PART I – FINANCIAL INFORMATION [ITEM 1 – FINANCIAL STATEMENTS](index=4&type=section&id=Item%201%20-%20Financial%20Statements) The unaudited condensed consolidated financial statements detail the company's financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (In thousands) | ASSETS | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Utility plant, at original cost (less accumulated depreciation) | $705,949 | $668,031 | | Cash and cash equivalents | $6,458 | $1,309 | | Total current assets | $33,946 | $27,804 | | Total Assets | $761,811 | $719,791 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total stockholders' equity | $229,593 | $187,931 | | Long-term debt, net of current portion | $175,875 | $175,619 | | Total current liabilities | $27,176 | $44,069 | | Total Liabilities and Stockholders' Equity | $761,811 | $719,791 | - Total Assets increased by **$42.02 million (5.84%)** from December 31, 2022, to September 30, 2023, primarily driven by an increase in utility plant and cash and cash equivalents[12](index=12&type=chunk) - Total Stockholders' Equity increased by **$41.66 million (22.17%)** from December 31, 2022, to September 30, 2023, largely due to an increase in additional paid-in capital and retained earnings[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (In thousands, except per share amounts) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $26,570 | $26,582 | $74,317 | $73,780 | | Total Operating Expenses | $19,909 | $18,500 | $57,385 | $54,111 | | Operating income | $6,661 | $8,082 | $16,932 | $19,669 | | Net income applicable to common stock | $5,071 | $6,144 | $13,219 | $15,673 | | Basic Income per common share | $0.49 | $0.65 | $1.33 | $1.66 | | Diluted Income per common share | $0.49 | $0.65 | $1.33 | $1.65 | | Cash dividends per share of common stock | $0.2840 | $0.2729 | $0.8464 | $0.8133 | - For the three months ended September 30, 2023, Net income applicable to common stock decreased by **$1.073 million (17.5%)** compared to the same period in 2022, primarily due to increased operating expenses[15](index=15&type=chunk)[159](index=159&type=chunk) - For the nine months ended September 30, 2023, Net income applicable to common stock decreased by **$2.454 million (15.7%)** compared to the same period in 2022, despite a slight increase in total operating revenues[15](index=15&type=chunk)[174](index=174&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,360 | $25,050 | | Net cash used in investing activities | $(48,762) | $(42,952) | | Net cash provided by financing activities | $30,551 | $17,918 | | Net increase in cash and cash equivalents | $5,149 | $16 | | Cash and cash equivalents at end of period | $6,458 | $108 | - Net cash provided by operating activities decreased by **$1.69 million (6.75%)** for the nine months ended September 30, 2023, compared to the same period in 2022[17](index=17&type=chunk) - Net cash provided by financing activities significantly increased by **$12.63 million (70.49%)** for the nine months ended September 30, 2023, primarily due to net proceeds from the issuance of common stock[17](index=17&type=chunk)[175](index=175&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Condensed Consolidated Statements of Changes in Stockholders' Equity (In thousands) | Metric | Balance as of Dec 31, 2022 | Balance as of Sep 30, 2023 | | :--- | :--- | :--- | | Total Stockholders' Equity | $187,931 | $229,593 | | Additional Paid-in Capital | $107,143 | $143,076 | | Retained Earnings | $71,286 | $76,240 | | Class A Non-Voting Common Shares Outstanding | 8,621 | 9,396 | | Class B Voting Common Shares Outstanding | 881 | 881 | - Total Stockholders' Equity increased by **$41.66 million** from December 31, 2022, to September 30, 2023, driven by net income, common stock issuance, and dividend reinvestment[23](index=23&type=chunk)[111](index=111&type=chunk) - The Company completed a public offering of Class A Stock in May and June 2023, generating approximately **$36.2 million in net proceeds**, significantly increasing additional paid-in capital[23](index=23&type=chunk)[111](index=111&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1 – GENERAL](index=11&type=section&id=NOTE%201%20%E2%80%93%20GENERAL) The Company operates regulated utilities and non-utility businesses through several wholly-owned subsidiaries - Artesian Resources Corporation operates regulated water and wastewater utilities in Delaware, Maryland, and Pennsylvania through multiple subsidiaries[27](index=27&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - Non-utility subsidiaries focus on infrastructure design/build, contract operations, and real estate holdings[35](index=35&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - Artesian Storm Water Services, Inc, a non-utility subsidiary, was dissolved effective June 20, 2023[35](index=35&type=chunk)[40](index=40&type=chunk) [NOTE 2 – BASIS OF PRESENTATION](index=12&type=section&id=NOTE%202%20%E2%80%93%20BASIS%20OF%20PRESENTATION) The financial statements adhere to SEC Form 10-Q rules and regulated utility accounting principles - The unaudited condensed consolidated financial statements are prepared in accordance with SEC Form 10-Q rules[41](index=41&type=chunk) - Regulated utility subsidiaries maintain accounting records per state public service commissions and follow FASB ASC Topic 980[44](index=44&type=chunk) - Fair value determinations for the TESI and Clayton acquisitions were finalized on December 31, 2022[46](index=46&type=chunk) [NOTE 3 – REVENUE RECOGNITION](index=13&type=section&id=NOTE%203%20%E2%80%93%20REVENUE%20RECOGNITION) Revenue is recognized from both tariff-regulated services and non-tariff business activities - Artesian's operating revenues are primarily from regulated tariff services approved by state commissions[47](index=47&type=chunk) - Non-tariff revenues include Service Line Protection Plans, contract operations, and design/installation services[47](index=47&type=chunk) Disaggregated Revenues (in thousands) | Revenue Type | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Tariff Revenue | $24,272 | $24,073 | $67,693 | $66,204 | | Total Non-Tariff Revenue | $1,879 | $2,210 | $5,444 | $6,310 | | Other Operating Revenue | $419 | $299 | $1,180 | $1,266 | | **Total Operating Revenue** | **$26,570** | **$26,582** | **$74,317** | **$73,780** | [NOTE 4 – ACCOUNTS RECEIVABLE](index=17&type=section&id=NOTE%204%20%E2%80%93%20ACCOUNTS%20RECEIVABLE) Accounts receivable consist of customer balances, a settlement agreement, and developer receivables - Artesian Water is due approximately **$10.0 million** in reimbursements from the Delaware Sand and Gravel Remedial Trust, with **$5.0 million** remaining[66](index=66&type=chunk) Accounts Receivable (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Customer accounts receivable – water | $6,246 | $5,981 | | Customer accounts receivable – wastewater | $552 | $482 | | Settlement agreement receivable – short term | $2,516 | $2,532 | | Miscellaneous accounts receivable | $832 | $3,781 | | Developer receivable | $698 | $1,151 | | Less: provision for expected credit loss | $356 | $416 | | **Net accounts receivable** | **$10,488** | **$13,511** | - Net accounts receivable decreased by **$3.023 million (22.37%)** from December 31, 2022, to September 30, 2023, mainly due to a decline in miscellaneous receivables[67](index=67&type=chunk) [NOTE 5 – LEASES](index=18&type=section&id=NOTE%205%20%E2%80%93%20LEASES) The Company maintains long-term operating lease arrangements for land and office equipment - The Company leases land and office equipment under operating leases with remaining terms of **5 to 74 years**[69](index=69&type=chunk) Supplemental Balance Sheet Information Related to Leases (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Operating lease right-of-use assets | $498 | $467 | | Operating lease liabilities | $492 | $466 | | Weighted Average Remaining Lease Term | 57 years | 61 years | | Weighted Average Discount Rate | 5.0% | 5.0% | - Total undiscounted operating lease payments amount to **$1.568 million**[73](index=73&type=chunk) [NOTE 6 – STOCK COMPENSATION PLANS](index=20&type=section&id=NOTE%206%20%E2%80%93%20STOCK%20COMPENSATION%20PLANS) The 2015 Equity Compensation Plan governs the issuance of various stock-based awards to employees - The 2015 Equity Compensation Plan allows for grants of stock options, stock units, and other stock-based awards[74](index=74&type=chunk) - Compensation expense for restricted stock awards was approximately **$185,000** for the nine months ended September 30, 2023[75](index=75&type=chunk) Summary of Class A Stock Options and Restricted Awards (9 Months Ended Sep 30, 2023) | Metric | Options Shares | Restricted Stock Awards | | :--- | :--- | :--- | | Outstanding at January 1, 2023 | 6,750 | 5,000 | | Granted | — | 5,000 | | Exercised/vested and released | — | (5,000) | | Outstanding at September 30, 2023 | 6,750 | 5,000 | | Unrecognized expenses related to non-vested awards | $0 | $166,000 | [NOTE 7 – OTHER DEFERRED ASSETS](index=21&type=section&id=NOTE%207%20%E2%80%93%20OTHER%20DEFERRED%20ASSETS) Other deferred assets primarily consist of an investment in CoBank and a long-term settlement receivable Other Deferred Assets (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Investment in CoBank | $5,882 | $5,351 | | Settlement agreement receivable-long term | $2,496 | $4,991 | | Other deferred assets | $128 | $194 | | **Total** | **$8,506** | **$10,536** | - Other deferred assets decreased by **$2.03 million (19.27%)** due to the reduction in the long-term settlement agreement receivable[82](index=82&type=chunk) [NOTE 8 – REGULATORY ASSETS](index=22&type=section&id=NOTE%208%20%E2%80%93%20REGULATORY%20ASSETS) Regulatory assets represent deferred costs that are recoverable through future customer rates - Regulatory assets represent costs recoverable through customer rates, as approved by state commissions[84](index=84&type=chunk) Regulatory Assets, Net of Amortization (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Deferred contract costs and other | $221 | $227 | | Rate case studies | $138 | $57 | | Rate proceedings | $222 | — | | Deferred income taxes | $449 | $465 | | Debt related costs | $4,416 | $4,682 | | Deferred costs affiliated interest agreement | $1,124 | $1,114 | | Goodwill | $260 | $266 | | Deferred acquisition and franchise costs | $435 | $463 | | **Total** | **$7,265** | **$7,274** | - Amortization periods for regulatory assets range from **2.5 years to 80 years**[88](index=88&type=chunk) [NOTE 9 – REGULATORY LIABILITIES](index=23&type=section&id=NOTE%209%20%E2%80%93%20REGULATORY%20LIABILITIES) Regulatory liabilities are deferred items probable to be returned to customers through future rates - Regulatory liabilities represent amounts deferred for future return to customers[90](index=90&type=chunk) - Deferred settlement refunds of **$10.0 million** are being refunded to customers in annual installments[92](index=92&type=chunk) Regulatory Liabilities (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Utility plant retirement cost obligation | — | — | | Deferred settlement refunds | $4,991 | $7,487 | | Deferred income taxes (related to TCJA) | $20,836 | $21,234 | | **Total** | **$25,827** | **$28,721** | [NOTE 10 – NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE](index=23&type=section&id=NOTE%2010%20%E2%80%93%20NET%20INCOME%20PER%20COMMON%20SHARE%20AND%20EQUITY%20PER%20COMMON%20SHARE) This note provides the calculation for basic and diluted net income per common share Shares Used in Computing Basic and Diluted Net Income Per Share (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Weighted average common shares outstanding for basic computation | 10,276 | 9,477 | 9,929 | 9,451 | | Dilutive effect of employee stock options and awards | 3 | 15 | 4 | 22 | | Weighted average common shares outstanding for diluted computation | 10,279 | 9,492 | 9,933 | 9,473 | - Equity per common share increased to **$23.12** at September 30, 2023, from **$19.86** at December 31, 2022[98](index=98&type=chunk) [NOTE 11 – REGULATORY PROCEEDINGS](index=24&type=section&id=NOTE%2011%20%E2%80%93%20REGULATORY%20PROCEEDINGS) The Company's utilities are subject to state and federal regulations, with a pending rate case in Delaware - Artesian's utilities are regulated by the DEPSC, MDPSC, and PAPUC, and subject to federal environmental laws[100](index=100&type=chunk)[101](index=101&type=chunk) - On April 28, 2023, Artesian Water filed for a **23.84% (approximately $17.5 million)** annualized revenue increase in Delaware[102](index=102&type=chunk) - Artesian Water plans to implement a temporary **15% base rate increase** on November 28, 2023, subject to refund[102](index=102&type=chunk) [NOTE 12 – INCOME TAXES](index=25&type=section&id=NOTE%2012%20%E2%80%93%20INCOME%20TAXES) The Company accounts for deferred income taxes and recognizes liabilities for uncertain tax positions - Deferred income taxes are provided on temporary differences, with regulatory assets/liabilities recognized for ratemaking impacts[105](index=105&type=chunk) - The Company establishes reserves for uncertain tax positions and accrues related interest and penalties[106](index=106&type=chunk) - The Company is subject to examination by tax authorities for tax years **2019 through 2022**[106](index=106&type=chunk) [NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS](index=26&type=section&id=NOTE%2013%20%E2%80%93%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) Fair value for current financial instruments approximates carrying value, while long-term debt is estimated - Current assets and liabilities' carrying amounts approximate fair value due to their short maturity[109](index=109&type=chunk) Long-term Debt (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Carrying amount | $178,094 | $177,622 | | Estimated fair value | $148,652 | $155,425 | - The fair value of long-term debt is lower than its carrying amount, indicating higher current market interest rates[110](index=110&type=chunk) [NOTE 14 – COMMON STOCK OFFERING](index=26&type=section&id=NOTE%2014%20%E2%80%93%20COMMON%20STOCK%20OFFERING) The Company completed a common stock offering in mid-2023, raising funds for capital expenditures - In May 2023, the Company sold 695,650 shares of Class A Stock, generating approximately **$33.0 million** in net proceeds[111](index=111&type=chunk) - In June 2023, the underwriter's over-allotment option exercise yielded an additional **$3.2 million** in net proceeds[111](index=111&type=chunk) - Total net proceeds of approximately **$36.2 million** were used to repay short-term borrowings financing capital expenditures[112](index=112&type=chunk) [NOTE 15 – BUSINESS COMBINATIONS](index=27&type=section&id=NOTE%2015%20%E2%80%93%20BUSINESS%20COMBINATIONS) The Company completed two significant utility acquisitions in 2022, expanding its customer base - Artesian Wastewater acquired TESI in January 2022 for **$6.4 million**, expanding its customer base in Sussex County, Delaware[113](index=113&type=chunk) - Artesian Water purchased the Town of Clayton's water operating assets in May 2022 for **$5.0 million**[116](index=116&type=chunk) - Both acquisitions were accounted for as business combinations, with fair value determinations finalized by December 31, 2022[113](index=113&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk) [NOTE 16 – GEOGRAPHIC CONCENTRATION OF CUSTOMERS](index=28&type=section&id=NOTE%2016%20%E2%80%93%20GEOGRAPHIC%20CONCENTRATION%20OF%20CUSTOMERS) The Company's regulated utility customer base is concentrated across Delaware, Maryland, and Pennsylvania Customer Counts as of September 30, 2023 | Subsidiary | Service | Customers | | :--- | :--- | :--- | | Artesian Water | Water | ~95,600 | | Artesian Water Maryland | Water | ~2,600 | | Artesian Water Pennsylvania | Water | ~40 | | Artesian Wastewater & TESI | Wastewater | ~8,000 | - The majority of the Company's water customers are in Delaware, while wastewater services are primarily in Sussex County, Delaware[119](index=119&type=chunk)[120](index=120&type=chunk) [NOTE 17 – BUSINESS SEGMENT INFORMATION](index=28&type=section&id=NOTE%2017%20%E2%80%93%20BUSINESS%20SEGMENT%20INFORMATION) The Company's primary reportable segment is its Regulated Utility operations on the Delmarva Peninsula - The Company operates primarily through one reportable segment: **Regulated Utility**, encompassing water and wastewater services[121](index=121&type=chunk) - Non-utility businesses are aggregated and presented as 'Other' or 'Non-utility'[122](index=122&type=chunk) Segment Financials (in thousands) | Metric | Segment | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | Sep 30, 2023 Assets | | :--- | :--- | :--- | :--- | :--- | | Revenues | Regulated Utility | $24,877 | $69,377 | | | | Other (non-utility) | $1,747 | $5,101 | | | Operating Income | Regulated Utility | $6,387 | $16,104 | | | | Other (non-utility) | $274 | $828 | | | Assets | Regulated Utility | | | $749,834 | | | Other (non-utility) | | | $11,977 | [NOTE 18 – LEGAL PROCEEDINGS](index=29&type=section&id=NOTE%2018%20%E2%80%93%20LEGAL%20PROCEEDINGS) A Consent Decree provides for reimbursement of costs related to a Superfund site, with funds returned to customers - Artesian Water is involved in a Consent Decree regarding contamination from the Delaware Sand & Gravel Landfill Superfund Site[127](index=127&type=chunk)[128](index=128&type=chunk) - The Company will receive approximately **$10.0 million** for past costs, with **$5.0 million** remaining due by July 2025[129](index=129&type=chunk) - The DEPSC approved refunding these reimbursements to customers through annual installments[129](index=129&type=chunk) [NOTE 19 – IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS](index=30&type=section&id=NOTE%2019%20%E2%80%93%20IMPACT%20OF%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) No new accounting pronouncements in 2023 had a material impact on the Company's financial results - No new FASB guidance applicable to the Company was issued during the nine months ended September 30, 2023[130](index=130&type=chunk) - No accounting policy adopted in the first nine months of 2023 had a material impact on the Company's financial condition or results[190](index=190&type=chunk) [ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=30&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This analysis covers financial performance, liquidity, and capital resources, focusing on regulated utility operations [OVERVIEW](index=31&type=section&id=OVERVIEW) - Profitability is primarily driven by the regulated utility business, which comprised **93.4% of total operating revenues** for the nine months ended September 30, 2023[132](index=132&type=chunk) - Water sales are subject to seasonal weather fluctuations, while wastewater and non-utility businesses provide more stable revenue[132](index=132&type=chunk)[133](index=133&type=chunk) - The Company's strategy focuses on customer growth, revenue expansion, and strategic acquisitions[140](index=140&type=chunk) - Year-over-year customer growth was **1.3%** for Delaware water, **0.8%** for Maryland water, and **7.6%** for Delaware wastewater[136](index=136&type=chunk)[138](index=138&type=chunk) [Results of Operations – Analysis of the Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022.](index=33&type=section&id=Results%20of%20Operations%20%E2%80%93%20Analysis%20of%20the%20Three%20Months%20Ended%20September%2030%2C%202023%20Compared%20to%20the%20Three%20Months%20Ended%20September%2030%2C%202022.) - Total Operating Revenues remained flat at **$26.6 million** for the three months ended September 30, 2023[149](index=149&type=chunk) - Water sales revenue decreased by **$0.1 million (0.3%)** due to wetter weather patterns, partially offset by customer growth[151](index=151&type=chunk) - Utility operating expenses increased by **$1.2 million (11.1%)**, driven by higher payroll, maintenance, and administrative costs[153](index=153&type=chunk) - Net income applicable to common stock decreased by **$1.1 million (17.5%)** due to increased operating expenses[159](index=159&type=chunk) [Results of Operations – Analysis of the Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022.](index=34&type=section&id=Results%20of%20Operations%20%E2%80%93%20Analysis%20of%20the%20Nine%20Months%20Ended%20September%2030%2C%202023%20Compared%20to%20the%20Nine%20Months%20Ended%20September%2030%2C%202022.) - Total Operating Revenues increased by **$0.5 million (0.7%)** to $74.3 million for the nine months ended September 30, 2023[161](index=161&type=chunk) - Utility operating expenses increased by **$3.5 million (11.3%)**, primarily due to higher payroll, maintenance, and water treatment costs[165](index=165&type=chunk) - Non-utility operating revenue decreased by **$1.0 million (16.7%)** due to a construction contract nearing completion[164](index=164&type=chunk) - Net income applicable to common stock decreased by **$2.5 million (15.7%)**, impacted by increased operating and interest expenses[174](index=174&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=36&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - Primary liquidity sources included **$23.4 million** from operations, **$17.0 million** in contributions, and **$36.5 million** from stock issuance[175](index=175&type=chunk) - Capital expenditures for the first nine months of 2023 were **$48.8 million**, an increase from $36.7 million in 2022[176](index=176&type=chunk) Material Cash Requirements (in thousands) | Obligation | Less than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | First mortgage bonds (principal and interest) | $7,902 | $15,714 | $40,610 | $204,564 | $268,790 | | State revolving fund loans (principal and interest) | $964 | $1,906 | $1,704 | $7,636 | $12,210 | | Promissory note (principal and interest) | $960 | $1,923 | $1,924 | $9,893 | $14,700 | | Asset purchase contractual obligation (principal and interest) | $339 | $659 | $320 | — | $1,318 | | Operating leases | $34 | $68 | $65 | $1,401 | $1,568 | | Operating agreements | $76 | $112 | $109 | $749 | $1,046 | | Unconditional purchase obligations | $812 | $1,539 | $194 | — | $2,545 | | Tank painting contractual obligation | $626 | $470 | — | — | $1,096 | | **Total contractual cash obligations** | **$11,713** | **$22,391** | **$44,926** | **$224,243** | **$303,273** | - The Company has **$60 million** in variable rate lines of credit with no outstanding balances as of September 30, 2023[178](index=178&type=chunk)[179](index=179&type=chunk)[191](index=191&type=chunk) [ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=40&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Company is exposed to market risks from fluctuating interest rates and commodity prices - The Company is exposed to interest rate risk from fixed-rate long-term debt and **$60 million** in variable rate lines of credit[191](index=191&type=chunk) - An increase in variable interest rates, particularly SOFR, is expected to increase borrowing costs[191](index=191&type=chunk) - Commodity price risks are mitigated by cost recovery through customer rates and fixed-price supply contracts[191](index=191&type=chunk) [ITEM 4 – CONTROLS AND PROCEDURES](index=40&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2023 - Management concluded that disclosure controls and procedures were effective as of September 30, 2023[192](index=192&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[193](index=193&type=chunk) PART II – OTHER INFORMATION [ITEM 1 – LEGAL PROCEEDINGS](index=40&type=section&id=Item%201%20-%20Legal%20Proceedings) The Company does not expect ordinary course legal proceedings to materially affect its financial position - The Company does not anticipate a material impact from ordinary course legal proceedings[194](index=194&type=chunk) - Further details on legal proceedings are provided in Note 18 to the financial statements[194](index=194&type=chunk) [ITEM 1A – RISK FACTORS](index=40&type=section&id=Item%201A%20-%20Risk%20Factors) No material changes to the risk factors disclosed in the 2022 Annual Report have occurred - Readers should consider risk factors detailed in the Company's 2022 Annual Report on Form 10-K[195](index=195&type=chunk) - No material changes to the previously disclosed risk factors have occurred[195](index=195&type=chunk) [ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES](index=41&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) No unregistered sales or issuer purchases of equity securities occurred during the reporting period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities occurred[196](index=196&type=chunk) [ITEM 3 – DEFAULTS UPON SENIOR SECURITIES](index=41&type=section&id=Item%203%20%E2%80%93%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred[197](index=197&type=chunk) [ITEM 4 – MINE SAFETY DISCLOSURES](index=41&type=section&id=Item%204%20%E2%80%93%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the Company's operations - Mine safety disclosures are not applicable to the Company[198](index=198&type=chunk) [ITEM 5 – OTHER INFORMATION](index=41&type=section&id=Item%205%20%E2%80%93%20Other%20Information) No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter[199](index=199&type=chunk) [ITEM 6 – EXHIBITS](index=42&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists exhibits filed with the Form 10-Q, including governance documents and certifications - Exhibits include amended corporate governance documents and a restated line of credit agreement dated August 3, 2023[201](index=201&type=chunk) - Certifications from the CEO and CFO are filed, along with Inline XBRL versions of the financial statements[201](index=201&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number 000-18516 ARTESIAN RESOURCES CORPORATION -------------------------------------------------------------- (Exact nam ...

[Part I - Financial Information](index=4&type=section&id=Part%20I%20-%20Financial%20Information) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2023 [Item 1 - Financial Statements](index=4&type=section&id=Item%201%20-%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2023, along with accompanying notes on accounting policies and key events [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity as of March 31, 2023, and December 31, 2022 Condensed Consolidated Balance Sheet Highlights (Unaudited, in millions) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$725.79** | **$719.79** | | Total Current Assets | $21.61 | $27.80 | | Utility Plant, Net | $679.71 | $668.03 | | **Total Liabilities** | **$536.65** | **$531.86** | | Total Current Liabilities | $43.54 | $44.07 | | Long-term Debt, Net | $176.26 | $175.62 | | **Total Stockholders' Equity** | **$189.14** | **$187.93** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance, including revenues, expenses, operating income, and net income for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Operations Highlights (Unaudited, in millions, except per share amounts) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Operating Revenues | $22.50 | $22.19 | | Total Operating Expenses | $18.44 | $17.44 | | Operating Income | $4.06 | $4.74 | | **Net Income** | **$3.71** | **$4.48** | | **Diluted EPS** | **$0.39** | **$0.47** | | Cash Dividends Per Share | $0.2784 | $0.2675 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Cash Flows Highlights (Unaudited, in millions) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $10.51 | $11.82 | | Net Cash used in Investing Activities | ($16.74) | ($12.62) | | Net Cash from Financing Activities | $5.04 | $1.18 | | **Net (Decrease) Increase in Cash** | **($1.19)** | **$0.39** | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section illustrates the changes in stockholders' equity, reflecting net income, dividends, and other comprehensive income for the period - Stockholders' equity increased from **$187.9 million** at December 31, 2022, to **$189.1 million** at March 31, 2023, primarily driven by **$3.7 million** in net income, partially offset by **$2.6 million** in cash dividends declared[29](index=29&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, significant transactions, and segment information supporting the financial statements - The company's Regulated Utility segment, its primary reportable segment, accounts for over **92% of operating revenues** and includes regulated water and wastewater services in Delaware, Maryland, and Pennsylvania[121](index=121&type=chunk)[137](index=137&type=chunk) - On April 28, 2023, Artesian Water filed a request with the Delaware Public Service Commission for a **23.84% rate increase**, equivalent to approximately **$17.5 million** in annualized revenue, to support capital improvements and cover rising operational costs[132](index=132&type=chunk) - The company completed the acquisition of Tidewater Environmental Services, Inc. (TESI) in January 2022 for **$6.4 million** and the Town of Clayton's water system in May 2022 for **$5.0 million**, significantly expanding its wastewater and water customer base[34](index=34&type=chunk)[115](index=115&type=chunk) - A settlement with the Delaware Sand and Gravel Remedial Trust will reimburse Artesian for approximately **$10.0 million** in past costs, which will be refunded to customers through bill credits[69](index=69&type=chunk)[129](index=129&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202%20-%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial results, highlighting revenue growth, net income decrease due to higher costs, strategic expansion, liquidity, and capital expenditures [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section analyzes the company's operational performance, highlighting key revenue and expense drivers and their impact on net income for the quarter Q1 2023 vs Q1 2022 Performance (in millions) | Metric | Q1 2023 | Q1 2022 | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenues** | $22.5 | $22.2 | +1.4% | Increase in wastewater revenue from customer growth and Service Line Protection Plan revenue | | **Operating Expenses** | $12.8 | $11.9 | +7.4% | Increased payroll, maintenance, water treatment chemicals, and power costs | | **Net Income** | $3.7 | $4.5 | -17.4% | Higher operating expenses and a $0.5 million increase in interest charges | - Customer growth continued, with a **3.2% increase** in Delaware water customers and an **8.3% increase** in Delaware wastewater customers compared to March 31, 2022[142](index=142&type=chunk)[143](index=143&type=chunk) - The company's strategy focuses on expanding water and wastewater services across the Delmarva Peninsula through strategic acquisitions and partnerships with governments and developers[145](index=145&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's sources and uses of cash, capital expenditure plans, and available credit facilities to manage its financial obligations and growth initiatives - Primary liquidity sources for Q1 2023 were **$10.5 million** from operating activities and **$5.3 million** in net contributions and advances, including **$1.8 million** in state grant funds[163](index=163&type=chunk) - Capital expenditures increased significantly to **$16.8 million** in Q1 2023, compared to **$9.8 million** in Q1 2022, focusing on infrastructure rehabilitation and expansion[164](index=164&type=chunk) - The company maintains two lines of credit totaling **$60 million** (**$40 million** with Citizens Bank, **$20 million** with CoBank) to support liquidity needs. As of March 31, 2023, **$21.6 million** was drawn on these lines[166](index=166&type=chunk)[167](index=167&type=chunk)[170](index=170&type=chunk) [Item 3 - Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk on variable-rate credit lines and mitigates commodity price risk through cost recovery mechanisms and fixed-price contracts - The company is subject to interest rate risk on its **$60 million** of variable-rate lines of credit, with **$21.6 million** outstanding at March 31, 2023. Rising SOFR rates have increased and are expected to continue to increase borrowing costs[179](index=179&type=chunk) - Risk from commodity price increases (e.g., chemicals, electricity) is managed by recovering costs through rate increases and securing multi-year fixed-price supply contracts for electricity[179](index=179&type=chunk) [Item 4 - Controls and Procedures](index=38&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[181](index=181&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[182](index=182&type=chunk) [Part II - Other Information](index=38&type=section&id=Part%20II%20-%20Other%20Information) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [Item 1 - Legal Proceedings](index=38&type=section&id=Item%201%20-%20Legal%20Proceedings) The company is involved in ordinary course litigation, with management not expecting material financial impact, and refers to Note 17 for further details - The company states that the ultimate resolution of legal proceedings arising in the ordinary course of business is not expected to materially affect its business, financial position, or results of operations. It refers to Note 17 for a full discussion[183](index=183&type=chunk) [Item 1A - Risk Factors](index=38&type=section&id=Item%201A%20-%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the risk factors described in the company's Annual Report on Form 10-K for the year ended December 31, 2022[184](index=184&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on any unregistered sales of equity securities and the use of proceeds during the period - None[184](index=184&type=chunk) [Item 3 - Defaults Upon Senior Securities](index=38&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) This section addresses any defaults on senior securities during the reporting period - None[184](index=184&type=chunk) [Item 4 - Mine Safety Disclosures](index=38&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) This section provides disclosures related to mine safety, if applicable to the company's operations - Not applicable[184](index=184&type=chunk) [Item 5 - Other Information](index=38&type=section&id=Item%205%20-%20Other%20Information) This section includes any other material information not covered elsewhere in the report - None[184](index=184&type=chunk) [Item 6 - Exhibits](index=39&type=section&id=Item%206%20-%20Exhibits) This section lists all documents filed as exhibits to the Form 10-Q, including certifications and financial data - The report lists all exhibits filed, including certifications by the CEO and CFO (Exhibits 31.1, 31.2, 32) and the financial statements in Inline XBRL format (Exhibits 101)[185](index=185&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 000-18516 ARTESIAN RESOURCES CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R. ...

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20Financial%20Information) This section details the company's financial statements, management's discussion and analysis, market risk disclosures, and internal controls [Item 1 - Financial Statements](index=3&type=section&id=Item%201%20-%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Artesian Resources Corporation as of September 30, 2020, including balance sheets, statements of operations, cash flows, and changes in stockholders' equity, along with detailed notes on accounting policies [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows an increase in total assets to $587.4 million as of September 30, 2020, from $560.4 million at year-end 2019, primarily driven by utility plant assets, with total liabilities and stockholders' equity also increasing Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$587,431** | **$560,368** | **+4.8%** | | Net Utility Plant | $553,387 | $530,721 | +4.3% | | Total Current Assets | $17,852 | $14,207 | +25.7% | | **Total Liabilities** | **$421,577** | **$400,100** | **+5.4%** | | Lines of Credit | $20,078 | $7,500 | +167.7% | | Long-term Debt, net | $142,651 | $144,156 | -1.0% | | **Total Stockholders' Equity** | **$165,854** | **$160,268** | **+3.5%** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the nine months ended September 30, 2020, total operating revenues increased by 6.1% year-over-year to $66.4 million, driven by higher water sales, with net income applicable to common stock rising 15.9% to $13.7 million, resulting in a diluted EPS of $1.46 Statements of Operations Summary (in thousands, except per share amounts) | Metric | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | YoY Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $66,390 | $62,586 | +6.1% | | Operating Income | $17,454 | $15,333 | +13.8% | | Net Income | $13,703 | $11,826 | +15.9% | | Diluted EPS | $1.46 | $1.27 | +15.0% | | Cash Dividends per Share | $0.7488 | $0.7341 | +2.0% | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2020, net cash from operating activities was $14.3 million, while $31.7 million was used in investing activities, and $17.0 million was provided by financing activities Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $14,298 | $13,103 | | Net Cash Used in Investing Activities | ($31,667) | ($27,240) | | Net Cash Provided by Financing Activities | $17,022 | $14,302 | | **Net (Decrease) Increase in Cash** | **($347)** | **$165** | - Key investing activities included **$26.0 million** in capital expenditures and **$5.7 million** for acquisitions. Key financing activities included **$12.6 million** in net borrowings under lines of credit and **$8.1 million** in net advances for construction, offset by **$7.0 million** in dividend payments[10](index=10&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial results, covering subsidiaries, revenue recognition, COVID-19 impact, business combinations, regulatory proceedings, debt, and equity - Due to the COVID-19 pandemic, the company anticipates a longer receivable cycle and increased reserves for bad debt. An adjustment of **$0.5 million** was made to increase the reserve for bad debt as of September 30, 2020[49](index=49&type=chunk)[117](index=117&type=chunk) - The company completed two acquisitions in 2020: the water system assets from the Town of Frankford for **$3.6 million** and from the City of Delaware City for **$2.1 million**. These acquisitions added approximately **1,160** new water customers[112](index=112&type=chunk)[114](index=114&type=chunk) Disaggregated Revenue for Nine Months Ended Sep 30 (in thousands) | Revenue Source | 2020 | 2019 | YoY Change | | :--- | :--- | :--- | :--- | | Consumption charges | $36,217 | $34,320 | +5.5% | | Fixed fees | $20,192 | $19,525 | +3.4% | | DSIC | $3,810 | $3,129 | +21.8% | | Industrial wastewater services | $866 | $14 | +6085.7% | | Service line protection plans | $3,267 | $3,117 | +4.8% | | **Total Operating Revenue** | **$66,390** | **$62,586** | **+6.1%** | [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202%20-%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, strategic direction, and liquidity, highlighting revenue growth from water consumption and customer additions, COVID-19 impacts, growth through acquisitions, and significant capital investments [Overview and Strategic Direction](index=28&type=section&id=Overview%20and%20Strategic%20Direction) The company's profitability is primarily driven by water sales, constituting 87.6% of revenues for the first nine months of 2020, with a core strategy to expand water, wastewater, and Service Line Protection Plan services across the Delmarva Peninsula through acquisitions and partnerships - The company's strategy focuses on expanding its water and wastewater services through strategic acquisitions, partnerships with local governments, and developing new service areas. Recent acquisitions include systems from High Point Associates (2019), the Town of Frankford (2020), and the City of Delaware City (2020)[130](index=130&type=chunk)[132](index=132&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - As of September 30, 2020, the company served approximately **90,000** metered water customers in Delaware, an increase of **3,100** from the prior year. Wastewater customers in Delaware grew by **16.2%** to approximately **2,730**[126](index=126&type=chunk)[127](index=127&type=chunk) [COVID-19 Pandemic Impact](index=29&type=section&id=COVID-19%20Pandemic%20Impact) While the COVID-19 pandemic did not materially adversely affect financial results for the first nine months of 2020, management is actively monitoring its impact, as state-mandated moratoriums on service disconnections and late fees led to an anticipated longer receivable cycle and increased bad debt reserves - State government executive orders prohibiting service disconnections and late fees due to COVID-19 are expected to result in a longer receivable cycle and increased bad debt reserves[124](index=124&type=chunk) - The moratorium on service disconnections was lifted in Delaware in July 2020, with late fees and disconnections resuming in September and October 2020, respectively. Moratoriums in Maryland and Pennsylvania were lifted effective November 2020[124](index=124&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2020, revenues grew 6.1% to $66.4 million, and net income increased 15.9% to $13.7 million compared to the same period in 2019, driven by higher residential water consumption, customer growth, and increased industrial wastewater revenue, while operating expenses rose due to bad debt, payroll, and wastewater treatment costs Revenue Analysis - Nine Months Ended Sep 30, 2020 vs 2019 (in millions) | Revenue Category | Change (in millions) | Reason | | :--- | :--- | :--- | | Water Sales Revenue | +$3.0 | Increased residential consumption and customer growth. | | Other Utility Operating Revenue | +$0.9 | Increased industrial wastewater service revenue. | | **Total Operating Revenues** | **+$3.8** | **Overall growth across segments.** | - For the nine months ended Sep 30, 2020, utility operating expenses increased by **$0.7 million** (**2.3%**), primarily due to a **$0.6 million** increase in bad debt expense related to COVID-19 payment suspensions and a **$0.6 million** increase in payroll costs[158](index=158&type=chunk)[159](index=159&type=chunk) - Net income for the nine months ended Sep 30, 2020 increased by **$1.9 million** year-over-year, driven by a **$3.8 million** increase in operating revenues, which outpaced the **$1.7 million** increase in operating expenses and **$0.5 million** increase in interest expense[163](index=163&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources were cash from operations ($14.3 million), borrowings on lines of credit ($12.6 million), and developer contributions ($8.1 million), with capital expenditures totaling $31.7 million focused on infrastructure and acquisitions, and $39.9 million available on lines of credit Capital Expenditures - First Nine Months of 2020 (in millions) | Category | Amount | | :--- | :--- | | Transmission & Distribution Main Rehabilitation | $8.6 | | Treatment Facility Enhancements | $5.5 | | Acquisitions (Frankford & Delaware City) | $5.7 | | Wastewater Projects | $2.4 | | Governmental Highway Relocations | $3.0 | | Other (Equipment, Meters, etc.) | $6.5 | | **Total Capital Expenditures** | **$31.7** | - As of September 30, 2020, the company had a **$40 million** line of credit with Citizens Bank and a **$20 million** line of credit with CoBank, with a total of **$20.1 million** drawn and **$39.9 million** available[168](index=168&type=chunk)[169](index=169&type=chunk) - On December 17, 2019, Artesian Water issued a **$30 million** First Mortgage Bond, Series V, due 2049, with an annual interest rate of **4.42%**. Proceeds were used to pay down outstanding lines of credit[173](index=173&type=chunk)[174](index=174&type=chunk) [Item 3 - Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is primarily exposed to interest rate risk on its $60 million variable-rate lines of credit, with $20.1 million outstanding, and manages commodity price risk through cost recovery mechanisms and multi-year fixed-price electricity contracts - The company has interest rate exposure on **$60 million** of variable-rate lines of credit. An increase in interest rates would increase borrowing costs on the **$20.1 million** outstanding as of September 30, 2020[183](index=183&type=chunk) - Commodity price risk is managed through rate recovery mechanisms and multi-year fixed-price contracts for electricity supply, with current contracts effective through May 2022[177](index=177&type=chunk)[183](index=183&type=chunk) [Item 4 - Controls and Procedures](index=39&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter, and no material impact from the COVID-19 pandemic - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[184](index=184&type=chunk)[185](index=185&type=chunk) - No material changes to internal control over financial reporting occurred during the third quarter of 2020[185](index=185&type=chunk) [Part II - Other Information](index=40&type=section&id=Part%20II%20-%20Other%20Information) This section covers legal proceedings, updated risk factors, and a list of exhibits filed with the report [Item 1 - Legal Proceedings](index=40&type=section&id=Item%201%20-%20Legal%20Proceedings) The company is periodically involved in litigation arising in the ordinary course of business but does not believe the ultimate resolution of these matters will materially affect its business, financial position, or results of operations - There are no legal proceedings mentioned that are expected to have a material impact on the company[186](index=186&type=chunk) [Item 1A - Risk Factors](index=40&type=section&id=Item%201A%20-%20Risk%20Factors) This section updates the company's risk factors to include the potential adverse effects of pandemics, specifically COVID-19, highlighting impacts on operations, receivable cycles, bad debt reserves, and financial market volatility - A new risk factor was added to address the potential adverse effects of pandemics like COVID-19 on the company's business, financial condition, cash flows, and stock price[187](index=187&type=chunk)[188](index=188&type=chunk) - Specific risks from COVID-19 include a longer receivable cycle and increased bad debt reserves due to government-mandated prohibitions on service disconnections and late fees, which have since been lifted[190](index=190&type=chunk) [Item 6 - Exhibits](index=42&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements formatted in Inline eXtensible Business Reporting Language (iXBRL) - Exhibits filed include certifications by the CEO and CFO as required by the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act[193](index=193&type=chunk)

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the company's financial performance and condition for the reported periods [ITEM 1 – FINANCIAL STATEMENTS](index=3&type=section&id=Item%201%20%E2%80%93%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements of Artesian Resources Corporation, including balance sheets, statements of operations, cash flows, and changes in stockholders' equity, along with detailed notes explaining accounting policies, revenue recognition, leases, stock compensation, regulatory assets/liabilities, and recent acquisitions for the periods ended June 30, 2020 and December 31, 2019 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Total Assets | $575,899 | $560,368 | | Total Stockholders' Equity | $162,910 | $160,268 | | Long-term Debt, net | $143,183 | $144,156 | | Total Current Liabilities | $36,473 | $25,599 | - Total Assets increased by **$15.5 million** (**2.78%**) from December 31, 2019, to June 30, 2020, primarily driven by an increase in utility plant and other deferred assets[8](index=8&type=chunk) - Current liabilities saw a significant increase of **$10.874 million** (**42.48%**) from December 31, 2019, to June 30, 2020, mainly due to higher lines of credit and income taxes payable[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income over specific reporting periods | Metric (in thousands, except per share) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Operating Revenues | $21,752 | $20,652 | $41,653 | $40,037 | | Operating Income | $6,124 | $5,320 | $10,585 | $9,604 | | Net Income Applicable to Common Stock | $4,566 | $3,778 | $8,640 | $7,368 | | Basic EPS | $0.49 | $0.41 | $0.93 | $0.80 | | Diluted EPS | $0.49 | $0.41 | $0.92 | $0.79 | | Cash Dividends Per Share | $0.2496 | $0.2459 | $0.4992 | $0.4882 | - Total Operating Revenues increased by **5.3%** for the three months and **4.0%** for the six months ended June 30, 2020, compared to the same periods in 2019, primarily driven by water sales[11](index=11&type=chunk) - Net Income Applicable to Common Stock increased by **20.8%** for the three months and **17.3%** for the six months ended June 30, 2020, year-over-year[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the sources and uses of cash from operating, investing, and financing activities | Metric (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $11,837 | $8,928 | | Net Cash Used in Investing Activities | $(20,550) | $(18,073) | | Net Cash Provided by Financing Activities | $8,490 | $9,037 | | Net Decrease in Cash and Cash Equivalents | $(223) | $(108) | | Cash and Cash Equivalents at End of Period | $373 | $185 | - Net cash provided by operating activities increased by **$2.909 million** (**32.58%**) for the six months ended June 30, 2020, compared to the same period in 2019, primarily due to higher net income and changes in working capital[12](index=12&type=chunk) - Net cash used in investing activities increased by **$2.477 million** (**13.71%**) due to higher capital expenditures and investments in acquisitions, including the Frankford Water System[12](index=12&type=chunk)[102](index=102&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section tracks changes in the company's equity, including retained earnings and capital contributions | Metric (in thousands) | December 31, 2019 | June 30, 2020 | | :-------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $160,268 | $162,910 | | Retained Earnings | $49,165 | $50,831 | | Additional Paid-in Capital | $101,811 | $102,746 | - Total stockholders' equity increased by **$2.642 million** from December 31, 2019, to June 30, 2020, driven by net income and issuance of common stock through dividend reinvestment and employee plans, partially offset by cash dividends declared[19](index=19&type=chunk)[20](index=20&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, significant transactions, and financial statement line items [NOTE 1 – GENERAL (Company Overview and Subsidiaries)](index=11&type=section&id=NOTE%201%20%E2%80%93%20GENERAL) This note describes Artesian Resources Corporation's business, its wholly-owned subsidiaries, and their primary services - Artesian Resources Corporation operates through eight wholly-owned subsidiaries, primarily providing water and wastewater services in Delaware, Maryland, and Pennsylvania[21](index=21&type=chunk)[22](index=22&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - Key regulated subsidiaries include Artesian Water Company, Inc. (largest public water utility in Delaware), Artesian Wastewater Management, Inc., Artesian Water Maryland, Inc., and Artesian Water Pennsylvania, Inc[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk) - Non-regulated subsidiaries (Artesian Utility Development, Artesian Development Corporation, Artesian Storm Water Services) focus on infrastructure design/build, contract operations, real estate, and storm water management[27](index=27&type=chunk)[28](index=28&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [NOTE 2 – BASIS OF PRESENTATION](index=12&type=section&id=NOTE%202%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note explains the accounting principles and management's estimates used in preparing the financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules for Form 10-Q, with certain information condensed or omitted compared to annual statements[33](index=33&type=chunk) - Management makes estimates and assumptions, particularly regarding lease agreements and the impact of the COVID-19 pandemic on credit losses and bad debt reserves due to executive orders prohibiting late fees and service disconnections[36](index=36&type=chunk)[37](index=37&type=chunk) [NOTE 3 – REVENUE RECOGNITION](index=13&type=section&id=NOTE%203%20%E2%80%93%20REVENUE%20RECOGNITION) This note details the company's revenue sources, recognition policies, and the impact of COVID-19 on receivables - Operating revenues are primarily from tariff-based contract services (water consumption, industrial wastewater, fixed fees, DSIC) approved by state Public Service Commissions[39](index=39&type=chunk) - Non-tariff revenues include Service Line Protection Plan (SLP Plan) fees, water/wastewater contract operations, and inspection fees[39](index=39&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) | Revenue Type (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Tariff Revenue | $20,128 | $18,921 | $38,331 | $36,604 | | Total Non-Tariff Revenue | $1,300 | $1,420 | $2,706 | $2,821 | | Other Operating Revenue | $324 | $311 | $616 | $612 | | Total Operating Revenue | $21,752 | $20,652 | $41,653 | $40,037 | - Due to COVID-19, the Company anticipates a longer receivable cycle and increased bad debt reserves, as state executive orders prohibit service disconnections and late fees for non-payment[45](index=45&type=chunk)[103](index=103&type=chunk) [NOTE 4 – LEASES](index=17&type=section&id=NOTE%204%20%E2%80%93%20LEASES) This note outlines the company's operating lease agreements, associated assets, and liabilities - The Company leases land and office equipment under operating leases with terms ranging from **2** to **77 years**, some including automatic extension options[57](index=57&type=chunk) | Lease Metric | June 30, 2020 | | :---------------------------- | :------------ | | Operating lease right-of-use assets | $469 thousand | | Total operating lease liabilities | $460 thousand | | Weighted Average Remaining Lease Term | 58 years | | Weighted Average Discount Rate | 5.0% | - Total undiscounted operating lease payments amount to **$1.465 million**, with **$42 thousand** due in 2020 and **$1.317 million** thereafter[63](index=63&type=chunk) [NOTE 5 – STOCK COMPENSATION PLANS](index=18&type=section&id=NOTE%205%20%E2%80%93%20STOCK%20COMPENSATION%20PLANS) This note describes the company's equity compensation plans, including stock options and restricted stock awards - The 2015 Equity Compensation Plan authorizes grants of incentive stock options, nonqualified stock options, stock units, stock awards, and dividend equivalents[64](index=64&type=chunk) - Compensation expense for restricted stock awards was **$45,000** for the three months and **$90,000** for the six months ended June 30, 2020[65](index=65&type=chunk) | Stock Compensation (June 30, 2020) | Options (Shares) | Restricted Stock Awards (Shares) | | :--------------------------------- | :--------------- | :------------------------------- | | Outstanding at January 1, 2020 | 153,250 | 5,000 | | Granted | — | 5,000 | | Exercised/Vested and Released | (25,000) | (5,000) | | Outstanding at June 30, 2020 | 128,250 | 5,000 | | Weighted Average Exercise Price (Options) | $20.73 | N/A | | Weighted Average Remaining Life (Options) | 2.438 years | N/A | | Aggregate Intrinsic Value (Options) | $1,995 thousand | N/A | | Unrecognized Expenses (Restricted Stock) | — | $148 thousand | [NOTE 6 – OTHER DEFERRED ASSETS](index=19&type=section&id=NOTE%206%20%E2%80%93%20OTHER%20DEFERRED%20ASSETS) This note details other deferred assets, including investments and goodwill from acquisitions - Other deferred assets include an investment in CoBank (**$4.374 million** at June 30, 2020) and goodwill (**$1.220 million** at June 30, 2020) resulting from the acquisition of water assets from the Town of Frankford[72](index=72&type=chunk)[73](index=73&type=chunk) [NOTE 7 - REGULATORY ASSETS](index=19&type=section&id=NOTE%207%20-%20REGULATORY%20ASSETS) This note explains regulatory assets, representing costs recoverable through future customer rates - Regulatory assets represent expenses recoverable through customer rates, deferred and amortized over future periods as permitted by regulatory agencies (DEPSC, MDPSC, PAPUC)[74](index=74&type=chunk) | Regulatory Asset (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------------ | :------------ | :---------------- | | Postretirement benefit obligation | $51 | $51 | | Deferred income taxes | $378 | $386 | | Expense of rate case studies | $22 | $27 | | Debt related costs | $5,398 | $5,556 | | Goodwill | $284 | $288 | | Deferred acquisition and franchise costs | $564 | $583 | | Total Regulatory Assets, net | $6,697 | $6,891 | [NOTE 8 – REGULATORY LIABILITIES](index=20&type=section&id=NOTE%208%20%E2%80%93%20REGULATORY%20LIABILITIES) This note describes regulatory liabilities, representing amounts to be returned to customers through future rates - Regulatory liabilities represent excess cost recovery or other deferred items that are probable to be returned to customers through future regulated rates[80](index=80&type=chunk) - A significant portion of regulatory liabilities (**$21.777 million** at June 30, 2020) is related to deferred income taxes from the Tax Cuts and Jobs Act (TCJA), amortized over **49.5 years**[82](index=82&type=chunk)[84](index=84&type=chunk) | Regulatory Liability (in thousands) | June 30, 2020 | December 31, 2019 | | :---------------------------------- | :------------ | :---------------- | | Utility plant retirement cost obligation | $192 | $247 | | Deferred income taxes (related to TCJA) | $21,777 | $21,999 | | Total Regulatory Liabilities | $21,969 | $22,246 | [NOTE 9 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE](index=21&type=section&id=NOTE%209%20-%20NET%20INCOME%20PER%20COMMON%20SHARE%20AND%20EQUITY%20PER%20COMMON%20SHARE) This note provides details on basic and diluted earnings per share and equity per common share | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic Shares Outstanding | 9,326 | 9,276 | 9,311 | 9,267 | | Diluted Shares Outstanding | 9,367 | 9,324 | 9,357 | 9,319 | - Equity per common share was **$17.50** at June 30, 2020, up from **$17.28** at December 31, 2019[87](index=87&type=chunk) [NOTE 10 - REGULATORY PROCEEDINGS](index=21&type=section&id=NOTE%2010%20-%20REGULATORY%20PROCEEDINGS) This note outlines the regulatory environment and rate-setting mechanisms for the company's utility operations - The Company's utilities are regulated by the DEPSC, MDPSC, and PAPUC, which establish rates to cover operating and investment costs[88](index=88&type=chunk)[89](index=89&type=chunk) - Delaware law permits semi-annual increases for distribution system improvements through a DSIC, which generated **$1.3 million** and **$2.4 million** in revenue for the three and six months ended June 30, 2020, respectively[92](index=92&type=chunk)[93](index=93&type=chunk) | DSIC Application | 11/28/2018 | 05/29/2019 | 11/15/2019 | 05/29/2020 | | :--------------- | :--------- | :--------- | :--------- | :--------- | | DEPSC Approval Date | 12/20/2018 | 06/18/2019 | 12/12/2019 | 06/17/2020 | | Effective Date | 01/01/2019 | 07/01/2019 | 01/01/2020 | 07/01/2020 | | Cumulative DSIC Rate | 5.55% | 7.41% | 7.50% | 7.41% | [NOTE 11 – INCOME TAXES](index=22&type=section&id=NOTE%2011%20%E2%80%93%20INCOME%20TAXES) This note details the company's deferred income taxes and uncertain tax positions - Deferred income taxes are provided for temporary differences between tax basis and financial statement amounts, with rate-regulated utilities recognizing regulatory liabilities/assets for deferred taxes[94](index=94&type=chunk) - The Company accrued approximately **$10,100** in penalties and interest for uncertain tax positions for the six months ended June 30, 2020, and is subject to examination by federal and state authorities for tax years 2016-2019[95](index=95&type=chunk) [NOTE 12 – FAIR VALUE OF FINANCIAL INSTRUMENTS](index=23&type=section&id=NOTE%2012%20%E2%80%93%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note discusses the fair value measurements of the company's financial instruments, particularly long-term debt - Current assets and liabilities approximate fair value due to their short maturity[98](index=98&type=chunk) | Long-term Debt (in thousands) | June 30, 2020 | December 31, 2019 | | :---------------------------- | :------------ | :---------------- | | Carrying amount | $144,982 | $145,862 | | Estimated fair value | $173,779 | $157,710 | - The fair value of long-term debt differs from carrying values due to differences between fixed interest rates and current market rates, classified as Level 2 measurements[98](index=98&type=chunk) [NOTE 13 – RELATED PARTY TRANSACTIONS](index=23&type=section&id=NOTE%2013%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note discloses transactions with related parties, including legal services from a director's firm - The Company utilized legal services from Morris Nichols Arsht & Tunnell (MNAT), where a director, Mr. Michael Houghton, is a Partner[99](index=99&type=chunk) | Payments to MNAT (in thousands) | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | | :------------------------------ | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Legal and director services | $109 | $228 | $97 | $123 | [NOTE 14 – BUSINESS COMBINATIONS](index=24&type=section&id=NOTE%2014%20%E2%80%93%20BUSINESS%20COMBINATIONS) This note details recent acquisitions of water system operating assets and their accounting treatment - On April 2, 2020, Artesian Water acquired the water system operating assets from the Town of Frankford for **$3.6 million**, serving approximately **360 customers**[102](index=102&type=chunk) - The acquisition was accounted for as a business combination, with the purchase price primarily attributed to utility plant assets, pending final valuation[102](index=102&type=chunk) [NOTE 15 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS](index=24&type=section&id=NOTE%2015%20-%20IMPACT%20OF%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note describes the impact of new accounting guidance on credit losses and bad debt reserves - New FASB guidance on credit losses (effective after December 15, 2019) is primarily applicable to accounts receivable[103](index=103&type=chunk) - An adjustment of **$0.3 million** was made to increase the reserve for bad debt as of June 30, 2020, due to COVID-19 related executive orders prohibiting service disconnections and late fees[103](index=103&type=chunk) [NOTE 16 - SUBSEQUENT EVENT](index=24&type=section&id=NOTE%2016%20-%20SUBSEQUENT%20EVENT) This note reports a significant event occurring after the reporting period, specifically a water system acquisition - On August 3, 2020, Artesian Water completed the purchase of water system operating assets from the City of Delaware City for **$2.1 million**, serving approximately **800 customers**[104](index=104&type=chunk) [ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=25&type=section&id=Item%202%20-%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of the Company's financial performance, strategic direction, and the impact of the COVID-19 pandemic. It details the results of operations for the three and six months ended June 30, 2020, compared to 2019, highlighting revenue and expense drivers, and discusses liquidity and capital resources [CAUTION REGARDING FORWARD-LOOKING STATEMENTS](index=25&type=section&id=CAUTION%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns about forward-looking statements and outlines key risks and uncertainties affecting future results - The report contains forward-looking statements regarding financial condition, operations, growth plans, regulatory decisions, and the impact of COVID-19, which involve risks and uncertainties[106](index=106&type=chunk) - Key risk factors include changes in weather, contractual obligations, government policies, regulatory approvals, economic conditions, and the ongoing impact of the COVID-19 pandemic[106](index=106&type=chunk) [RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2020](index=25&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20PERIOD%20ENDED%20JUNE%2030%2C%202020) This section analyzes the company's operational performance for the reported period, detailing revenue and expense drivers [OVERVIEW](index=25&type=section&id=OVERVIEW) This overview highlights the primary drivers of profitability and strategic growth areas for the company - Profitability is primarily driven by water sales, which constituted **88.3%** of total operating revenues for the six months ended June 30, 2020[107](index=107&type=chunk) - The Company seeks growth in wastewater services and non-regulated contract operations (water/wastewater operations, SLP Plans, design/construction/engineering services) to diversify revenue streams and mitigate weather-related fluctuations[107](index=107&type=chunk)[108](index=108&type=chunk) [COVID-19 Pandemic](index=26&type=section&id=COVID-19%20Pandemic) This section assesses the impact of the COVID-19 pandemic on financial results and future operational considerations - The COVID-19 pandemic did not materially adversely affect financial results for the six months ended June 30, 2020, but its full impact remains uncertain and could affect future quarters[110](index=110&type=chunk)[112](index=112&type=chunk) - State executive orders prohibiting service disconnections and late fees are expected to lead to a longer receivable cycle and increased bad debt reserves, with potential changes in revenue mix between commercial and residential customers[111](index=111&type=chunk) - DEPSC and MDPSC authorized deferred regulatory treatment for incremental COVID-19 related costs[111](index=111&type=chunk) [Water Division](index=26&type=section&id=Water%20Division) This section provides key metrics and operational details for the company's water utility services - Metered water customers in Delaware increased by approximately **2,350** to **88,900 customers** as of June 30, 2020, compared to June 30, 2019[114](index=114&type=chunk) - Approximately **3.9 billion gallons** of water were distributed in Delaware systems and **63.1 million gallons** in Maryland systems for the six months ended June 30, 2020[114](index=114&type=chunk) [Wastewater Division](index=26&type=section&id=Wastewater%20Division) This section details the growth and operational developments within the company's wastewater services - Delaware wastewater customers increased by approximately **380** (**16.7%**) to **2,650 customers** as of June 30, 2020, compared to June 30, 2019[115](index=115&type=chunk) - Artesian Wastewater received an operations permit in March 2020 for a disposal facility to provide treated process wastewater disposal services for an industrial customer (Allen Harim) at **1.5 mgd**, anticipated to be operational in Q3 2020[23](index=23&type=chunk)[126](index=126&type=chunk) [Non-Regulated Division](index=26&type=section&id=Non-Regulated%20Division) This section describes the activities and customer enrollment in the company's non-regulated services - The non-regulated division, primarily Artesian Utility, provides contract water/wastewater operations and Service Line Protection (SLP) Plans[116](index=116&type=chunk) | SLP Plan Enrollment (June 30, 2020) | Number of Customers | % of Eligible Water Customers | | :---------------------------------- | :------------------ | :---------------------------- | | WSLP Plan | 20,600 | 24.2% | | SSLP Plan | 16,000 | 18.9% | | ISLP Plan | 7,300 | 8.6% | [Strategic Direction](index=27&type=section&id=Strategic%20Direction) This section outlines the company's growth strategy, including customer expansion and recent acquisitions - The Company's strategy focuses on increasing customer growth, revenues, earnings, and dividends by expanding water, wastewater, and SLP Plan services across the Delmarva Peninsula through strategic acquisitions and partnerships[117](index=117&type=chunk)[118](index=118&type=chunk) - Recent acquisitions include utility assets from High Point Associates (Oct 2019), the Frankford Water System (April 2020 for **$3.6 million**), and the Delaware City Water System (Aug 2020 for **$2.1 million**)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Significant growth opportunities are foreseen in the regulated wastewater division, with plans to expand service areas using larger regional facilities and convert smaller treatment facilities into pump stations for efficiency[124](index=124&type=chunk) [Results of Operations – Analysis of the Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019.](index=29&type=section&id=Results%20of%20Operations%20%E2%80%93%20Analysis%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202019.) This section analyzes the financial performance for the three-month period, detailing revenue and expense changes - Operating revenues increased by **$1.1 million** (**5.3%**) to **$21.8 million**, primarily due to a **$1.2 million** (**6.8%**) increase in water sales revenue from residential consumption and higher DSIC and fixed fee revenues[130](index=130&type=chunk) - Operating expenses (excluding depreciation and income taxes) increased by **$0.1 million** (**1.0%**), driven by a **$0.3 million** increase in bad debt expense due to COVID-19 related non-payment prohibitions[132](index=132&type=chunk)[134](index=134&type=chunk) - Net income applicable to common stock increased by **$0.8 million**, reflecting higher operating revenues and other income, partially offset by increased operating and interest expenses[137](index=137&type=chunk) [Results of Operations – Analysis of the Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019.](index=30&type=section&id=Results%20of%20Operations%20%E2%80%93%20Analysis%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202019.) This section analyzes the financial performance for the six-month period, detailing revenue and expense changes - Operating revenues increased by **$1.6 million** (**4.0%**) to **$41.7 million**, mainly from a **$1.7 million** (**4.8%**) increase in water sales revenue due to residential consumption and higher DSIC and fixed fee revenues[137](index=137&type=chunk) - Operating expenses (excluding depreciation and income taxes) increased by **$0.2 million** (**1.0%**), with a **$0.3 million** increase in bad debt expense and **$0.3 million** in payroll/employee benefits, partially offset by decreases in general administration and purchased water expenses[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Net income applicable to common stock increased by **$1.3 million**, driven by higher operating revenues and other income, partially offset by increased operating and interest expenses[147](index=147&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=32&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's cash flow, funding sources, capital expenditures, and debt obligations - Primary liquidity sources for the six months ended June 30, 2020, included **$11.8 million** from operating activities, **$5.7 million** from contributions/advances, **$7.2 million** from lines of credit, and **$0.9 million** from common stock issuance[148](index=148&type=chunk) - Capital expenditures were **$20.6 million** for the first six months of 2020, up from **$18.2 million** in 2019, focusing on transmission/distribution, treatment facilities, and the Frankford acquisition[149](index=149&type=chunk) | Contractual Obligations (in thousands) | Less than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | Total | | :------------------------------------- | :--------------- | :-------- | :-------- | :------------ | :---- | | First mortgage bonds (principal and interest) | $6,650 | $13,218 | $13,115 | $194,734 | $227,717 | | State revolving fund loans (principal and interest) | $1,002 | $838 | $674 | $3,963 | $6,477 | | Promissory note (principal and interest) | $960 | $1,921 | $1,921 | $13,018 | $17,820 | | Operating leases | $42 | $60 | $46 | $1,317 | $1,465 | | Operating agreements | $72 | $85 | $78 | $890 | $1,125 | | Unconditional purchase obligations | $3,881 | $2,042 | $57 | — | $5,980 | | Total contractual cash obligations | $12,607 | $18,164 | $15,891 | $213,922 | $260,584 | - The Company had **$40 million** and **$20 million** lines of credit with Citizens Bank and CoBank, respectively, with **$32.8 million** and **$12.5 million** available as of June 30, 2020, and expects to renew them[151](index=151&type=chunk)[152](index=152&type=chunk) [ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=31&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Company is exposed to market risks primarily from fluctuating interest rates on its debt and changes in commodity prices. It manages interest rate risk through fixed-rate long-term debt and mitigates commodity price risk by recovering costs through rate increases and multi-year fixed-price supply contracts for electricity - The Company is exposed to interest rate risk on its **$60 million** variable rate lines of credit, with **$14.7 million** outstanding at June 30, 2020[164](index=164&type=chunk) - Commodity price risks (chemicals, electricity) are mitigated by the ability to recover costs through customer rate increases and multi-year fixed-price electric supply contracts[158](index=158&type=chunk)[164](index=164&type=chunk) [ITEM 4 – CONTROLS AND PROCEDURES](index=35&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2020, concluding they were effective. No material changes to internal control over financial reporting occurred during the quarter, and the COVID-19 pandemic had no impact on these controls - Disclosure controls and procedures were evaluated as effective, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[166](index=166&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter, and the COVID-19 pandemic had no impact on these controls[167](index=167&type=chunk) [PART II – OTHER INFORMATION](index=32&type=section&id=Part%20II%20-%20Other%20Information) This section provides additional information not covered in the financial statements, including legal matters and risk factors [ITEM 1 – LEGAL PROCEEDINGS](index=35&type=section&id=Item%201%20%E2%80%93%20LEGAL%20PROCEEDINGS) The Company is periodically involved in legal proceedings arising in the ordinary course of business. Management does not believe the ultimate resolution of these matters will materially affect its business, financial position, or results of operations, though significant litigation expense and diversion of management attention may occur - The Company is involved in ordinary course legal proceedings, which are not expected to materially affect business, financial position, or results of operations[168](index=168&type=chunk) - Potential risks include significant litigation expense and diversion of management attention, regardless of the outcome[168](index=168&type=chunk) [ITEM 1A – RISK FACTORS](index=35&type=section&id=Item%201A%20%E2%80%93%20RISK%20FACTORS) This section updates the risk factors from the annual report, specifically highlighting the adverse impact of pandemics like COVID-19 on the Company's business, financial condition, cash flows, and stock price. It notes that state executive orders related to COVID-19 may lead to longer receivable cycles and increased bad debt reserves - The COVID-19 pandemic is a new material risk factor that may adversely affect the Company's business, results of operations, financial condition, cash flows, and stock price[169](index=169&type=chunk)[170](index=170&type=chunk) - State executive orders prohibiting service disconnections and late fees due to COVID-19 are anticipated to result in a longer receivable cycle and increased bad debt reserves[171](index=171&type=chunk) - Concerns over the economic impact of COVID-19 have caused extreme volatility in financial markets, potentially impacting the Company's stock price[171](index=171&type=chunk) [ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=36&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the current report [ITEM 3 – DEFAULTS UPON SENIOR SECURITIES](index=36&type=section&id=Item%203%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the current report [ITEM 4 – MINE SAFETY DISCLOSURES](index=36&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This item is not applicable to the current report [ITEM 5 – OTHER INFORMATION](index=36&type=section&id=Item%205%20Other%20Information) This item is not applicable to the current report [ITEM 6 – EXHIBITS](index=37&type=section&id=Item%206%20-%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including financing agreements, general obligation notes, an asset purchase agreement, and certifications from the Chief Executive Officer and Chief Financial Officer - Exhibits include financing agreements and general obligation notes with the Delaware Drinking Water State Revolving Fund for water main transmission replacements[174](index=174&type=chunk) - An Asset Purchase Agreement dated June 11, 2020, between Artesian Water Company Inc. and the City of Delaware City is filed as an exhibit[174](index=174&type=chunk) - Certifications from the CEO and CFO (Rule 13a–14(a) and 13a-14(b)) are included[174](index=174&type=chunk)

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the period [ITEM 1 – FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201%20%E2%80%93%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, cash flows, and changes in stockholders' equity, along with detailed notes explaining the company's accounting policies, revenue recognition, regulatory assets and liabilities, stock compensation, and the impact of recent events like COVID-19 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time **Condensed Consolidated Balance Sheets (Amounts in thousands):** | Item | March 31, 2020 | December 31, 2019 | | :----------------------------------- | :------------- | :---------------- | | Total Assets | $565,587 | $560,368 | | Total Stockholders' Equity | $162,354 | $160,268 | | Total Current Assets | $12,679 | $14,207 | | Total Current Liabilities | $27,923 | $25,599 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over a period, showing revenues, expenses, and net income **Condensed Consolidated Statements of Operations (Amounts in thousands, except per share amounts):** | Item | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change ($k) | Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :---------- | :--------- | | Total Operating Revenues | $19,901 | $19,386 | $515 | 2.7% | | Operating Income | $4,462 | $4,284 | $178 | 4.2% | | Net Income Applicable to Common Stock | $4,074 | $3,590 | $484 | 13.5% | | Basic Income per Common Share | $0.44 | $0.39 | $0.05 | 12.8% | | Diluted Income per Common Share | $0.44 | $0.39 | $0.05 | 12.8% | | Cash Dividends per Share of Common Stock | $0.2496 | $0.2423 | $0.0073 | 3.0% | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities over a period **Condensed Consolidated Statements of Cash Flows (Amounts in thousands):** | Item | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net Cash Provided by Operating Activities | $7,129 | $7,621 | | Net Cash Used in Investing Activities | $(9,182) | $(9,064) | | Net Cash Provided by Financing Activities | $1,787 | $1,415 | | Net Decrease in Cash and Cash Equivalents | $(266) | $(28) | | Cash and Cash Equivalents at End of Period | $330 | $265 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section illustrates the changes in the company's equity accounts, including net income, dividends, and stock issuances **Condensed Consolidated Statements of Changes in Stockholders' Equity (Amounts in thousands):** | Item | March 31, 2020 | March 31, 2019 | | :----------------------------------- | :------------- | :------------- | | Balance as of December 31 | $160,268 | $153,251 | | Net Income | $4,074 | $3,590 | | Cash Dividends Declared | $(2,319) | $(2,241) | | Issuance of Common Stock (Dividend reinvestment plan) | $108 | $87 | | Issuance of Common Stock (Employee stock options and awards) | $134 | $277 | | Issuance of Common Stock (Employee Retirement Plan) | $89 | $78 | | Balance as of March 31 | $162,354 | $155,042 | [NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=8&type=section&id=NOTES%20TO%20THE%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes provide essential details and explanations for the figures presented in the condensed consolidated financial statements [NOTE 1 – GENERAL](index=10&type=section&id=NOTE%201%20%E2%80%93%20GENERAL) This note describes Artesian Resources Corporation's business operations, including its regulated water and wastewater services and non-regulated infrastructure development activities - Artesian Resources Corporation operates through eight wholly-owned subsidiaries, providing water and wastewater services in Delaware, Maryland, and Pennsylvania, alongside non-regulated activities like infrastructure development and service line protection plans[19](index=19&type=chunk)[20](index=20&type=chunk)[25](index=25&type=chunk) - Artesian Wastewater Management, Inc. received an operations permit in March 2020 for a new disposal facility (**90 million gallon storage lagoon**) in Delaware, expected to operate in Q2 2020 for an industrial customer at approximately **1.5 million gallons per day**[21](index=21&type=chunk) - Non-regulated subsidiaries include Artesian Utility Development, Inc. (design/build infrastructure, contract operations, Service Line Protection Plans), Artesian Development Corporation (real estate holding), and Artesian Storm Water Services, Inc. (storm water management systems)[25](index=25&type=chunk)[26](index=26&type=chunk)[30](index=30&type=chunk) [NOTE 2 – BASIS OF PRESENTATION](index=11&type=section&id=NOTE%202%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note explains the preparation of the unaudited condensed consolidated financial statements in accordance with SEC rules, including consolidation principles and the nature of interim results - The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules for Form 10-Q, with certain information condensed or omitted[31](index=31&type=chunk) - The statements include Artesian Resources Corporation and its wholly-owned subsidiaries, reflecting all normal recurring adjustments[32](index=32&type=chunk) - Interim results are not necessarily indicative of the results for the full year or for future periods[33](index=33&type=chunk) [NOTE 3 – REVENUE RECOGNITION](index=11&type=section&id=NOTE%203%20%E2%80%93%20REVENUE%20RECOGNITION) This note details the company's revenue streams from tariff and non-tariff contract services and discusses the anticipated impact of COVID-19 on receivables and bad debt reserves - Artesian's operating revenues are primarily from tariff contract services (water consumption, industrial wastewater, fixed fees, service charges, DSIC) and non-tariff contract revenues (Service Line Protection Plan fees, water/wastewater contract operations, wastewater inspection fees)[35](index=35&type=chunk) - Due to the COVID-19 pandemic and state executive orders prohibiting service disconnections and late fees, the Company anticipates a longer receivable cycle and increased reserves for bad debt compared to 2019[42](index=42&type=chunk) **Disaggregated Revenues (Amounts in thousands):** | Revenue Type | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | **Tariff Revenue** | | | | Consumption charges | $10,160 | $10,393 | | Fixed fees | $6,737 | $6,648 | | Service charges | $147 | $177 | | DSIC | $1,152 | $888 | | Industrial wastewater services | $8 | $– | | Revenue reserved for refund – TCJA impact | $– | $(422) | | **Total Tariff Revenue** | **$18,204** | **$17,684** | | **Non-Tariff Revenue** | | | | Service line protection plans | $1,088 | $1,050 | | Contract operations | $216 | $328 | | Inspection fees | $102 | $23 | | **Total Non-Tariff Revenue** | **$1,406** | **$1,401** | | Other Operating Revenue (not in scope of ASC 606) | $291 | $301 | | **Total Operating Revenue** | **$19,901** | **$19,386** | [NOTE 4 – LEASES](index=15&type=section&id=NOTE%204%20%E2%80%93%20LEASES) This note provides information on the company's operating lease arrangements, including right-of-use assets, liabilities, and future payment maturities - The Company leases land and office equipment under operating leases with remaining terms of **2 to 77 years**, some including options to extend for up to **66 years**[52](index=52&type=chunk) **Supplemental Balance Sheet Information Related to Leases (Amounts in thousands):** | Item | March 31, 2020 | December 31, 2019 | | :----------------------------------- | :------------- | :---------------- | | Operating lease right-of-use assets | $474 | $480 | | Total operating lease liabilities | $465 | $469 | | Weighted Average Remaining Lease Term (years) | 58 | 58 | | Weighted Average Discount Rate (%) | 5.0 | 5.0 | **Maturities of Operating Lease Liabilities (Amounts in thousands) as of March 31, 2020:** | Year | Operating Leases | | :--- | :--------------- | | 2020 | $42 | | 2021 | $42 | | 2022 | $23 | | 2023 | $23 | | 2024 | $23 | | Thereafter | $1,319 | | Total undiscounted lease payments | $1,472 | | Less effects of discounting | $(1,007) | | Total lease liabilities recognized | $465 | [NOTE 5 – STOCK COMPENSATION PLANS](index=18&type=section&id=NOTE%205%20%E2%80%93%20STOCK%20COMPENSATION%20PLANS) This note outlines the company's equity compensation plan, detailing stock option and restricted stock awards, associated expenses, and unrecognized compensation costs - The 2015 Equity Compensation Plan allows for various forms of grants, including stock options and restricted stock awards, administered by the Compensation Committee[58](index=58&type=chunk) **Stock Compensation Expense (Amounts in thousands):** | Period | Compensation Expense | | :----------------------------------- | :------------------- | | Three Months Ended March 31, 2020 | $45 | | Three Months Ended March 31, 2019 | $47 | **Summary of Class A Stock Options/Restricted Stock Awards (Amounts in thousands, except shares and years) (as of March 31, 2020):** | Item | Option Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (Yrs.) | Aggregate Intrinsic Value ($k) | Restricted Stock Awards | | :----------------------------------- | :------------ | :------------------------------ | :------------------------------------- | :----------------------------- | :---------------------- | | Outstanding at January 1, 2020 | 153,250 | $20.40 | N/A | $2,575 | 5,000 | | Exercised/Vested and Released | (4,750) | $18.61 | N/A | $70 | – | | Outstanding at March 31, 2020 | 148,500 | $20.46 | 2.384 | $2,512 | 5,000 | | Exercisable/Vested at March 31, 2020 | 148,500 | $20.46 | 2.384 | $2,512 | – | - As of March 31, 2020, there was **$18,000** in total unrecognized expenses related to non-vested restricted shares, to be recognized over **0.10 years**[62](index=62&type=chunk) [NOTE 6 – REGULATORY ASSETS](index=19&type=section&id=NOTE%206%20%E2%80%93%20REGULATORY%20ASSETS) This note explains regulatory assets, which represent expenses recoverable through customer rates, and provides a breakdown of these assets - Regulatory assets represent certain expenses recoverable through customer rates, deferred and amortized over future periods as permitted by state regulatory agencies (DEPSC, MDPSC, PAPUC)[63](index=63&type=chunk) **Regulatory Assets, net of amortization (Amounts in thousands):** | Item | March 31, 2020 | December 31, 2019 | | :----------------------------------- | :------------- | :---------------- | | Postretirement benefit obligation | $51 | $51 | | Deferred income taxes | $382 | $386 | | Expense of rate case studies | $25 | $27 | | Debt related costs | $5,468 | $5,556 | | Goodwill | $286 | $288 | | Deferred acquisition and franchise costs | $573 | $583 | | **Total Regulatory Assets, net** | **$6,785** | **$6,891** | - Debt related costs associated with the Series V First Mortgage bond (issued December 2019) are recovered over the term of the new long-term debt[66](index=66&type=chunk) [NOTE 7 – REGULATORY LIABILITIES](index=20&type=section&id=NOTE%207%20%E2%80%93%20REGULATORY%20LIABILITIES) This note describes regulatory liabilities, which are deferred cost recoveries or other items probable to be returned to customers through future regulated rates - Regulatory liabilities represent excess recovery of costs or other items deferred because they are probable to be returned to customers through future regulated rates, as determined by state commissions[69](index=69&type=chunk) - The utility plant retirement cost obligation consists of estimated costs for facility removal and replacement, charged to a regulated retirement liability annually[70](index=70&type=chunk) **Regulatory Liabilities (Amounts in thousands):** | Item | March 31, 2020 | December 31, 2019 | | :----------------------------------- | :------------- | :---------------- | | Utility plant retirement cost obligation | $216 | $247 | | Deferred income taxes (related to TCJA) | $21,888 | $21,999 | | **Total Regulatory Liabilities** | **$22,104** | **$22,246** | [NOTE 8 – NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE](index=21&type=section&id=NOTE%208%20%E2%80%93%20NET%20INCOME%20PER%20COMMON%20SHARE%20AND%20EQUITY%20PER%20COMMON%20SHARE) This note presents the calculation of basic and diluted net income per common share and the company's equity per common share **Weighted Average Common Shares Outstanding (Shares in thousands):** | Item | March 31, 2020 | March 31, 2019 | | :----------------------------------- | :------------- | :------------- | | Basic computation | 9,297 | 9,258 | | Dilutive effect of employee stock options and awards | 46 | 56 | | **Diluted computation** | **9,343** | **9,314** | - Equity per common share was **$17.46** at March 31, 2020, compared to **$17.28** at December 31, 2019[76](index=76&type=chunk) - **6,050 shares** of restricted stock awards were excluded from diluted net income per share calculations for Q1 2020 due to an anti-dilutive effect[74](index=74&type=chunk) [NOTE 9 – REGULATORY PROCEEDINGS](index=21&type=section&id=NOTE%209%20%E2%80%93%20REGULATORY%20PROCEEDINGS) This note details the regulatory oversight by state commissions and the mechanisms for rate adjustments, including temporary increases and Distribution System Improvement Charges - Artesian's water and wastewater utilities are regulated by the Delaware Public Service Commission (DEPSC), Maryland Public Service Commission (MDPSC), and Pennsylvania Public Utility Commission (PAPUC)[78](index=78&type=chunk) - In Delaware, utilities can implement temporary rate increases under bond, up to the lesser of **$2.5 million annually** or **15% of gross water sales**, pending final regulatory approval[79](index=79&type=chunk) **Distribution System Improvement Charge (DSIC) Rates (Delaware):** | Application Date | DEPSC Approval Date | Effective Date | Cumulative DSIC Rate (%) | Net Eligible Plant Improvements – Cumulative Dollars (in millions) | | :--------------- | :------------------ | :------------- | :----------------------- | :--------------------------------------------------------------- | | 11/28/2018 | 12/20/2018 | 01/01/2019 | 5.55 | $30.4 | | 05/29/2019 | 06/18/2019 | 07/01/2019 | 7.41 | $43.1 | | 11/15/2019 | 12/12/2019 | 01/01/2020 | 7.50 | $43.1 | - DSIC revenue for the three months ended March 31, 2020, was approximately **$1.2 million**, up from **$0.9 million** in the prior year period[82](index=82&type=chunk) [NOTE 10 – INCOME TAXES](index=22&type=section&id=NOTE%2010%20%E2%80%93%20INCOME%20TAXES) This note discusses deferred income taxes, the impact of the Tax Cuts and Jobs Act on Contributions in Aid of Construction, and the company's tax examination status - Deferred income taxes are provided on temporary differences between tax basis and financial statement amounts, with rate-regulated utilities recognizing regulatory liabilities or assets for deferred taxes[83](index=83&type=chunk) - The Tax Cuts and Jobs Act (TCJA) repealed the 1996 exclusion from taxable income for Contributions in Aid of Construction (CIAC) and Advances, effective December 22, 2017[85](index=85&type=chunk) - The Company accrued approximately **$5,000** in penalties and interest for uncertain tax positions for the three months ended March 31, 2020, and is subject to examination for tax years 2016 through 2019[84](index=84&type=chunk) [NOTE 11 – FAIR VALUE OF FINANCIAL INSTRUMENTS](index=23&type=section&id=NOTE%2011%20%E2%80%93%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note explains how the fair value of financial instruments, particularly long-term debt, is determined and its approximation for current assets and liabilities - The carrying amounts of current assets and liabilities approximate fair value due to their short maturity[87](index=87&type=chunk) - All outstanding long-term debt is fixed-rate, with fair value determined by discounting future cash flows using current market interest rates (classified as Level 2 measurements)[87](index=87&type=chunk) **Long-term Debt (including current portion) (Amounts in thousands):** | Item | March 31, 2020 | December 31, 2019 | | :----------------------------------- | :------------- | :---------------- | | Carrying amount | $145,352 | $145,862 | | Estimated fair value | $164,083 | $157,710 | [NOTE 12 – RELATED PARTY TRANSACTIONS](index=23&type=section&id=NOTE%2012%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note discloses payments made to a law firm where a director is a partner and the company's policy for reviewing related party transactions - The Company paid **$119,000** to the law firm Morris Nichols Arsht & Tunnell (MNAT) for legal and director-related services during the three months ended March 31, 2020, compared to **$40,000** in the prior year period[89](index=89&type=chunk) - Mr. Michael Houghton, a director of Artesian Resources, is a Partner in MNAT[89](index=89&type=chunk) - The Audit Committee reviews and approves all related party transactions to ensure they are in the best interests of the Company and its stockholders[90](index=90&type=chunk) [NOTE 13 – IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS](index=24&type=section&id=NOTE%2013%20%E2%80%93%20IMPACT%20OF%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note discusses the impact of new FASB guidance on credit losses and the anticipated effects of the COVID-19 pandemic on receivables and bad debt reserves - New FASB guidance on credit losses (effective after December 15, 2019) is primarily applicable to accounts receivable balances[92](index=92&type=chunk) - Due to the COVID-19 pandemic and state government executive orders, the Company anticipates a longer receivable cycle and the need for increased reserves for bad debt[92](index=92&type=chunk) - The MDPSC authorized deferred regulatory treatment for incremental COVID-19 costs, including increased bad debt expense, and the DEPSC is anticipated to issue a similar order[92](index=92&type=chunk) [NOTE 14 – SUBSEQUENT EVENTS](index=24&type=section&id=NOTE%2014%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note addresses the potential impacts of the COVID-19 pandemic, recent financing agreements, and the CARES Act on the company's operations - The COVID-19 outbreak was classified as a pandemic in March 2020, leading to potential impacts on operations, workforce disruptions, longer receivable cycles, increased bad debt reserves, and changes in revenue mix[93](index=93&type=chunk) - On April 28, 2020, Artesian Water entered into three financing agreements with the Delaware Drinking Water State Revolving Fund for up to **$4.0 million** in loans (**0.6% interest + 0.6% administrative fee**) to finance water transmission main replacements in New Castle County, Delaware[95](index=95&type=chunk) - The United States Government enacted the CARES Act on March 27, 2020, and the Company is reviewing its provisions to assess potential impacts on operations[94](index=94&type=chunk) [ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=25&type=section&id=ITEM%202%20%E2%80%93%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance, condition, and future outlook for the three months ended March 31, 2020. It discusses the impact of the COVID-19 pandemic, operational results across water, wastewater, and non-regulated divisions, strategic direction, and liquidity and capital resources [CAUTION REGARDING FORWARD-LOOKING STATEMENTS](index=25&type=section&id=CAUTION%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements subject to various risks and uncertainties, many of which are heightened by the COVID-19 pandemic - The report contains forward-looking statements subject to risks and uncertainties, including those related to the COVID-19 pandemic, weather, regulatory decisions, and economic conditions[97](index=97&type=chunk) - Many of these risks and uncertainties are currently elevated by and may continue to be elevated by the COVID-19 pandemic[97](index=97&type=chunk) [RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2020](index=25&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20PERIOD%20ENDED%20MARCH%2031%2C%202020) This section analyzes the company's operational performance for the three months ended March 31, 2020, covering revenue drivers, divisional results, and strategic initiatives [OVERVIEW](index=25&type=section&id=OVERVIEW) This overview highlights that gross water sales are the primary driver of profitability, with the company actively seeking growth in wastewater and non-regulated services for diversification - Gross water sales constituted **87.4%** of total operating revenues for the three months ended March 31, 2020, making profitability primarily attributable to water sales[98](index=98&type=chunk) - The Company seeks growth opportunities in wastewater services and non-regulated contract operations (e.g., wastewater management, design, construction, engineering) to diversify revenue streams and mitigate seasonal weather fluctuations affecting water sales[99](index=99&type=chunk) [COVID-19 Pandemic](index=26&type=section&id=COVID-19%20Pandemic) This section discusses the potential future adverse impacts of the COVID-19 pandemic on the company's financial results, including workforce disruptions, receivable cycles, and bad debt - While the COVID-19 pandemic did not materially adversely affect Q1 2020 financial results, rapid changes in economic and health conditions since the period end pose future risks[101](index=101&type=chunk) - Anticipated future impacts include prolonged workforce disruptions, a longer receivable cycle, increased bad debt reserves, and changes in revenue mix between commercial and residential customers due to state executive orders[102](index=102&type=chunk) - The MDPSC authorized deferred regulatory treatment for incremental COVID-19 costs, including increased bad debt expense, and the DEPSC is expected to issue a similar order[102](index=102&type=chunk) [Water Division](index=26&type=section&id=Water%20Division) This section provides an update on the company's water customer base and distributed water volumes in its Delaware and Maryland systems - As of March 31, 2020, the Company had approximately **88,000 metered water customers** in Delaware (up ~**1,900 YoY**) and ~**2,490** in Maryland (up ~**60 YoY**), with consistent customer numbers in Pennsylvania[104](index=104&type=chunk) - For Q1 2020, approximately **1.8 billion gallons** of water were distributed in Delaware systems and **23.4 million gallons** in Maryland systems[104](index=104&type=chunk) [Wastewater Division](index=26&type=section&id=Wastewater%20Division) This section details the growth in Delaware wastewater customers, the flat monthly fee billing structure, and agreements with industrial customers - Delaware wastewater customers totaled approximately **2,550** as of March 31, 2020, an increase of approximately **350**, or **15.9%**, compared to March 31, 2019[105](index=105&type=chunk) - Residential and commercial wastewater customers are billed a flat monthly fee, providing a revenue stream unaffected by weather[105](index=105&type=chunk) - Artesian Wastewater has wastewater services agreements with Allen Harim Foods, LLC, a large industrial customer[105](index=105&type=chunk) [Non-Regulated Division](index=26&type=section&id=Non-Regulated%20Division) This section describes the Non-Regulated Division's Service Line Protection Plans, highlighting consistent customer growth and their weather-unaffected revenue contribution - The Non-Regulated Division, primarily through Artesian Utility, offers Service Line Protection (SLP) Plans (WSLP, SSLP, ISLP) with consistent customer growth, providing a weather-unaffected revenue stream[106](index=106&type=chunk) **SLP Plan Customer Enrollment (as of March 31, 2020):** | Plan Type | Number of Customers | % of Eligible Water Customers | | :----------------------------------- | :------------------ | :---------------------------- | | WSLP Plan | ~20,500 | 24.3% | | SSLP Plan | ~16,000 | 19.0% | | ISLP Plan | ~7,200 | 8.6% | | Non-utility customers enrolled in one of the three plans | ~1,890 | N/A | [Strategic Direction](index=27&type=section&id=Strategic%20Direction) This section outlines the company's strategy to expand services, increase customer growth, and enhance earnings through acquisitions and infrastructure investments across the Delmarva Peninsula - The Company's strategy is to increase customer growth, revenues, earnings, and dividends by expanding water, wastewater, and SLP Plan services across the Delmarva Peninsula, leveraging acquisitions and infrastructure investments[108](index=108&type=chunk) - Recent acquisitions include utility assets in Kent County, Delaware (Oct 2019, ~**400 customers**) and the Town of Frankford's water system (Feb 2020, closed April 2020, ~**360 customers** for **$3.6 million**)[110](index=110&type=chunk)[111](index=111&type=chunk) - In the regulated wastewater division, the Company plans to utilize larger regional facilities to expand service areas and convert smaller treatment facilities into regional pump stations for efficiency[113](index=113&type=chunk) - A new **90 million gallon storage lagoon** and spray irrigation facility for industrial process wastewater (Allen Harim) is expected to be operational in Q2 2020, treating approximately **1.5 mgd**[114](index=114&type=chunk) [Inflation](index=28&type=section&id=Inflation) This section notes that inflation impacts the company through increasing costs for maintaining, improving, and expanding service capabilities, which must be recovered through future cash flows - The Company is affected by inflation, particularly through continually increasing costs for maintaining, improving, and expanding service capabilities, which must be recovered from future cash flows[117](index=117&type=chunk) [Results of Operations – Analysis of the Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019](index=28&type=section&id=Results%20of%20Operations%20%E2%80%93%20Analysis%20of%20the%20Three%20Months%20Ended%20March%2031%2C%202020%20Compared%20to%20the%20Three%20Months%20Ended%20March%2031%2C%202019.) This section provides a detailed comparative analysis of the company's operating revenues, expenses, other income, interest charges, and net income for the first quarter of 2020 versus 2019 [Operating Revenues](index=28&type=section&id=Operating%20Revenues) This section analyzes the increase in total operating revenues, primarily driven by higher water sales due to DSIC and consumption, alongside changes in other utility and non-utility revenues - Total operating revenues increased by **$0.5 million**, or **2.7%**, to **$19.9 million** for Q1 2020, primarily driven by a **$0.5 million** increase in water sales revenue[118](index=118&type=chunk) - The increase in water sales was mainly due to higher Distribution System Improvement Charge (DSIC) revenue (**7.50% rate** in Q1 2020 vs. **5.55%** in Q1 2019) and consumption revenue[118](index=118&type=chunk) - Other utility operating revenue increased by **$0.1 million** (**11.9%**) due to wastewater customer growth and inspection fee revenue, while non-utility operating revenue decreased by **$0.1 million** (**5.7%**) due to lower contract service revenue[119](index=119&type=chunk)[120](index=120&type=chunk) [Operating Expenses](index=28&type=section&id=Operating%20Expenses) This section examines the increase in operating expenses, driven by higher payroll and employee benefits, partially offset by reduced repair and maintenance costs, and an increase in income tax expense - Operating expenses (excluding depreciation and income taxes) increased by **$0.1 million**, or **1.1%**, for Q1 2020[120](index=120&type=chunk) - Utility operating expenses rose by **$0.1 million** (**1.2%**) due to increased payroll and employee benefit costs, partially offset by decreased repair and maintenance costs[121](index=121&type=chunk) - Federal and state income tax expense increased by **$0.2 million** (**15.2%**) due to higher pre-tax book income[122](index=122&type=chunk) [Other Income, Net](index=29&type=section&id=Other%20Income%2C%20Net) This section details the increase in other income, primarily from a patronage refund and an increase in Allowance for Funds Used During Construction - Other income increased by **$0.5 million**, primarily driven by a **$0.3 million** increase in miscellaneous income from an annual patronage refund from CoBank, ACB (including a one-time additional distribution)[122](index=122&type=chunk) - Allowance for Funds Used During Construction (AFUDC) increased by **$0.2 million** due to higher long-term construction activity[122](index=122&type=chunk) [Interest Charges](index=29&type=section&id=Interest%20Charges) This section explains the increase in interest expense, mainly due to higher long-term debt from a new bond issuance, partially offset by lower short-term borrowing costs - Interest expense increased by **$0.2 million**, mainly due to higher long-term debt interest from the Series V First Mortgage Bond issued on December 17, 2019[123](index=123&type=chunk) - This increase was partially offset by a decrease in short-term debt interest, primarily related to lower short-term borrowing levels in 2020[123](index=123&type=chunk) [Net Income](index=29&type=section&id=Net%20Income) This section summarizes the increase in net income applicable to common stock, attributing it to higher operating revenues and other income, partially offset by increased expenses - Net income applicable to common stock increased by **$0.5 million**, driven by a **$0.5 million** increase in operating revenues and a **$0.5 million** increase in other income, partially offset by a **$0.3 million** increase in operating expenses and a **$0.2 million** increase in interest expense[124](index=124&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=29&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's sources of liquidity, capital expenditure plans, financing arrangements, and compliance with debt covenants [Overview](index=29&type=section&id=Overview) This overview identifies primary liquidity sources and emphasizes the importance of timely rate increases for recovering utility plant investments - Primary liquidity sources for Q1 2020 included **$7.1 million** from operating activities, **$3.2 million** in net contributions/advances from developers, **$1.1 million** from lines of credit borrowings, and **$0.3 million** from common stock issuance[125](index=125&type=chunk) - Maintaining financial objectives relies on ensuring investments in utility plant and equipment are recovered through timely and adequate rate increases[125](index=125&type=chunk) [Investment in Plant and Systems](index=29&type=section&id=Investment%20in%20Plant%20and%20Systems) This section details capital expenditures for Q1 2020, highlighting key investments in infrastructure and future financing plans - Capital expenditures for Q1 2020 were **$9.2 million**, compared to **$9.1 million** in Q1 2019[126](index=126&type=chunk) - Key investments in Q1 2020 included **$2.0 million** for transmission/distribution rehabilitation, **$1.9 million** for treatment facility enhancements, **$1.3 million** for Delaware wastewater projects, and **$1.7 million** for mandatory utility plant expenditures due to governmental highway projects[126](index=126&type=chunk) - Future investments are expected to be financed by operations and external sources, including available cash, bank credit lines, state revolving fund loans, and potential capital market financing[127](index=127&type=chunk) [Lines of Credit and Long Term Debt](index=30&type=section&id=Lines%20of%20Credit%20and%20Long%20Term%20Debt) This section outlines the company's available lines of credit, details contractual cash obligations, and confirms compliance with debt covenants - As of March 31, 2020, Artesian Resources had a **$40 million** line of credit with Citizens Bank (**$38.9 million available**, LIBOR + **1.00%**, expires May 23, 2020) and Artesian Water had a **$20 million** line of credit with CoBank (**$12.5 million available**, LIBOR + **1.50%** or weekly variable rate, expires July 20, 2020); both are expected to be renewed[129](index=129&type=chunk)[130](index=130&type=chunk) **Contractual Cash Obligations (Amounts in thousands) as of March 31, 2020:** | Obligation Type | Less than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | Total | | :----------------------------------- | :--------------- | :-------- | :-------- | :------------ | :---- | | First mortgage bonds (principal and interest) | $6,650 | $13,218 | $13,115 | $194,734 | $227,717 | | State revolving fund loans (principal and interest) | $1,002 | $838 | $674 | $4,042 | $6,556 | | Promissory note (principal and interest) | $960 | $1,921 | $1,921 | $13,257 | $18,059 | | Operating leases | $42 | $65 | $46 | $1,319 | $1,472 | | Operating agreements | $72 | $88 | $77 | $896 | $1,133 | | Unconditional purchase obligations | $3,881 | $2,995 | $52 | --- | $6,928 | | **Total contractual cash obligations** | **$12,607** | **$19,125** | **$15,885** | **$214,248** | **$261,865** | - The Company was in compliance with all affirmative and negative covenants in its long-term debt agreements and revolving lines of credit as of March 31, 2020[131](index=131&type=chunk) [Off-Balance Sheet Arrangements](index=31&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms that the company does not have any off-balance sheet arrangements, including those with structured finance or special purpose entities - The Company does not have any off-balance sheet arrangements, including with structured finance, special purpose, or variable interest entities[138](index=138&type=chunk) [Critical Accounting Assumptions, Estimates and Policies; Recent Accounting Pronouncements](index=31&type=section&id=Critical%20Accounting%20Assumptions%2C%20Estimates%20and%20Policies%3B%20Recent%20Accounting%20Pronouncements) This section states that there have been no material changes to critical accounting policies or significant impacts from new accounting pronouncements during the quarter - There have been no changes in the Company's critical accounting policies from those disclosed in its 2019 Annual Report on Form 10-K[140](index=140&type=chunk) - No new accounting policies adopted in the first three months of 2020 had a material impact on the Company's financial condition, liquidity, or results of operations[141](index=141&type=chunk) [ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=32&type=section&id=ITEM%203%20-%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section outlines the company's exposure to market risks, primarily fluctuating interest rates on variable-rate debt and commodity price changes. It details how these risks are mitigated through fixed-rate long-term debt, multi-year fixed-price electric supply contracts, and the ability to recover costs through rate increases - The Company is exposed to interest rate risk on **$60 million** of variable rate lines of credit, with approximately **$8.6 million** outstanding at March 31, 2020[142](index=142&type=chunk) - Interest rate risk is managed through the use of fixed-rate long-term debt (**4.24% to 5.96% interest rates**, maturities 2028-2038)[142](index=142&type=chunk) - Commodity price risk (e.g., chemicals, electricity) is mitigated by the ability to recover costs through rate increases to customers and by signing multi-year fixed-price electric supply contracts[142](index=142&type=chunk) [ITEM 4 – CONTROLS AND PROCEDURES](index=32&type=section&id=ITEM%204%20%E2%80%93%20CONTROLS%20AND%20PROCEDURES) This section confirms that management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2020, concluding they were effective. It also states that no material changes to internal control over financial reporting occurred during the quarter - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of March 31, 2020, providing reasonable assurance for timely and accurate financial reporting[143](index=143&type=chunk) - No change in internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[144](index=144&type=chunk) [Part II - Other Information](index=32&type=section&id=Part%20II%20-%20Other%20Information) This section covers legal proceedings, risk factors, and other required disclosures, including exhibits, for the reporting period [ITEM 1 – LEGAL PROCEEDINGS](index=32&type=section&id=ITEM%201%20%E2%80%93%20LEGAL%20PROCEEDINGS) This section states that the company is periodically involved in ordinary course legal proceedings but does not believe their ultimate resolution will materially affect its business, financial position, or results of operations, while acknowledging potential litigation expenses and diversion of management attention - The Company is periodically involved in legal proceedings arising in the ordinary course of business[145](index=145&type=chunk) - Management does not believe the ultimate resolution of these matters will materially affect the Company's business, financial position, or results of operations[145](index=145&type=chunk) - However, significant litigation expense and diversion of management attention may occur regardless of the outcome[145](index=145&type=chunk) [ITEM 1A – RISK FACTORS](index=32&type=section&id=ITEM%201A%20%E2%80%93%20RISK%20FACTORS) This section highlights that the company's business and financial results may be adversely affected by pandemics like COVID-19. Government orders prohibiting service disconnections and late fees are expected to lead to longer receivable cycles, increased bad debt reserves, and shifts in revenue mix, while market volatility may impact stock price - The Company's business, results of operations, financial condition, cash flows, and stock price may be adversely affected by pandemics, epidemics, or other public health emergencies, such as the recent COVID-19 outbreak[146](index=146&type=chunk)[147](index=147&type=chunk) - State government executive orders prohibiting service disconnections for non-payment and late fees are anticipated to result in a longer receivable cycle, increased reserves for bad debt, and changes in revenue mix between commercial and residential customers[148](index=148&type=chunk) - Concerns over the economic impact of COVID-19 have caused extreme volatility in financial and capital markets, which has and may continue to adversely impact the Company's stock price[148](index=148&type=chunk) [ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=33&type=section&id=ITEM%202%20%E2%80%93%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This item is not applicable to the current report [ITEM 3 – DEFAULTS UPON SENIOR SECURITIES](index=33&type=section&id=ITEM%203%20%E2%80%93%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable to the current report [ITEM 4 – MINE SAFETY DISCLOSURES](index=33&type=section&id=ITEM%204%20%E2%80%93%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the current report [ITEM 5 – OTHER INFORMATION](index=33&type=section&id=ITEM%205%20%E2%80%93%20OTHER%20INFORMATION) This item is not applicable to the current report [ITEM 6 - EXHIBITS](index=34&type=section&id=ITEM%206%20-%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including various agreements, notes, and certifications, which provide supporting documentation for the financial statements and other disclosures - Exhibits include the Asset Purchase Agreement with the Town of Frankford (dated February 27, 2020) and multiple Financing Agreements and General Obligation Notes with the Delaware Drinking Water State Revolving Fund (dated April 28, 2020)[151](index=151&type=chunk) - Certifications of the Chief Executive Officer and Chief Financial Officer (required by Rule 13a–14(a) and 13a-14(b)) are filed or furnished[151](index=151&type=chunk) - The financial statements are also provided in eXtensible Business Reporting Language (XBRL) format[151](index=151&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR □ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 000-18516 ARTESIAN RESOURCES CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R. ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR □ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number 000-18516 ARTESIAN RESOURCES CORPORATION -------------------------------------------------------------- (Exac ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR □ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number 000-18516 ARTESIAN RESOURCES CORPORATION -------------------------------------------------------------- (Exact nam ...