What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-10 · 228 added, 186 removed, 728 unchanged (36% of the section changed)

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(In thousands)

March 31, 2023

June 30, 2023

December 31, 2022

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Cash and cash equivalents

Accounts receivable (less allowance for doubtful accounts - 2023 - $ 410 ;

Accounts and other receivables (less allowance for doubtful accounts - 2023 - $ 409 ;

2022 - $ 416 )

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(In thousands, except per share amounts)

For the Three Months Ended March 31,

For the Three Months Ended

For the Six Months Ended

Operating revenues

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Operating income

Other income, net

Allowance for funds used during construction (AFUDC)

Miscellaneous income

Miscellaneous (expense) income

Income before interest charges

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(In thousands)

For the Three Months

Ended March 31,

For the Six Months

Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

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Changes in assets and liabilities, net of acquisitions:

Accounts receivable, net of allowance for doubtful accounts

Accounts and other receivables, net of allowance for doubtful accounts

Income tax receivable

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CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings under lines of credit agreements

Net (repayments) under lines of credit agreements

Increase in overdraft payable

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Issuance of long-term debt

Equity issuance costs

Dividends paid

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NET CASH PROVIDED BY FINANCING ACTIVITIES

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

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Utility plant

Future contractual obligation payable to seller

Contributions in aid of construction

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Balance as of March 31, 2022

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

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

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Balance as of March 31, 2023

At March 31, 2023, and March 31, 2022, Class A Common Stock had 15,000,000 shares authorized.

Cash dividends declared

Issuance of common stock

Public offering, net of costs

Dividend reinvestment plan

Employee stock options and awards (4)

Employee Retirement Plan (3)

Balance as of June 30, 2023

At June 30, 2023 and June 30, 2022, Class A Common Stock had 15,000,000 shares authorized.

For the same periods,

shares issued, inclusive of treasury shares, were 9,422,321 and 8,606,597 , respectively.

At March 31, 2023, and March 31, 2022, Class B Common Stock had 1,040,000 shares authorized and 881,452 shares issued.

At June 30, 2023 and June 30, 2022, 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

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discussed in the 2015 Plan.

Includes stock compensation expense for March 31, 2023 and March 31, 2022, see Note 6-Stock Compensation Plans.

Includes stock compensation expense for June 30, 2023, and June 30, 2022, see Note 6-Stock Compensation Plans.

See notes to the condensed consolidated financial statements

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The office facility consists of approximately 10,000 square feet of office space along with nearly 10,000 square feet of warehouse space.

Artesian Storm Water, incorporated in 2017, was formed to provide design, installation, maintenance and repair

services related to existing or proposed storm water management systems in Delaware and the surrounding areas.

The ability to offer storm water services will complement the primary water and wastewater services that we provide.

Artesian Storm Water

is not actively seeking new opportunities.

Artesian Storm Water, incorporated in 2017, was formed to provide design, installation, maintenance and repair services related to existing or proposed

storm water management systems in Delaware and the surrounding areas.

Artesian Storm Water elected to not seek new opportunities.

In May 2023, the Board of Directors of Artesian Storm Water unanimously approved its dissolution.

Also, in May 2023,

the Board of Directors of Artesian Resources Corporation, the sole shareholder of Artesian Storm Water, unanimously approved the dissolution of Artesian Storm Water.

The Company filed a Certificate of Dissolution with the Delaware Secretary of State

to be effective as of June 20, 2023.

NOTE 2 – BASIS OF PRESENTATION

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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, 2023 , the results of its operations for the three -month periods ended March 31, 2023 and March 31, 2022 , its cash flows for the three -month periods ended March 31, 2023 and March 31, 2022 and the changes in stockholders’ equity for the three -month periods ended March 31, 2023 and March 31, 2022 .

adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of June 30, 2023 , the results of its operations for the

three and six -month periods ended June 30, 2023 and June 30, 2022 , its cash flows for the six -month periods ended June 30, 2023 and June 30, 2022 and the changes in stockholders’ equity for the three and six -month periods ended June 30, 2023 and June 30, 2022 .

The December 31 , 2022 Condensed Consolidated Balance

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Clayton in May 2022.

As of December 31, 2022, the fair value determination for TESI and the town of Clayton is finalized.

A third-party valuation specialist assisted with the valuation of the assets acquired.

Reclassification

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year

financial statements.

These reclassifications had no effect on net income or stockholders' equity.

As of December 31, 2022, the fair value determination for TESI and the water operating assets acquired from the Town of Clayton was finalized.

A third-party valuation specialist assisted with the valuation of the assets

NOTE 3 – REVENUE RECOGNITION

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Tariff Contract Revenues

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern

Chester County, Pennsylvania once a customer requests service in our territory.

We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of

water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period.

As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled

estimates in the next billing cycle based on the actual results.

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer

requests service in our territory.

We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for

estimated usage from the date of the last meter reading to the end of the accounting period.

As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the

actual results.

Estimates are made on an individual customer basis, based on one of three methods:

the previous year’s consumption in the same period, the previous billing period’s consumption, or

While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ

materially from actual billed consumption.

The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis.

As a result, we record unbilled operating revenue

(contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.

the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging.

While actual usage for individual customers

may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption.

The majority of

our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis.

As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the

accounting period that will be billed in the next monthly or quarterly billing cycle.

Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware.

We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred.

services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue.

The contract also provides for a minimum required volume of

wastewater flow to our facility.

At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue.

Additionally, if during the course of the year it is probable that

the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year.

Artesian generates revenue from metered wastewater services provided to certain customers in Sussex County,

We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled

amounts for estimated volume from the date of the last meter reading to the end of the accounting period.

As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle

based on the actual results.

Estimates are made on an individual customer basis, based on one of three methods:

We recognize industrial wastewater service

revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred.

These services are invoiced at the end of every month

based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue.

The contract also provides for a minimum required volume of wastewater flow to our facility.

At each year end, any

shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue.

Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required

volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year.

Artesian generates revenue from metered wastewater services provided to certain customers in Sussex County, Delaware.

We recognize metered wastewater

services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of

the last meter reading to the end of the accounting period.

As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.

Estimates are made

on an individual customer basis, based on one of three methods:

the previous year’s volume in the same period, the previous billing period’s volume, or averaging.

While actual usage for individual

customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption.

of these wastewater customers are billed for the volume of water transferred on a quarterly basis.

As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed

in the next quarterly cycle.

Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer

requests service in our territory.

Our wastewater territory is located in Sussex County, Delaware.

We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the

Company remaining ready to provide them water and wastewater service.

While actual usage for individual customers may differ materially from the estimate based

on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption.

The majority of these wastewater customers are billed for the volume

of water transferred on a quarterly basis.

As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next quarterly cycle.

Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer requests service in our territory.

wastewater territory is located in Sussex County, Delaware.

We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them

water and wastewater service.

These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis.

For contract services billed in arrears, we record

unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle.

For contract services billed in advance, we record deferred revenue (contract liability)

and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.

For contract services billed in arrears, we record unbilled operating revenue (contract asset)

for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle.

For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for

which we have a right to invoice but for which services have not been provided.

This deferred revenue is netted with unbilled operating revenue on the Condensed Consolidated Balance Sheet.

Artesian generates service charges primarily from non-payment fees, such as water shut-off and reconnection fees and

finance charges.

These fees are billed and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed.

no contract asset or liability associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware

related to specific types of water distribution system improvements.

Artesian generates service charges primarily from non-payment fees, such as water shut-off and reconnection fees and finance charges.

These fees are billed

and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed.

There is no contract asset or liability

associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution

system improvements.

This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period.

This rate is adjusted up or down at the next

DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement.

Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending

on whether the surcharge was applied to consumption revenue or fixed-fee revenue.

This rate is adjusted up or down at the next DSIC filing to account for any differences

between actual earned revenue and the projected revenue requirement.

Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to

consumption revenue or fixed-fee revenue.

Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing.

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incurred costs to date.

As of March 31, 2023, there is no associated contract asset or liability.

As of June 30, 2023, there is no associated contract asset or liability.

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

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(in thousands)

Three months ended March 31, 2023

Three months ended March 31, 2022

Three months ended

June 30, 2023

Three months ended

June 30, 2022

Six months ended

June 30, 2023

Six months ended

June 30, 2022

Tariff Revenue

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(in thousands)

March 31, 2023

June 30, 2023

December 31, 2022

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Total Deferred Revenue

For the three months ended March 31, 2023, the Company recognized revenue of $ 1.2

For the six months ended June 30, 2023, 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

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Remaining Performance Obligations

As of March 31, 2023 and December 31, 2022, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining

As of June 30, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our

SLP Plan services, contract water operation services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months for the SLP revenue, approximately seven years for the contract service

As of June 30, 2023 and December 31, 2022, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our

revenue and one year for the inspection fee revenue.

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related to the treatment costs associated with the release of contaminants from the Delaware Sand & Gravel Landfill Superfund Site, or Site, in groundwater that Artesian Water uses for public potable water supply.

Approximately $ 2.5 million was paid in August 2022.

The remaining $ 7.5

million is due in three equal installments no later than August of each year from 2023 through 2025.

Approximately $ 2.5 million was paid in each of August 2022 and July 2023.

The remaining $ 5.0 million is due in two equal installments no later than July of 2024 and 2025.

An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current

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Three Months Ended

March 31, 2023

March 31, 2022

Six Months Ended

Minimum rentals

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(in thousands)

Three Months Ended

March 31, 2023

March 31, 2022

Six Months Ended

June 30, 2023

June 30, 2022

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

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except lease term and discount rate)

March 31, 2023

June 30, 2023

December 31, 2022

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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, 2023 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, 2023 are as follows:

(in thousands)

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Total lease liabilities recognized

As of March 31, 2023, we have not entered into

As of June 30, 2023, we have not entered into

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

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Non-employee directors of the Company are also eligible to receive grants under the 2015 Plan.

Compensation expense of $ 56,000 , related to the

May 2022 issue of restricted stock awards, was recorded for the three months ended March 31, 2023.

Compensation expense of $ 49,000 was recorded

for the three months ended March 31, 2022 for restricted stock awards issued in 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

Compensation expense, for the three and six months ended June 30, 2023 of approximately $ 60,000 and $ 116,000 , respectively, was recorded for restricted stock

awards issued in May 2022 and May 2023.

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.

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.

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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 3, 2022, 5,000 shares of Class A Common

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

The fair value per share was $ 45.58 , the closing price of the Class A Stock as

recorded on the Nasdaq Global Select Market on May 3, 2022.

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, 2023:

the six months ended June 30, 2023:

Restricted Awards

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Expired/cancelled

Outstanding at March 31, 2023

Exercisable/vested at March 31, 2023

There were no options exercised during the three months ended March 31, 2023.

There were no unvested option shares outstanding under the 2015 Plan during the three months ended March 31, 2023.

As of March 31, 2023, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan.

As of March 31, 2023, there was $ 20,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.

Outstanding at June 30, 2023

Exercisable/vested at June 30, 2023

There were no options exercised during the six months ended June 30, 2023.

There were no unvested option shares outstanding under the 2015 Plan during the six months ended June 30, 2023.

As of June 30, 2023, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan.

As of June 30, 2023, there was $ 235,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.

The cost will be recognized over 0.86 years, the remaining vesting period for the restricted stock awards.

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(in thousands)

March 31, 2023

June 30, 2023

December 31, 2022

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Other deferred assets

N OTE 8 - REGULATORY ASSETS

NOTE 8 – REGULATORY ASSETS

The FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party

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asset in 2022.

Amortization of these deferred costs will begin once the interconnection is completed and Artesian Water begins purchasing water from Artesian Water Pennsylvania.

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

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(in thousands)

March 31, 2023

June 30, 2023

December 31, 2022

Deferred income taxes

Deferred contract costs and other

Debt related costs

Rate case studies

Rate proceedings

Deferred income taxes

Debt related costs

Deferred costs affiliated interest agreement

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Approximately $ 2.5

million was paid in August 2022.

The remaining $ 7.5 million is due in three equal installments no later than August of each year from 2023 through 2025.

Artesian Water received approval from the DEPSC in October 2022 to refund to its customers these

reimbursements for past capital and operating costs.

million was paid in each of August 2022 and July 2023.

The remaining $ 5.0 million is due in two equal installments no later than July of 2024 and 2025.

Artesian Water received approval from the DEPSC in October 2022 to refund to its customers these reimbursements for past

capital and operating costs.

The refund for the reimbursements will be applied to current and future customer bills in annual installments.

The first refund occurred in October 2022, and future customer refunds will occur no

later than August of each year from 2023 through 2025.

The first refund occurred in October 2022, and future customer refunds will occur no later than August of each

year from 2023 through 2025.

The amount of the credit will be calculated by dividing the amount of the reimbursement by the number of eligible customers.

Beginning in 2022, Artesian Water will record 2022 and future recovery

of capital expenditures as Contributions in Aid of Construction and will record expense recovery as an offset to operations and maintenance expense, with the intention that those recoveries will then be available for inclusion and consideration in any

future rate applications.

Beginning in 2022, Artesian Water began recording 2022 and future recovery of capital

expenditures as Contributions in Aid of Construction and began recording expense recovery as an offset to operations and maintenance expense, with the intention that those recoveries will be available for inclusion and consideration in any future rate

applications.

For a full discussion of the Settlement Agreement, refer to Note 18 - Legal Proceedings.

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(in thousands)

March 31, 2023

June 30, 2023

December 31, 2022

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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)

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Weighted average common shares outstanding during the period for Diluted computation

For the three months ended March 31, 2023 and 2022, 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, 2023

and 2022, 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, 2023, 8,622,999 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding.

As of March 31, 2022 , 8,556,970

As of June 30, 2023, 9,393,344 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding.

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.

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

Equity per common share was $ 19.90 and $ 19.16 at March 31, 2023 and December 31, 2022 , respectively.

These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on March 31, 2023

and December 31, 2022 , respectively.

N OTE 11 - REGULATO RY PROCEEDINGS

Equity per common share was $ 23.30 and $ 19.86 at June 30, 2023 and December 31, 2022 , respectively.

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

of common stock outstanding on June 30, 2023 and December 31, 2022 , respectively.

NOTE 11 – REGULATORY PROCEEDINGS

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

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investments in utility plant and other costs of doing business.

Artesian Water provided notice to the DEPSC of its intent to file a request in the second quarter of 2023 to implement new rates to support Artesian Water’s ongoing capital improvement

program and to cover increased costs of operations.

In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding.

Any DSIC rate in effect will be reset to

zero upon implementation of a temporary increase in base rates charged to customers.

Any DSIC rate in effect will be

reset to zero upon implementation of a temporary increase in base rates charged to customers.

The first temporary increase may be up to the lesser of $ 2.5 million on an annual basis or 15 % of gross water sales.

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will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.

See Note 19 – Subsequent Events.

On April 28, 2023, Artesian Water filed a request with the DEPSC to implement new rates to meet a requested increase in revenue of 23.84 %, or approximately $ 17.5 million, on an

annualized basis.

The actual effective increase is less than 23.84 % since Artesian Water has been permitted to recover specific investments

made in infrastructure through the assessment of a 7.50 % DSIC.

Since the DSIC rate is set to zero when temporary rates are placed into effect,

customers would experience an incremental increase of 16.34 %, the net of the overall 23.84 % increase less the DSIC rate of 7.50 % currently in effect, if the

requested increase is granted in full by the DEPSC.

The new rates are designed to support Artesian Water’s ongoing capital improvement program and to cover increased costs of operations, including chemicals and electricity for water treatment, water

quality testing, fuel, taxes, interest, labor and benefits.

In accordance with applicable Delaware law, Artesian Water is permitted to implement temporary rates of 15 % of gross water sales on an annual basis, or $ 2.5 million, whichever is lower, 60 days after the application is filed.

Since Artesian Water has DSIC surcharges in excess of the allowable temporary increase and imposing the temporary

increase would require DSIC to be reset to zero, Artesian Water has elected not to request the initial temporary rate increase.

However, should the application not be resolved within the seven-month statutory timeframe, Artesian Water would be permitted and plans to place into effect on November 28, 2023 temporary rates of up to 15 % of gross water sales on an annual basis, subject to refund, until permanent rates are determined by the DEPSC.

Artesian Water’s last comprehensive

application for an increase in base rate charges was filed in April 2014.

Other Proceedings

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periodic audit by the DEPSC.

For each of the three months ended March 31, 2023 and March 31, 2022, we earned approximately $ 1.2 million in DSIC revenue.

For the three and six months ended June 30, 2023, we earned approximately $ 1.3 million and $ 2.5 million in DSIC revenue, respectively.

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

NOTE 12 – INCOME TAXES

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Long-term Financial Liabilities

All of Artesian Resources’ outstanding lo ng-term debt as of March 31, 2023 and December 31, 2022 was fixed-rate.

All of Artesian Resources’ outstanding lo ng-term debt as of June 30, 2023 and December 31, 2022 was fixed-rate.

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

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(in thousands)

March 31, 2023

June 30, 2023

December 31, 2022

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because these financial instruments are non-interest bearing.

NOTE 14 – COMMON STOCK OFFERING

On May 23, 2023, the Company completed the sale of 695,650

shares of its Class A Stock, par value $ 1.00 per share, at a price to the public of $ 50 per share.

The net proceeds to the Company from the offering, after deducting the underwriting discounts and commissions and other offering costs, are approximately $ 33.0 million.

The Company also granted the underwriter a 30 -day option to purchase up to an additional 104,348 shares of Class A Stock at the public offering price, less the

underwriting discount .

On June 16, 2023, the underwriter exercised its over-allotment

option, to purchase 67,689 shares of Class A Stock at the

public offering price.

The net proceeds to the Company resulting from the exercise of the over-allotment option, after deducting the underwriting discounts and commissions and other offering costs, are approximately $ 3.2 million.

All of the shares of Class A Stock sold in the offering were

offered by the Company.

The proceeds from both the initial offering and the over-allotment option were used to repay short-term borrowings, including borrowings incurred under our

lines of credit with Citizens Bank and CoBank, incurred primarily to finance capital expenditures, including investment in utility plant and equipment, and other general corporate purposes.

NOTE 15 – BUSINESS COMBINATIONS

19 unchanged sentences

Goodwill was recognized primarily as a result of expected synergies of operations and interconnections to our existing utility plant infrastructure.

Any goodwill as a result of the transaction is not expected to be deductible for tax purposes.

Goodwill as a result of the transaction is not expected to be deductible for tax purposes.

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’s next base rate case.

The results of operations for the three months ended March 31, 2023 and March 31, 2022 related to the business

acquired are included in the Company’s condensed consolidated statements of operations.

The results of operations for the three and six months ended June 30, 2023 and June 30, 2022 related to the

business acquired are included in the Company’s condensed consolidated statements of operations.

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

9 unchanged sentences

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

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 purchase price allocation is $ 7.9 million of utility

plant assets offset by $ 2.9 million of CIAC.

The Company utilized similar valuation methodologies to those described above.

The first installment payment

was paid in May 2023.

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

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

The purchase price allocation is $ 7.9 million of utility plant assets offset by $ 2.9 million of CIAC.

Company utilized similar valuation methodologies to those described above.

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

3 unchanged sentences

the Company’s financial position or results of operations based on estimated annual revenue of approximately $ 0.5 million related to customers acquired.

As of December 31, 2022, the fair value determination for TESI and the town of Clayton is finalized.

As of December 31, 2022, the fair value determination for TESI and the water operating assets acquired from the Town of Clayton was finalized.

NOTE 16 – GEOGRAPHIC CONCENTRATION OF CUSTOMERS

2 unchanged sentences

MDPSC and the PAPUC.

As of March 31, 2023, Artesian Water was serving approximately 95,000 customers, Artesian Water Maryland was serving approximately 2,600

As of June 30, 2023, Artesian Water was serving approximately 95,400 customers, Artesian Water Maryland was serving approximately 2,600

customers and Artesian Water Pennsylvania was serving approximately 40 customers.

1 unchanged sentence

to rates filed with and approved by the DEPSC.

As of March 31, 2023, the number of wastewater customers served was approximately 7,700 , including one large industrial customer.

As of June 30, 2023, the number of wastewater customers served was approximately 7,900 , including one large industrial customer.

NOTE 17 – BUSINESS SEGMENT INFORMATION

23 unchanged sentences

predominately related to our Regulated Utility segment.

These amounts in our non-utility business are negligible and account for approximately less than 1% of consolidated amounts as of March 31, 2023 and March 31, 2022.

These amounts in our non-utility business are negligible and account for approximately less than 1% of consolidated amounts as of June 30, 2023 and June 30, 2022.

(in thousands)

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Regulated Utility

36 unchanged sentences

Approximately $ 2.5 million was

paid in August 2022, and 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.

paid in each of August 2022 and July 2023, and the remaining $ 5.0 million is payable in two equal installments annually on the second and third 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.

Artesian Water received approval from the DEPSC in October 2022 to refund the reimbursements for past capital and operating costs to its customers.

The refund for the reimbursements will be applied to

current and future customer bills in annual installments.

The refund for the reimbursements will be

applied to current and future customer bills in annual installments.

The first refund occurred in October 2022, and future customer refunds will occur no later than August of each year from 2023 through 2025.

The amount of the credit is calculated by dividing

the amount of the reimbursement by the number of eligible customers.

Artesian Water will record 2022 and future recovery of capital expenditures as Contributions in Aid of Construction and will record expense recovery as an offset to operations and

maintenance expense, with the intention that those recoveries will then be available for inclusion and consideration in any future rate applications.

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.

The amount of the credit is calculated

by dividing the amount of the reimbursement by the number of eligible customers.

Artesian Water will record 2022 and future recovery of capital expenditures as Contributions in Aid of Construction and will record expense recovery as an offset to

operations and maintenance expense, with the intention that those recoveries will then be available for inclusion and consideration in any future rate applications.

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.

NOTE 19 – IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

There was no new guidance issued by the FASB during the three months ended March 31, 2023 that is applicable to the Company.

NOTE 19 – SUBSEQUENT EVENTS

On April 28, 2023, Artesian Water Company, Inc.

(“Artesian Water”), the principal subsidiary of Artesian Resources

Corporation, filed a request with the Delaware Public Service Commission to implement new rates to meet a requested increase in revenue of 23.84 %,

or approximately $ 17.5 million, on an annualized basis.

The actual effective increase is less than 23.84 % since Artesian Water has been permitted to recover specific investments made in infrastructure through the assessment of a 7.50 % Distribution System Infrastructure Charge (“DSIC”).

Since the DSIC rate is set to zero when temporary rates are placed into effect, customers would experience an incremental

increase of 16.34 %, the net of the overall 23.84 %

increase less the DSIC rate of 7.50 % currently in effect, if the requested increase is granted in full by the Delaware Public Service

The new rates are designed to support Artesian Water’s ongoing capital improvement program and to cover increased costs of operations, including chemicals and electricity for water treatment, water quality testing, fuel, taxes, interest,

labor and benefits.

In accordance with applicable Delaware law, Artesian Water is permitted to implement temporary rates of 15 % or $ 2.5 million, whichever is lower, 60 days after

the application is accepted.

Since Artesian Water has DSIC surcharges in excess of the allowable temporary increase and imposing the temporary increase would require DSIC to be reset to zero, Artesian Water has elected not to request the initial

temporary rate increase.

However, should the application not be resolved within the seven-months statutory timeframe, Artesian Water would be

permitted to place into effect temporary rates of up to 15 % of gross water sales on an annual basis, subject to refund, until permanent rates

are determined by the Delaware Public Service Commission.

Artesian Water’s last comprehensive application for an increase in base rate charges was filed in April 2014.

There was no new guidance issued by the FASB during the six months ended June 30, 2023 that is applicable to the Company.

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