increased $0.3 million, or 8.7%, primarily due to higher pre-tax income in 2022 compared to 2021.

Interest Charges

Long-term debt interest increased $0.2 million, primarily related to an

increase in long-term debt interest associated with the Series W First Mortgage Bond issued on April 29, 2022 .

Our net income applicable to common stock increased $0.8 million, or 9.4%.

Total operating revenues increased $4.1 million, mostly offset by a $3.1 million

increase in total operating expenses and $0.2 million increase in interest charges.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sourc es of liquidity for the three months ended March 31,

2022 were $11.8 million of cash provided by operating activities, $2.8 million in net contributions and advances from developers, and $0.5 million in net proceeds from the issuance of common stock.

Cash flow from operating activities is primarily

provided by our utility operations, and is impacted by the timeliness and adequacy of rate increases and changes in water consumption as a result of year-to-year variations in weather conditions, particularly during the summer.

A significant part of

our ability to maintain and meet our financial objectives is to ensure that our investments in utility plant and equipment are recovered in the rates charged to customers.

As such, from time to time, we file rate increase requests to recover increases

in operating expenses and investments in utility plant and equipment.

We will continue to borrow on available lines of credit in order to satisfy current liquidity needs.

In addition, the Company has a long history of paying regular quarterly

dividends as approved by our Board of Directors using net cash from operating activities.

Our primary sourc es of liquidity for the six months ended June 30, 2022

were $13.6 million of cash provided by operating activities, $30.0 million principal amount from a new First Mortgage Series Bond issued in April 2022, $8.0 million in

net contributions and advances from developers, and $0.9 million in net proceeds from the issuance of common stock.

Cash flow from operating activities is primarily provided by our utility operations, and is impacted by the timeliness and adequacy of

rate increases and changes in water consumption as a result of year-to-year variations in weather conditions, particularly during the summer.

A significant part of our ability to maintain and meet our financial objectives is to ensure that our

investments in utility plant and equipment are recovered in the rates charged to customers.

As such, from time to time, we file rate increase requests to recover increases in operating expenses and investments in utility plant and equipment.

continue to borrow on available lines of credit in order to satisfy current liquidity needs.

In addition, the Company has a long history of paying regular quarterly dividends as approved by our Board of Directors using net cash from operating

Investment in Plant and Systems

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Capital expenditures during

the first three months of 2022 were $12.6 million compared to $6.3 million during the same period in 2021.

During the first three months of 2022, we continue to focus our

the first six months of 2022 were $29.6 million compared to $19.4 million during the same period in 2021.

During the first six months of 2022, we continue to focus our

investment through our rehabilitation program for transmission and distribution facilities by replacing aging or deteriorating mains, installation of new main, enhancing or improving existing treatment facilities and replacing aging wells and pumping

equipment to better serve our customers.

We also continue to invest in wastewater projects including the acquisition of TESI.

Developers contributed $1.2 million of the total investment during the first three months of 2022.

In May 2022, we completed the purchase of substantially all of the water operating assets from the Town of Clayton.

We also continue to invest in wastewater projects, including the acquisition of TESI in

January 2022.

Developers contributed $3.0 million of the total investment during the first six months of 2022.

We depend on the availability of capital for expansion, construction and maintenance.

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Lines of Credit and Long-Term Debt

At March 31, 2022, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all subsidiaries of Artesian

As of March 31, 2022, there was $30.6 million of available funds under this line of credit.

The interest rate for borrowings under this line is the London Interbank Offered Rate, or LIBOR, plus 1.00%.

It is expected that the LIBOR rate

for USD currency will be discontinued after 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.

In light of this eventuality, Citizens currently has initiatives underway to identify new or alternative reference rates to be used in place of the LIBOR rate.

This is a demand line of credit and therefore the financial institution

may demand payment for any outstanding amounts at any time.

The term of this line of credit expires on the earlier of May 22, 2022 or any date on which Citizens demands payment.

At June 30, 2022, Artesian Resources had a $40 million line of credit with

Citizens Bank, or Citizens, which is available to all subsidiaries of Artesian Resources.

As of June 30, 2022, there was $34.0 million of available funds under this line of credit.

The previous interest rate for borrowings under this line was the

London Interbank Offered Rate, or LIBOR, plus 1.00%.

It is expected that the LIBOR rate for USD currency will be discontinued after June 30, 2023.

As a result effective

May 20, 2022, this line of credit agreement was amended to replace LIBOR with the Daily Secured Overnight Financing Rate, or SOFR.

The interest rate is a one month SOFR plus 10 basis points, or Term SOFR, plus an applicable margin of 0.85%.

SOFR cannot be less than 0.00%.

This is a demand line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time.

The term of this line of credit expires on the earlier of May 21, 2023 or any date

on which Citizens demands payment.

The Company expects to renew this line of credit.

At March 31, 2022, Artesian Water had a $20 million line of credit with CoBank,

At June 30, 2022, Artesian Water had a $20 million line of credit with CoBank,

ACB, or CoBank, that allows for the financing of operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland.

As of March 31, 2022, there was $2.0 million of available funds under this

As of June 30, 2022, there was $16.4 million of available funds under this

line of credit.

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the Company has historically used the weekly variable interest rate.

The term of this line of credit expires on July 30, 2022.

The term of this line of credit expires on October 30, 2022.

Artesian Water expects to renew this line of credit.

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State revolving fund loans (principal and interest)

Lines of credit

Promissory note (principal and interest)

Asset purchase contractual obligation (principal and interest)

Lines of credit

Operating leases

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transfer certain assets or change our business.

As of March 31, 2022, we were in compliance with these covenants.

As of June 30, 2022, we were in compliance with these covenants.

Long-term debt obligations reflect the maturities of certain series of our first mortgage bonds, which we intend to refinance when due if not refinanced

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We have not experienced conditions that would result in our default under these agreements.

On April 29, 2022, Artesian Water and CoBank, ACB 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.

On April 29, 2022, Artesian Water and 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.

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 proceeds from the sale of the Bond were 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 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.

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,

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

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

The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the water operating assets.

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

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 an annual rate of 2.0%.

In order to control purchased power cost, in August 2018 Artesian Water entered into an electric supply contract with MidAmerican

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The other agreement is effective from January 1, 2022

through December 31, 2026, includes automatic five year renewal terms, unless terminated by either party, and has a “take or pay” clause requiring us to purchase water on a step down schedule through July 5, 2022, thereafter requiring us to purchase a

through December 31, 2026, includes automatic five year renewal terms, unless terminated by either party, and has a “take or pay” clause which required us to purchase water on a step down schedule through July 5, 2022, and now requires us to purchase a

minimum of 0.5 million gallons per day.

18 unchanged sentences

financial statements contained in this Quarterly Report on Form 10-Q .

We did not adopt any accounting policy in the first three months of 2022 that had a material impact on our financial condition, liquidity or results of operations.

We did not adopt any accounting policy in the first six months of 2022 that had a material impact on our financial condition, liquidity or results of operations.

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 2. Management’s Discussion and Analysis