What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-07 compared with 2023-08-08 · 217 added, 189 removed, 767 unchanged (35% of the section changed)

3 unchanged sentences

(In thousands)

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

Cash and cash equivalents

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

Accounts and other receivables

(less provision for expected credit loss - 2023 - $ 356 ;

2022 - $ 416 )

43 unchanged sentences

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

Operating revenues

23 unchanged sentences

(In thousands)

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

5 unchanged sentences

Changes in assets and liabilities, net of acquisitions:

Accounts and other receivables, net of allowance for doubtful accounts

Accounts and other receivables, net of provision for expected credit loss

Income tax receivable

70 unchanged sentences

Balance as of June 30, 2022

Cash dividends declared

Issuance of common stock

Dividend reinvestment plan

Employee stock options and awards (4)

Employee Retirement Plan (3)

Balance as of September 30, 2022

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

18 unchanged sentences

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 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

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 June 30, 2023, and June 30, 2022, see Note 6-Stock Compensation Plans.

Cash dividends declared

Issuance of common stock

Dividend reinvestment plan

Employee stock options and awards (4)

Employee Retirement Plan (3)

Balance as of September 30, 2023

At September 30, 2023 and September 30, 2022, Class A Common Stock had 15,000,000 shares

For the same periods, shares issued, inclusive of treasury shares, were 9,424,518 and 8,638,474 , respectively.

At September 30, 2023 and September 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 for stock splits, available for purchase through the Company’s 401(k) retirement plan.

certain circumstances as discussed in the 2015 Plan.

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

See notes to the condensed consolidated financial statements

9 unchanged sentences

Artesian Water also provides water for public and private fire protection to customers in our service territories.

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

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

municipality located in Kent County, Delaware.

This purchase agreement is discussed further in the “Strategic Direction and Recent Developments” section.

This purchase agreement is discussed further in the “Strategic Direction and Recent Developments” section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

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

17 unchanged sentences

OTHER NON-UTILITY SUBSIDIARIES

Our three other subsidiaries, none of which are

regulated, are Artesian Utility Development, Inc., or Artesian Utility, Artesian Development Corporation, or Artesian Development, and Artesian Storm Water Services, Inc., or Artesian Storm Water.

We have two other subsidiaries, neither of which

are regulated.

They are Artesian Utility Development, Inc., or Artesian Utility, and Artesian Development Corporation, or Artesian Development.

We also had a third

subsidiary, Artesian Storm Water Services, Inc., or Artesian Storm Water, which was dissolved effective June 20, 2023.

Artesian Utility was formed in 1996 and designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services

18 unchanged sentences

wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware.

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

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

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

4 unchanged sentences

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.

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

State, which became effective on June 20, 2023.

NOTE 2 – BASIS OF PRESENTATION

9 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 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

Sheet was derived from the Company’s December 31 , 2022 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements.

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

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

The December 31 , 2022 Condensed Consolidated Balance Sheet was

derived from the Company’s December 31 , 2022 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.

18 unchanged sentences

Clayton in May 2022.

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

On December 31, 2022, the fair value determinations for TESI and the water operating assets acquired from the Town of Clayton were finalized.

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

23 unchanged sentences

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

We recognize industrial wastewater service

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

These services are invoiced at the end of every month

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

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

At each year end, any

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

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

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

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.

Any estimated revenue

amounts are recorded as unbilled operating revenue (contract asset) through the end of the accounting period and will be billed at each year end for any shortfall of the actual volume from the required minimal volume.

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

34 unchanged sentences

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

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

We mitigate our exposure to credit losses by discontinuing services in the event of non-payment;

accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions.

mitigate our exposure to credit losses by discontinuing services in the event of non-payment;

accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant.

Non-tariff Contract Revenues

8 unchanged sentences

days of invoicing.

An allowance for doubtful accounts is calculated as a percentage of total SLP Plan contract revenue.

A provision for expected credit loss is calculated as a percentage of total SLP Plan contract revenue.

We mitigate our exposure to credit losses by discontinuing services in the event of non-payment;

accordingly, the related

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

provision for expected credit loss and associated bad debt expense has not been significant.

Artesian generates contract operation revenue from water and wastewater operation services provided to customers.

4 unchanged sentences

We have one 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.

A provision for expected

credit loss is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness.

The related provision for

expected credit loss and associated bad debt expense has not been significant.

Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under

2 unchanged sentences

incurred costs to date.

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.

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

There is no provision for expected credit loss or bad debt expense associated with this revenue.

Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new

2 unchanged sentences

As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected.

There are no accounts receivable, allowance for doubtful accounts or bad debt expense associated with inspection fee

There are no accounts receivable, provision for expected credit loss or bad debt expense associated with inspection

fee contracts.

The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax.

7 unchanged sentences

Three months ended

June 30, 2023

September 30, 2023

Three months ended

June 30, 2022

Six months ended

June 30, 2023

Six months ended

June 30, 2022

September 30, 2022

Nine months ended

September 30, 2023

Nine months ended

September 30, 2022

Tariff Revenue

15 unchanged sentences

(in thousands)

June 30, 2023

September 30, 2023

December 31, 2022

December 31, 2021

Contract Assets – Tariff

3 unchanged sentences

Total Deferred Revenue

For the six months ended June 30, 2023, the Company recognized revenue of $ 1.2

For the nine months ended September 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

2 unchanged sentences

Remaining Performance Obligations

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

As of September 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 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

As of September 30, 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 six years for the contract service

5 unchanged sentences

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 each of August 2022 and July 2023.

Two installments for approximately $ 2.5

million each were paid in 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

A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current

We mitigate our exposure to credit losses by discontinuing services in the event of non-payment;

accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

The following table summarizes the

changes in the Company’s accounts receivable balance:

accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant.

The following

table summarizes the changes in the Company’s accounts receivable balance:

September 30,

(in thousands)

1 unchanged sentence

Customer accounts receivable – wastewater

Settlement agreement receivable

Settlement agreement receivable – short term

Miscellaneous accounts receivable

Developer receivable

Less allowance for doubtful accounts

provision for expected credit loss

Net accounts receivable

21 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Minimum rentals

2 unchanged sentences

(in thousands)

Six Months Ended

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

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

5 unchanged sentences

except lease term and discount rate)

June 30, 2023

September 30, 2023

December 31, 2022

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 June 30, 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 September 30, 2023 are as follows:

(in thousands)

3 unchanged sentences

Total lease liabilities recognized

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

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

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

10 unchanged sentences

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

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.

Compensation expense, for the three and nine months ended September 30, 2023 of approximately $ 69,000 and $ 185,000 , respectively, was recorded for restricted stock awards issued in

May 2022 and May 2023.

Compensation expense, for the three and nine months ended September 30, 2022 of approximately $ 57,000 and $ 162,000 , 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

10 unchanged sentences

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 six months ended June 30, 2023:

Prior to their release date, these restricted stock awards were 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 nine months ended September 30, 2023:

Restricted Awards

9 unchanged sentences

Expired/cancelled

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.

Outstanding at September 30, 2023

Exercisable/vested at September 30, 2023

There were no options exercised during the nine months ended September 30, 2023.

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

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

As of September 30, 2023, there was $ 166,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.

The cost will be recognized over 0.61 years, the remaining vesting period for the restricted stock awards.

NOTE 7 – 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

The investment in CoBank, ACB, or CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank

based on the underlying long-term debt agreements.

The settlement agreement receivable is related to the long-term portion of reimbursements due in years 2024 and 2025 as further discussed in Note 4 - Accounts Receivable.

(in thousands)

June 30, 2023

September 30, 2023

December 31, 2022

11 unchanged sentences

Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations.

Affiliated interest agreement deferred costs relate to the regulatory and administrative costs resulting from

efforts necessary to secure water allocations in Artesian Water Pennsylvania’s territory for the provision of service to the surrounding area and interconnection to Artesian Water Pennsylvania’s affiliate regulated water utility Artesian Water.

costs were specifically included for cost recovery pursuant to an Affiliated Interest Agreement between Artesian Water and Artesian Water Pennsylvania and were approved for recovery by the PAPUC and were reclassed from deferred costs to a regulatory

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.

Affiliated interest agreement deferred costs relate to the regulatory and administrative costs resulting from efforts necessary to secure water allocations

in Artesian Water Pennsylvania’s territory for the provision of service to the surrounding area and interconnection to Artesian Water Pennsylvania’s affiliate regulated water utility Artesian Water.

These costs were specifically included for cost

recovery pursuant to an Affiliated Interest Agreement between Artesian Water and Artesian Water Pennsylvania and were approved for recovery by the PAPUC and were reclassed from deferred costs to a regulatory asset in 2022.

Amortization of these

deferred costs will begin in the fourth quarter of 2023.

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

12 unchanged sentences

(in thousands)

June 30, 2023

September 30, 2023

December 31, 2022

12 unchanged sentences

will be returned to customers through future regulated rates.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the

Company’s water and wastewater properties.

Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a

regulated retirement liability.

Each year the liability is increased by an annual amount authorized by the DEPSC.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and

replacement of facilities and equipment on the Company’s water and wastewater properties.

Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage

value or proceeds received, is charged to a regulated retirement liability.

The annual amortization currently authorized by the DEPSC could be adjusted in future rate applications.

Deferred settlement refunds consist of reimbursements from the Delaware Sand and Gravel Remedial Trust for Artesian Water’s past capital and operating costs,

1 unchanged sentence

Gravel Landfill Superfund Site in groundwater that Artesian Water uses for public potable water supply, pursuant to the Settlement Agreement.

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.

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.

installments for approximately $ 2.5 million each were paid in August 2022 and July 2023.

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

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 two refunds occurred in October 2022 and August 2023.

Future customer refunds will occur no later than August

2024 and August 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 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.

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.

10 unchanged sentences

(in thousands)

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

Deferred income taxes (related to TCJA)

NOTE 10 – NET INCOME PER COMMON

SHARE AND EQUITY PER COMMON SHARE

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

Basic net income per share is based on the weighted average number of common shares outstanding.

1 unchanged sentence

average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards.

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

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

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Weighted average common shares outstanding during the period for diluted computation

For the three and six months ended June 30, 2023

For the three and nine months ended September 30, 2023

and 2022, no shares of

2 unchanged sentences

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

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.

As of September 30, 2023, 9,395,541 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding.

As of September 30, 2022 , 8,609,497 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 $ 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.

Equity per common share was $ 23.12 and $ 19.86 at September 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 September 30, 2023 and December 31, 2022 ,

respectively.

NOTE 11 – REGULATORY PROCEEDINGS

31 unchanged sentences

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.

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 a temporary base rate increase 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.

However, since the application is not expected to be resolved within the seven-month statutory timeframe, Artesian Water filed an interim rates application to place into effect on November 28, 2023 a temporary base rate increase of 15 % of gross water sales on an annual basis and reduce the 7.5% DSIC rate to zero, 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

6 unchanged sentences

customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0 % within an y 12-month period.

The following table summarizes (1) Artesian Water’s application with the DEPSC to collect DSIC rates and (2) the rate upon which eligible plant improvements are based:

The following table summarizes (1) Artesian Water’s application with the DEPSC to collect DSIC rates and (2) the rate upon which eligible plant improvements

Application Date

8 unchanged sentences

periodic audit by the DEPSC.

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.

For the three and nine months ended September 30, 2023, we earned approximately $ 1.4 million and $ 3.9 million in DSIC revenue, respectively.

For the three and nine months ended September 30, 2022, we earned approximately $ 1.4 million and $ 3.9 million in DSIC revenue,

respectively.

NOTE 12 – INCOME TAXES

17 unchanged sentences

During the third quarter of 2022 , the Company reversed approximately $ 10,000 in penalties and interest leaving a zero balance.

Through the third quarter of 2023, the Company has accrued approximately $8,000 in penalties and interest related to positions taken on the 2022 corporate income tax return.

The Company remains subject to examination by federal and state authorities for the tax years 2019 through 2022 .

7 unchanged sentences

Long-term Financial Liabilities

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

determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.

Under the fair value hierarchy, the fair value of the long-term debt in the table

below is classified as Level 2 measurements.

As of September 30, 2023 and December 31, 2022, all of the Company's outstanding lo ng-term debt interest rates were a fixed-rate.

fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.

Under the fair value hierarchy, the

fair value of the long-term debt in the table below is classified as Level 2 measurements.

Level 2 is valued using observable inputs other than quoted prices.

The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market

interest rates.

The fair values for long-term debt differ from the carrying values primarily due to

interest rates that differ from the current market interest rates.

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

(in thousands)

June 30, 2023

September 30, 2023

December 31, 2022

9 unchanged sentences

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 net proceeds to the Company from the offering, after deducting the underwriting discounts and commissions and other offering costs, were 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

3 unchanged sentences

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

5 unchanged sentences

acquire TESI, which provides regulated wastewater services in Delaware.

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

consisting of $ 3.1 million paid at closing.

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.” The purchase price allocation is

primarily attributed to intangible assets and utility plant assets acquired and liabilities assumed based on their respective estimated fair values.

The acquisition method of accounting requires, among other things, that assets acquired, and

liabilities assumed in a business purchase combination be recognized at their fair values as of the acquisition date.

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

note due from Middlesex, consisting of $ 3.1 million paid at closing.

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.”

The purchase price allocation is primarily attributed to intangible assets and utility plant assets acquired and liabilities assumed based on their respective estimated fair values.

The acquisition method of accounting requires, among other things,

that assets acquired, and liabilities assumed in a business purchase combination be recognized at their fair values as of the acquisition date.

The Company utilized a third-party valuation firm to assist with the fair value of the assets acquired.

A combination of methods

was used to determine the reasonableness of the purchase price:

A combination of methods was used to determine the reasonableness of the purchase price:

the cost approach and the comparative sales (market) approach.

Given the majority of the net assets acquired were tangible utility plant assets and related contributions in aid of

construction, the Company primarily utilized the cost approach to record the fair value of the assets as well as some of the assumed liabilities.

This approach values the underlying assets to derive market value based on the estimated replacement

cost, adjusted for depreciation.

Given the majority of the net assets acquired were tangible utility plant assets and related

contributions in aid of construction, the Company primarily utilized the cost approach to record the fair value of the assets as well as some of the assumed liabilities.

This approach values the underlying assets to derive market value based on the

estimated replacement cost, adjusted for depreciation.

Real property was valued using the comparative sales approach.

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

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

plant infrastructure.

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

1 unchanged sentence

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

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 results of operations for the three and nine months ended September 30, 2023 and September 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.

14 unchanged sentences

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.

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 water operating assets acquired from the Town of Clayton was finalized.

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

NOTE 16 – GEOGRAPHIC CONCENTRATION OF CUSTOMERS

2 unchanged sentences

MDPSC and the PAPUC.

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.

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

and Artesian Water Pennsylvania was serving approximately 40 customers.

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.

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

As of September 30, 2023, the number of wastewater customers served was approximately 8,000 , including one large industrial customer.

NOTE 17 – BUSINESS SEGMENT INFORMATION

17 unchanged sentences

The accounting policies of the operating segments are the same as those described in Note 2 – Basis of Presentation.

The Regulated Utility segment includes

inter-segment costs related to leased office space provided by one non-utility business, calculated on the lower of cost or market method, which

are eliminated to reconcile to the Consolidated Statements of Operations.

The Regulated Utility

segment includes inter-segment costs related to leased office space provided by one non-utility business, calculated on the lower of cost or

market method, which are eliminated to reconcile to the Consolidated Statements of Operations.

The Regulated Utility segment also allocates certain corporate costs to the non-utility businesses.

The measurement of depreciation, interest, and capital expenditures are

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 June 30, 2023 and June 30, 2022.

The measurement of depreciation, interest, and capital

expenditures are 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 September 30, 2023 and September 30, 2022.

(in thousands)

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Regulated Utility

10 unchanged sentences

Consolidated Income Taxes

September 30,

Regulated Utility

23 unchanged sentences

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

Approximately $ 2.5 million was

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 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.

Two installments of approximately $ 2.5

million each were paid in August 2022 and July 2023.

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

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.

first two refunds occurred in October 2022 and August 2023.

Future customer refunds will occur no later than August 2024 and August 2025.

The amount of the credit is calculated by dividing the amount of the reimbursement by the number of eligible

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 six months ended June 30, 2023 that is applicable to the Company.

There was no new guidance issued by the FASB during the nine months ended September 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