10-Q

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 March 31, 2022

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

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(Exact name of registrant as specified in its charter)

Delaware	51-0002090
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(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

664 Churchmans Road, Newark, Delaware 19702

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Address of principal executive offices

(302) 453 – 6900

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Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock	ARTNA	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes □ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑ Yes □ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.

Large Accelerated Filer □ Accelerated Filer ☐ Non-accelerated Filer ☑ Smaller Reporting Company ☒☒ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act ).

☐ Yes ☑ No

As of May 2, 2022, 8,557,003 shares of Class A Non-Voting Common Stock and 881,452 shares of Class B Common Stock were outstanding.

TABLE OF CONTENTS

ARTESIAN RESOURCES CORPORATION

FORM 10-Q

Part I	-	Financial Information:
Item 1	-	Financial Statements	Page(s)
		Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited)	3
		Condensed Consolidated Statements of Operations for the three  months ended March 31, 2022 and 2021 (unaudited)	4
		Condensed Consolidated Statements of Cash Flows for the three  months ended March 31, 2022 and 2021 (unaudited)	5 - 6
		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)	7
		Notes to the Condensed Consolidated Financial Statements	8 - 21
Item 2	-	Management's Discussion and Analysis of Financial Condition and Results of Operations	22 - 29
Item 3	-	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4	-	Controls and Procedures	29
Part II	-	Other Information	29
Item 1	-	Legal Proceedings	29
Item 1A	-	Risk Factors	29
Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3		Defaults Upon Senior Securities	30
Item 4		Mine Safety Disclosures	30
Item 5		Other Information	30
Item 6	-	Exhibits	31
Signatures

2

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands)

ASSETS	March 31, 2022		December 31, 2021
Utility plant, at original cost (less accumulated depreciation - 2022 - $168,815; 2021 - $159,385)	$	618,424	$	590,431
Current assets
Cash and cash equivalents		478		92
Accounts receivable (less allowance for doubtful accounts - 2022 - $444; 2021 - $429)		6,440		8,367
Income tax receivable		977		2,234
Unbilled operating revenues		1,504		1,080
Materials and supplies		2,852		1,933
Prepaid property taxes		1,057		2,306
Prepaid expenses and other		2,328		2,652
Total current assets		15,636		18,664
Other assets
Non-utility property (less accumulated depreciation - 2022 - $938; 2021 - $919)		3,756		3,751
Other deferred assets		8,134		5,097
Operating lease right of use assets		446		451
Total other assets		12,336		9,299
Regulatory assets, net		6,362		6,321
Total Assets	$	652,758	$	624,715
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock	$	9,438	$	9,414
Preferred stock		—		—
Additional paid-in capital		105,551		104,989
Retained earnings		65,572		63,607
Total stockholders' equity		180,561		178,010
Long-term debt, net of current portion		142,908		143,259
		323,469		321,269
Current liabilities
Lines of credit		27,409		26,703
Current portion of long-term debt		1,563		1,591
Accounts payable		12,441		10,206
Accrued expenses		4,282		4,038
Overdraft payable		133		30
Accrued interest		1,339		917
Income taxes payable		244		-
Customer and other deposits		2,372		2,273
Other		2,141		1,448
Total current liabilities		51,924		47,206
Commitments and contingencies
Deferred credits and other liabilities
Net advances for construction		4,310		4,295
Operating lease liabilities		440		440
Regulatory liabilities		21,732		21,260
Deferred investment tax credits		451		456
Deferred income taxes		53,370		53,133
Total deferred credits and other liabilities		80,303		79,584
Net contributions in aid of construction		197,062		176,656
Total Liabilities and Stockholders’ Equity	$	652,758	$	624,715

See notes to the condensed consolidated financial statements.

3

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In thousands, except per share amounts)

	For the Three Months Ended March 31,
	2022		2021
Operating revenues
Water sales	$	18,143	$	17,830
Other utility operating revenue		2,525		1,376
Non-utility operating revenue		1,519		1,439
Total Operating Revenues		22,187		20,645
Operating expenses
Utility operating expenses		10,495		9,505
Non-utility operating expenses		943		915
Depreciation and amortization		3,085		3,012
State and federal income taxes		1,419		1,351
Property and other taxes		1,502		1,420
Total Operating Expenses		17,444		16,203
Operating income		4,743		4,442
Other income, net
Allowance for funds used during construction (AFUDC)		181		244
Miscellaneous income		1,446		1,402
Income before interest charges		6,370		6,088
Interest charges		1,887		1,882
Net income applicable to common stock	$	4,483	$	4,206
Income per common share:
Basic	$	0.48	$	0.45
Diluted	$	0.47	$	0.45
Weighted average common shares outstanding:
Basic		9,423		9,368
Diluted		9,455		9,407
Cash dividends per share of common stock	$	0.2675	$	0.2571

See notes to the condensed consolidated financial statements.

4

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In thousands)

	For the Three Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	4,483		$	4,206
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,085			3,012
Deferred income taxes, net		34			(1,236	)
Stock compensation		49			43
AFUDC, equity portion		(125	)		(164	)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts		1,878			1,347
Income tax receivable		1,257			623
Unbilled operating revenues		(60	)		15
Materials and supplies		(919	)		135
Prepaid property taxes		1,827			869
Prepaid expenses and other		333			254
Other deferred assets		(499	)		(463	)
Regulatory assets		92			91
Regulatory liabilities		(109	)		(125	)
Income tax payable		244			2,036
Accounts payable		(2	)		(51	)
Accrued expenses		(137	)		(809	)
Accrued interest		422			395
Deposits and other		(34	)		64
NET CASH PROVIDED BY OPERATING ACTIVITIES		11,819			10,242
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)		(9,776	)		(6,272	)
Investment in acquisitions, net of cash acquired		(2,842	)		—
Proceeds from sale of assets		2			7
NET CASH USED IN INVESTING ACTIVITIES		(12,616	)		(6,265	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under lines of credit agreements		706			(4,097	)
Deferred debt issuance cost		(30	)		—
Increase (decrease) in overdraft payable		103			(78	)
Net advances and contributions in aid of construction		2,764			2,751
Net proceeds from issuance of common stock		537			601
Dividends paid		(2,518	)		(2,406	)
Principal repayments of long-term debt		(379	)		(527	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		1,183			(3,756	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		386			221
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		92			28
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	478		$	249
Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions	$	1,878		$	1,991
Dividends declared but not paid		—			—
Amounts included in accounts payable and accrued payables related to capital expenditures		684			3,074
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	1,465		$	1,487
Income taxes paid	$	—		$	30

See notes to the condensed consolidated financial statements.

5

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Unaudited

(In thousands)

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)		Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings			Total
Balance as of December 31, 2020		8,475		882	$	8,475	$	882	$	103,463	$	56,606		$	169,426
Net income		–		–		–		–		–		4,206			4,206
Cash dividends declared
Common stock		–		–		–		–		–		(2,406	)		(2,406	)
Issuance of common stock
Dividend reinvestment plan		3		–		3		–		95		–			98
Employee stock options and awards(4)		22		–		22		–		438		–			460
Employee Retirement Plan(3)		2		–		2		–		84		–			86
Balance as of March 31, 2021		8,502		882		8,502		882		104,080		58,406			171,870

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)		Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings		Total
Balance as of December 31, 2021	$	8,532	$	882	$	8,532	$	882	$	104,989	$	63,607	$	178,010
Net income		–		–		–		–		–		4,483		4,483
Cash dividends declared
Common stock		–		–		–		–		–		–		–
Issuance of common stock
Dividend reinvestment plan		2		–		2		–		87		–		89
Employee stock options and awards(4)		22		–		22		–		475		–		497
Employee Retirement Plan(3)		–		–		–		–		–		–		–
Balance as of March 31, 2022	$	8,556	$	882	$	8,556	$	882	$	105,551	$	65,572	$	180,561

(1) At March 31, 2022, and March 31, 2021, Class A Common Stock had 15,000,000 shares authorized.  For the same periods, shares issued, inclusive of treasury shares, were 8,585,947 and 8,531,099, respectively.

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

(3) Artesian Resources Corporation registered 200,000 shares of Class A Common Stock, subsequently adjusted for stock splits, available for purchase through the Artesian Retirement Plan and the Artesian Supplemental Retirement Plan.

(4) Under the Equity Compensation Plan, effective December 9, 2015, or the 2015 Plan, Artesian Resources Corporation authorized up to 331,500 shares of Class A Common Stock for issuance of grants in the form of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the 2015 Plan. Includes stock compensation expense for March 31, 2022 and March 31, 2021, see Note 5-Stock Compensation Plans.

See notes to the condensed consolidated financial statements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL

Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all of our wholly owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.

DELAWARE REGULATED SUBSIDIARIES

Artesian Water Company, Inc., or Artesian Water, our principal subsidiary, distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware.  In addition, Artesian Water provides services to other water utilities, including operations and billing functions, and has contract operation agreements with private and municipal water providers.  Artesian Water also provides water for public and private fire protection to customers in our service territories.

Artesian Wastewater Management, Inc., or Artesian Wastewater, began providing wastewater services in Sussex County, Delaware in July 2005.  Artesian Wastewater is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Delaware as a regulated public wastewater service company.

In January 2022, Artesian Wastewater acquired Tidewater Environmental Services, Inc.  Artesian Wastewater operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI.  TESI was incorporated in 2004 and is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Sussex County, Delaware as a regulated public wastewater service company.  Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company, or Middlesex, for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex.  This acquisition more than doubled the number of wastewater customers served in Sussex County, Delaware and included all residents within the Town of Milton.

MARYLAND REGULATED SUBSIDIARIES

Artesian Water Maryland, Inc. began operations in August 2007. Artesian Water Maryland distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland.

Artesian Wastewater Maryland, Inc. was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in the State of Maryland.  It is currently not providing these services.

PENNSYLVANIA REGULATED SUBSIDIARY

Artesian Water Pennsylvania, Inc. began operations in 2002.  It provides water service to a residential community in Chester County, Pennsylvania.

OTHER SUBSIDIARIES

Our three other subsidiaries, none of which are regulated, are Artesian Utility Development, Inc., or Artesian Utility, Artesian Development Corporation, or Artesian Development, and Artesian Storm Water Services, Inc., or Artesian Storm Water.

Artesian Utility was formed in 1996 and designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions.  Artesian Utility also evaluates land parcels, provides recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities, and operates water and wastewater facilities in Delaware for municipal and governmental agencies.  Artesian Utility also contracts with developers and government agencies for design and construction of wastewater infrastructure throughout the Delmarva Peninsula.  In addition, as further discussed below, Artesian Utility operates the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan.

7

Artesian Utility currently operates wastewater treatment facilities for the town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039.  The Company currently operates three wastewater treatment systems with a combined capacity of up to approximately 3.8 million gallons per day. The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.

Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan, and the ISLP Plan. The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up to an annual limit. The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit.  The ISLP Plan enhances available coverage to include water and wastewater lines within customers' residences up to an annual limit.

Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware.  The facility consists of approximately 10,000 square feet of office space along with nearly 10,000 square feet of warehouse space.

Artesian Storm Water, incorporated in 2017, was formed to provide design, installation, maintenance and repair services related to existing or proposed storm water management systems in Delaware and the surrounding areas.  The ability to offer storm water services will complement the primary water and wastewater services that we provide.  Artesian Storm Water is not actively seeking new opportunities.

NOTE 2 – BASIS OF PRESENTATION

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q.  Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.  Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes in the Company's annual report on Form 10-K for fiscal year 2021 as filed with the SEC on March 11, 2022.

The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly owned subsidiaries, including its principal operating company, Artesian Water.  In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of March 31, 2022, the results of its operations for the three-month periods ended March 31, 2022 and March 31, 2021, its cash flows for the three-month periods ended March 31, 2022 and March 31, 2021 and the changes in stockholders’ equity for the three-month periods ended March 31, 2022 and March 31, 2021.  The December 31, 2021 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2021 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements.

The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods.

Use of Estimates

The condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S., which require management to make certain estimates and assumptions regarding the reported amounts of assets and liabilities including unbilled revenues, credit losses and reserves for bad debt, regulatory asset recovery, lease agreements and contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from management's estimates.

All additions to utility plant are recorded at cost.  Business combinations pursuant to ASC Topic 805 may result in a purchase price allocation and the acquired assets are required to be evaluated by the applicable regulatory agency.  Artesian Wastewater acquired TESI in January 2022.  As of March 31, 2022, the accounting for the transaction was preliminary.  Management’s preliminary determination of fair value of the tangible assets acquired using the cost method requires management to make significant estimates and assumptions related to economic lives of the assets, replacement costs, and physical characteristics of the tangible assets acquired.  A third party valuation specialist will assist with the valuation of the assets acquired.  The purchase price allocation is expected to be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.

Reclassification

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.  These reclassifications had no effect on net income or stockholders' equity.

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NOTE 3 – REVENUE RECOGNITION

Background

Artesian’s operating revenues are primarily attributable to contract services based upon tariff rates approved by the Delaware Public Service Commission, or DEPSC, the Maryland Public Service Commission, or MDPSC, and the Pennsylvania Public Utility Commission, or PAPUC.  Tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent stand-alone selling prices.  Our non-tariff contract revenues consist of Service Line Protection Plan, or SLP Plan, fees, water and wastewater contract operations, design and installation contract services, and wastewater inspection fees.  Other operating revenue primarily consists of developer guarantee contributions for wastewater and rental income for antenna agreements, which are not considered in the scope of Accounting Standards Codification 606, Revenue from Contracts with Customers.

Tariff Contract Revenues

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory.  We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period.  As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.

Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware.  We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred.  These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue.  The contract also provides for a minimum required volume of wastewater flow to our facility.  At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue.  Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year.  Pursuant to a settlement agreement, the minimum required volume was prorated on a seven month basis beginning June 1, 2021 and ending December 31, 2021.

Artesian generates revenue from metered wastewater services provided to customers in Sussex County, Delaware.  We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of the last meter reading to the end of the accounting period.  As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s volume in the same period, the previous billing period’s volume, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of these wastewater customers are billed for the volume of water transferred on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next monthly cycle.

9

Artesian generates fixed fee revenue for water and wastewater services provided to customers once a customer requests service in our territory.  Our wastewater territory is located in Sussex County, Delaware.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service.  These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis.  For contract services billed in arrears, we record unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle.  For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  This deferred revenue is netted with unbilled operating revenue on the Condensed Consolidated Balance Sheet.

Artesian generates service charges primarily from non-payment fees, such as water shut off and reconnection fees and finance charges.  These fees are billed and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed.  There is no contract asset or liability associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements.  This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period.  This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement.  Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed fee revenue.

Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.  However, due to the COVID-19 pandemic causing hardships for many utility customers, the Company experienced longer receivable cycles throughout 2020 and into 2021 and made an adjustment to increase the reserve for bad debt by $0.5 million in 2020.  In June 2021 we made an adjustment to reduce the reserve by $0.3 million.  We will continue to monitor factors that affect the reserve for bad debt.

Non-tariff Contract Revenues

Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customer’s residence, up to an annual limit.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services.  These contract services are billed in advance on a monthly or quarterly basis.  As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total SLP Plan contract revenue.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates contract operation revenue from water and wastewater operation services provided to customers.  We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services over time as customers receive and consume the benefits of such services performed. These services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with these revenues.  An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness.  The related allowance for doubtful accounts and associated bad debt expense has not been significant.

10

Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract.  We recognize revenue from these services over time as services are performed using the percentage-of-completion method based on an input method of incurred costs (cost-to-cost).  These services are invoiced at the end of every month based on incurred costs to date.  As of March 31, 2022, there is no associated contract asset or liability.  There is no allowance for doubtful accounts or bad debt expense associated with this revenue.

Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities.  These fees are paid by developers in advance when a service is requested for a new phase of a development.  Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed.  As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected.  There are no accounts receivable, allowance for doubtful accounts or bad debt expense associated with inspection fee contracts.

Sales Tax

The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax.  Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax.  Therefore, no sales tax is collected on revenues.

Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

(in thousands)	Three months ended March 31, 2022		Three months ended March 31, 2021
Tariff Revenue
Consumption charges	$	10,566	$	10,418
Fixed fees		7,778		6,999
Service charges		156		201
DSIC		1,182		1,172
Metered wastewater services		140		—
Industrial wastewater services		407		6
Total Tariff Revenue	$	20,229	$	18,796
Non-Tariff Revenue
Service line protection plans	$	1,222	$	1,096
Contract operations		211		230
Design and installation		123		151
Inspection fees		41		84
Total Non-Tariff Revenue	$	1,597	$	1,561
Other Operating Revenue	$	361	$	288
Total Operating Revenue	$	22,187	$	20,645

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	March 31, 2022		December 31, 2021
Contract Assets – Tariff	$	2,424	$	2,144
Deferred Revenue
Deferred Revenue – Tariff	$	1,085	$	1,227
Deferred Revenue – Non-Tariff		246		287
Total Deferred Revenue	$	1,331	$	1,514

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For the three months ended March 31, 2022, the Company recognized revenue of $1.2 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.3 million from amounts that were included in Deferred Revenue – Non- Tariff at the beginning of the year.

The changes in Contract Assets and Deferred Revenue are primarily due to normal timing differences between our performance and customer payments.

Remaining Performance Obligations

As of March 31, 2022 and December 31, 2021, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months.

As of March 31, 2022 and December 31, 2021, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months and one year for the SLP Plan revenue and inspection fee revenue, respectively.

NOTE 4 – LEASES

The Company leases land and office equipment under operating leases from non-related parties.  Our leases have remaining lease terms of 20 years to 74 years, some of which include options to automatically extend the leases for up to 66 years.  Payments made under operating leases are recognized in the consolidated statement of operations on a straight-line basis over the period of the lease.  The annual lease payments for the land operating leases increase each year either by the most recent increase in the Consumer Price Index or by 3%, as applicable based on the lease agreements.  Periodically, the annual lease payment for one operating land lease is determined based on the fair market value of the applicable parcel of land.  None of the operating leases contain contingent rent provisions.  The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment.  The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.

Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right of use asset and liability amounts for the operating leases.  As our leases do not provide an implicit rate, we use our incremental borrowing rates for long term and short term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments.

Rent expense for all operating leases except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2022			March 31, 2021
Minimum rentals		$	7		$	7
Contingent rentals			–			–
		$	7		$	7

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2022			March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	7	$	7
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	446	$	455

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Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	March 31, 2022			December 31, 2021
Operating Leases:
Operating lease right-of-use assets	$	446		$	451
Other current liabilities	$	2			6
Operating lease liabilities		440			440
Total operating lease liabilities	$	442		$	446
Weighted Average Remaining Lease Term
Operating leases	61 years			61 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

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

	(in thousands)
	Operating Leases
Year
2023	$	24
2024		24
2025		24
2026		24
2027		25
Thereafter		1,332
Total undiscounted lease payments	$	1,453
Less effects of discounting		(1,011	)
Total lease liabilities recognized	$	442

As of March 31, 2022, we have not entered into operating or finance leases that will commence at a future date.

NOTE 5 – STOCK COMPENSATION PLANS

On December 9, 2015, the Company's stockholders approved the 2015 Equity Compensation Plan, or the 2015 Plan. The 2015 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2015 Plan is administered and interpreted by the Compensation Committee, or the Committee, of the Board of Directors of the Company, or the Board. The Committee has the authority to determine the individuals to whom grants will be made under the 2015 Plan, the type, size and terms of the grants, the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2015 Plan), and deal with any other matters arising under the 2015 Plan. The Committee presently consists of three directors, each of whom is a non-employee director of the Company. All of the employees of the Company and its subsidiaries and non-employee directors of the Company are eligible for grants under the 2015 Plan. 

Compensation expense of $49,000, related to the May 2021 issue of restricted stock awards, was recorded for the three months ended March 31, 2022.  Compensation expense of $43,000 was recorded for the three months ended March 31, 2021 for restricted stock awards issued in May 2020.  Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards.

There was no stock compensation cost capitalized as part of an asset.

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On May 4, 2021, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards.  The fair value per share was $40.11, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 4, 2021.  Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the three months ended March 31, 2022:

	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards		Weighted Average Grant Date Fair Value
Plan options/restricted stock awards
Outstanding at January 1, 2022		83,000		$	21.65			$	2,048		5,000	$	40.11
Granted		—			—				—		—		—
Exercised/vested and released		(22,250	)		20.12				600		—		—
Expired/cancelled		—			—				—		—		—
Outstanding at March 31, 2022		60,750		$	22.22		1.659	$	1,600		5,000	$	40.11
Exercisable/vested at March 31, 2022		60,750		$	22.22		1.659	$	1,600		—		—

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

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

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

As of March 31, 2022, there was $18,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.  The cost will be recognized over 0.09 years, the remaining vesting period for the restricted stock awards.

NOTE 6 – OTHER DEFERRED ASSETS

The investment in CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements.  Other deferred assets is primarily associated with the acquisition of TESI in January 2022 based on the preliminary purchase price allocation.  The purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.  In addition, other deferred assets includes the Mountain Hill Water Company acquisition.

In thousands	March 31, 2022	December 31, 2021
Investment in CoBank	$5,351	$4,850
Other deferred assets	2,783	247
	$8,134	$5,097

NOTE 7 - REGULATORY ASSETS

The FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC.

The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed.

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Debt related costs include debt issuance costs and other debt related expense.  The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations.

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

Expense	Years Amortized
Deferred contract costs and other	5
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory assets, net of amortization, comprise:
	(in thousands)
	March 31, 2022		December 31, 2021
Deferred income taxes	$	481	$	355
Deferred contract costs and other		273		288
Debt related costs		4,844		4,902
Goodwill		271		273
Deferred acquisition and franchise costs		493		503
	$	6,362	$	6,321

NOTE 8 – REGULATORY LIABILITIES

FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency.  Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC.  Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties.  Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability.  Each year the liability is increased by an annual amount authorized by the DEPSC.    

Pursuant to the enactment of the Tax Cuts and Jobs Act, or TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 11) resulting in a decrease in the net deferred income tax liability of $24.3 million, of which $22.8 million was reclassified to a regulatory liability related to Artesian Water and Artesian Water Maryland.  The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes.  On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date. This audit is currently underway by the DEPSC, with no final ruling yet made.  The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers.

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Regulatory liabilities comprise:
	(in thousands)
	March 31, 2022		December 31, 2021
Utility plant retirement cost obligation	$	158	$	149
Deferred income taxes (related to TCJA)		21,574		21,111
	$	21,732	$	21,260

NOTE 9 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards.

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

	For the Three Months Ended March 31,
	2022		2021
	(in thousands)
Weighted average common shares outstanding during the period for Basic computation		9,423		9,368
Dilutive effect of employee stock options and awards		32		39
Weighted average common shares outstanding during the period for Diluted computation		9,455		9,407

For the three months ended March 31, 2022 and 2021, no shares of restricted stock awards were excluded from the calculations of diluted net income per share.

The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of March 31, 2022, 8,556,970 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of March 31, 2021, 8,502,122 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. The par value for both classes is $1.00 per share.

Equity per common share was $19.16 and $18.94 at March 31, 2022 and December 31, 2021, respectively. These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on March 31, 2022 and December 31, 2021, respectively.

NOTE 10 - REGULATORY PROCEEDINGS

Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state Public Service Commissions through a rate setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the requested level of rates by the Company.

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

• The DEPSC, regulates both Artesian Water and Artesian Wastewater.

• The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland.

• The PAPUC, regulates Artesian Water Pennsylvania.

Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws.  These laws and regulations establish criteria and standards for drinking water and for wastewater discharges.  Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates.

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Water and Wastewater Rates

Our regulated utilities periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business.  In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15% of gross water sales.  Should the rate case not be completed within seven months, by law, the utility may put the entire requested rate relief, up to 15% of gross water sales, in effect under bond until a final resolution is ordered and placed into effect.  If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest.  The timing of our rate increase requests is therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase.  We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.

Other Proceedings

Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at  7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within any 12-month period.

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

Application Date	11/20/2020
DEPSC Approval Date	12/14/2020
Effective Date	01/01/2021
Cumulative DSIC Rate	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014
Eligible Plant Improvements – Installed Ending Date	04/30/2019

The rate reflects the eligible plant improvements installed through April 30, 2019.  The DSIC rate effective January 1, 2021 is still subject to audit by the DEPSC at a later date. For each of the three months ended March 31, 2022 and March 31, 2021, we earned approximately $1.2 million in DSIC revenue.

NOTE 11 – INCOME TAXES

Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated utilities recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate.  Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.

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Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes.  The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known.  The statute of limitations for the 2017 Corporate tax returns lapsed during the fourth quarter of 2021, which resulted in the reversal of the reserve in the amount of approximately $26,000.  The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense.  The Company has accrued approximately $5,000 in penalties and interest for the three months ended March 31, 2022. The Company remains subject to examination by federal and state authorities for the tax years 2018 through 2021.

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

NOTE 12 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Current Assets and Liabilities

For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments.

Long-term Financial Liabilities

All of Artesian Resources’ outstanding long-term debt as of March 31, 2022 and December 31, 2021 was fixed-rate.  The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.  Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements.  Level 2 is valued using observable inputs other than quoted prices.  The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates.  The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

In thousands
	March 31, 2022		December 31, 2021
Carrying amount	$	144,471	$	144,850
Estimated fair value	$	147,505	$	163,182

The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts.  Refund payments are based on the water sales to new customers in the particular development constructed.  The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing.

NOTE 13 – RELATED PARTY TRANSACTIONS

Mr. Michael Houghton currently serves as a director.  During 2021, Mr. Houghton was a Partner in the law firm of Morris, Nichols, Arsht & Tunnell LLP, or MNAT, in Wilmington, Delaware.  Mr. Houghton retired from MNAT as a Partner, effective January 1, 2022, however, Mr. Houghton continues to perform legal services for MNAT as an independent contractor and non-partner.  In the normal course of business, the Company utilized the services of MNAT in 2021 for various regulatory, real estate and public policy matters.  Approximately $13,000 was paid to MNAT during the three months ended March 31, 2021, for legal and director related services.

As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer, any director, any person known to be the beneficial owner of more than 5% of any class of the Company's voting securities or any other related person that would potentially require disclosure.  In its review and approval of the related party transactions with MNAT, the Audit Committee considered the nature of the related person's interest in the transactions; the satisfactory performance of work contracted with the related party prior to the election of Mr. Houghton as a director; and the material terms of the transactions, including, without limitation, the amount and type of transactions, the importance of the transactions to the related person, the importance of the transactions to the Company and whether the transactions would impair the judgment of a director or officer to act in the best interest of the Company.  The Audit Committee approves only those related person transactions that are in, or are consistent with, the best interests of the Company and its stockholders.

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NOTE 14 – BUSINESS COMBINATIONS

As part of the Company’s growth strategy, on January 14, 2022 Artesian Wastewater completed its agreement to acquire TESI, which provides regulated wastewater services in Delaware.  Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company for $6.4 million in cash and other consideration, including, forgiveness of a $2.1 million note due from Middlesex, consisting of $3.1 million paid at closing.  This acquisition more than doubled the number of wastewater customers served in Sussex County, Delaware.  The acquisition is being accounted for as a business combination under ASC Topic 805, “Business Combinations,” in accordance with the acquisition method whereby the total purchase price consideration will be allocated to intangible assets and utility plant assets acquired and liabilities assumed based on their respective estimated fair values.  The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed in a business purchase combination be recognized at their fair values as of the acquisition date.  The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions.  The Company is still gathering detailed records for valuing utility plant assets and related contributions in aid of construction at replacement cost adjusted for depreciation and valuing real property using a comparative sales approach in order to complete the purchase price allocation for the items as well as some of the assumed liabilities.  The purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date. Any goodwill as a result of the transaction is not expected to be deductible for tax purposes.

The TESI acquisition was approved by the DEPSC on October 27, 2021, subject to the DEPSC determining the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Wastewater Management’s next base rate case.

The Company reflected revenue of $0.7 million for the three months ended March 31, 2022 in its condensed consolidated statement of operations related to the acquisition.  The pro forma revenue for the three months ended March 31, 2022 is estimated to be approximately $0.7 million.  The Company anticipates the pro forma effects of revenue for the three months ended March 31, 2022 to be approximately the same given there has not been any changes in the rates.  The pro forma information is not necessarily indicative of the Company’s future results.  Any pro forma effects of earnings is not practicable, as we continue to integrate TESI operations and adjust the operating cost structure as it relates to operating expenses reflective of synergies of the combined operations, and therefore would not present an accurate comparison.

The table below sets forth the preliminary purchase price allocation of this acquisition as of March 31, 2022.  The preliminary purchase price allocation is provisional and there could be material changes to the estimates below.

(In thousands)
		TESI
	Utility plant	$	19,455
	Cash		280
	Other assets		2,565
	Total assets		22,300
	Less: Liabilities and contributions in aid of construction (CIAC)
	Liabilities		2,521
	CIAC		16,657
	Net cash purchase price	$	3,122

Additionally, as part of the Company’s growth strategy, on February 16, 2022, Artesian Water signed an agreement, or the Asset Purchase Agreement, to purchase from the Town of Clayton, a Delaware municipality, or Clayton, substantially all of the operating assets of Clayton’s water system, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Water System.  Pursuant to the terms of the Asset Purchase Agreement, Clayton shall transfer to Artesian Water all of Clayton’s right, title and interest in and to substantially all of the municipal water utility, plant and equipment, associated real property, contracts, easements and permits possessed by Clayton at closing related to the Water System.  The total purchase price is $5.0 million, less the current payoff amount of any secured debt or debt associated with the Water System.  Closing on this transaction is expected in the second quarter of 2022, pending due diligence.  The DEPSC approved the transfer of Clayton’s exclusive franchise territory on April 20, 2022.

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NOTE 15 - GEOGRAPHIC CONCENTRATION OF CUSTOMERS

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC.  As of March 31, 2022, Artesian Water was serving approximately 92,000 customers, Artesian Water Maryland was serving approximately 2,600 customers and Artesian Water Pennsylvania was serving approximately 40 customers.

Artesian Wastewater provides wastewater utility service to customers within its established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC.  As of March 31, 2022, Artesian Wastewater was serving approximately 3,400 customers, including one large industrial customer. Effective January 14, 2022, following the acquisition of TESI, the number of wastewater customers served more than doubled.  All wastewater customers are located in Sussex County, Delaware.

NOTE 16 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued new guidance that provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as the market transitions from reference rates that are expected to be discontinued, such as the London Inter-bank Offered Rate, or LIBOR.  The guidance was effective upon issuance and may be applied prospectively to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued, evaluated on or before December 31, 2022, beginning during the reporting period in which the guidance has been elected.  It is expected that the LIBOR rate will no longer be published for most currencies as of December 31, 2021, however, publication for USD currency should continue through June 30, 2023.  LIBOR is expected to be phased out completely by June 30, 2023.  As a result, it is possible that, in the future, the LIBOR rate may become unavailable or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on LIBOR Rate Loans.  The guidance is optional and may be elected over time as reference rate reform activities occur.  In light of this eventuality, one of the banks with which we have a line of credit arrangement, currently has initiatives underway to identify new or alternative reference rates to be used in place of the LIBOR rate.  The Company is evaluating the impact of the new guidance on our financial position, results of operations and cash flows.

NOTE 17 - SUBSEQUENT EVENT

On April 29, 2022, Artesian Water and CoBank, ACB, or CoBank, entered into a Bond Purchase Agreement, or the Agreement, relating to the issue and sale by Artesian Water to CoBank of a $30 million principal amount First Mortgage Bond, Series W, or the Bond, due April 30, 2047, or the Maturity Date.  The Bond was issued pursuant to Artesian Water’s Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Fifth Supplemental Indenture dated as of April 29, 2022, or the Supplemental Indenture, from Artesian Water to Wilmington Trust Company, as Trustee.  The Supplemental Indenture is a first mortgage lien against substantially all of Artesian Water’s utility plant.  The proceeds from the sale of the Bond shall be used to pay down outstanding lines of credit of the Company and a loan payable to Artesian Resources, with any additional proceeds used to fund future capital investments in Artesian Water.  The Delaware Public Service Commission approved the issuance of the Bond on April 20, 2022.

The Bond carries an annual interest rate of 4.43% through but excluding the Maturity Date.  Interest is payable on June 30th, September 30th, December 30th and March 30th in each year and on the Maturity Date, beginning June 30, 2022, until Artesian Water’s obligation with respect to the payment of principal, premium (if any) and interest shall be discharged.  Overdue payments shall bear interest as provided in the Supplemental Indenture. The term of the Bond also includes certain limitations on Artesian Water’s indebtedness.

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ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q that express our "belief," "anticipation" or "expectation," as well as other statements that are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act and the Private Securities Litigation Reform Act of 1995.  Statements regarding specific and overall impacts of the COVID-19 global pandemic on our financial condition and results of operations, our goals, priorities, growth and expansion plans and expectation for our water and wastewater subsidiaries and non-regulated subsidiaries, customer base growth opportunities in Delaware and Cecil County, Maryland, our belief regarding our capacity to provide water services for the foreseeable future to our customers, our belief relating to our compliance and the cost to achieve compliance with relevant governmental regulations, our expectation of the timing of decisions by regulatory authorities, the impact of weather on our operations and the execution of our strategic initiatives, our expectation of the timing for construction on new projects, our expectations regarding the closing of our transaction with TESI, our expectation relating to the adoption of recent accounting pronouncements, contract operations opportunities, legal proceedings, our properties, deferred tax assets, adequacy of our available sources of financing, the expected recovery of expenses related to our long-term debt, our expectation to be in compliance with financial covenants in our debt instruments, our ability to refinance our debt as it comes due, our ability to adjust our debt level, interest rate, maturity schedule and structure, the timing and terms of renewals of our lines of credit, plans to increase our wastewater treatment operations, engineering services and other revenue streams less affected by weather, expected future contributions to our postretirement benefit plan, anticipated growth in our non-regulated division, the impact of recent acquisitions on our ability to expand and foster relationships, anticipated investments in certain of our facilities and systems and the sources of funding for such investments, and the sufficiency of internally generated funds and credit facilities to provide working capital and our liquidity needs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from those projected.  Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "projects", "forecasts", "may", "should", variations of such words and similar expressions are intended to identify such forward-looking statements.  Certain factors as discussed under Item 1A -Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2021, and this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, such as changes in weather, changes in our contractual obligations, changes in government policies, the timing and results of our rate requests, failure to receive regulatory approval, changes in economic and market conditions generally, and other matters could cause results to differ materially from those in the forward-looking statements.  Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic.  While the Company may elect to update forward-looking statements, we specifically disclaim any obligation to do so and you should not rely on any forward-looking statement as a representation of the Company's views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2022

OVERVIEW

Our profitability is primarily attributable to the sale of water. Gross water sales composed 81.8% of total operating revenues for the three months ended March 31, 2022.  Our profitability is also attributed to the various contract operations, water, sewer and internal SLP Plans, wastewater services and other services we provide.  Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature.  In the event temperatures during the typically warmer months are cooler than expected, or rainfall is greater than expected, the demand for water may decrease and our revenues may be adversely affected.  We believe the effects of weather are short term and do not materially affect the execution of our strategic initiatives. Our wastewater services, contract operations, SLP Plans and other services provide a revenue stream that is not affected by changes in weather patterns.

While water sales are our primary source of revenues, we continue to seek growth opportunities to provide wastewater services in Delaware and the surrounding areas. We also continue to explore and develop relationships with developers and municipalities in order to increase revenues from contract water and wastewater operations, wastewater management services, and design, construction and engineering services. We plan to continue developing and expanding our contract operations and other services in a manner that complements our growth in water service to new customers. Our anticipated growth in these areas is subject to changes in residential and commercial construction, which may be affected by interest rates, inflation and general housing and economic market conditions.  We anticipate continued growth in our non-regulated division due to our water, sewer, and internal SLP Plans.

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COVID-19 Pandemic

As of March 31, 2022, the Company’s financial results and business operations have not been materially adversely affected by the coronavirus, or COVID-19, outbreak, which was declared a pandemic in March 2020.  However, we have experienced delays in procuring some materials and supplies.  While we have been successful in managing these delays, there is no assurance that our future financial results or business operations will not be negatively affected.  The full impact of the COVID-19 outbreak continues to evolve as of the date of this report.  Management is actively monitoring the situation and impacts on its operations, suppliers, industry, and workforce.

Inflation

We are affected by inflation, most notably by the continually increasing costs required to maintain, improve and expand our service capability.  The cumulative effect of inflation results in significantly higher facility replacement costs which must be recovered from future cash flows.  Our ability to recover increases in investments in facilities is dependent upon future rate increases, which are subject to approval by the applicable regulatory authority.  We can provide no assurances that any future rate increase request will be approved, and if approved, we cannot guarantee that any rate increase will be granted in a timely manner and/or will be sufficient in amount to cover costs for which we initially sought the rate increase.  The impact of inflation could adversely affect our results of operations, financial position or cash flows.

Materials and Supplies

We are highly dependent on the availability of essential materials and parts from our suppliers for expansion, construction and maintenance of our services.  The majority of the materials required for our water and wastewater utility business are typically under contract at fixed prices, however, supply chain issues associated with the COVID-19 pandemic resulted in price increases and delays in procuring certain materials and equipment.  We have been successful in minimizing these delays and cost increases with thorough planning and pre-ordering, however there is no assurance that our future financial results or business operations will not be negatively affected.

Water Division

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water service to residential, commercial, industrial, governmental, municipal and utility customers.  Increases in the number of customers contribute to increases, or help to offset any intermittent decreases, in our operating revenue.  As of March 31, 2022, the number of metered water customers in Delaware increased approximately 1.6% compared to March 31, 2021.  The number of metered water customers in Maryland increased approximately 2.2% compared to March 31, 2021.  The number of metered water customers in Pennsylvania remained consistent compared to March 31, 2021.  For the three months ended March 31, 2022, approximately 1.9 billion gallons of water were distributed in our Delaware systems and approximately 29.0 million gallons of water were distributed in our Maryland systems.

Wastewater Division

Artesian Wastewater owns wastewater collection and treatment infrastructure and began providing regulated wastewater services to customers in Delaware in July 2005.  Artesian Wastewater Maryland was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in Maryland.  It is not currently providing these services in Maryland.  Our residential and commercial wastewater customers are billed a flat monthly fee, which contributes to providing a revenue stream unaffected by weather.  The number of Delaware wastewater customers more than doubled compared to March 31, 2021, following the acquisition of Tidewater Environmental Services, Inc., or TESI.  This acquisition agreement is discussed further in the “Strategic Direction” section below.

Non-Regulated Division

Artesian Utility provides contract water and wastewater operation services to private, municipal and governmental institutions.  Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan, and the ISLP Plan.  SLP Plan customers are billed a flat monthly or quarterly rate, which contributes to providing a revenue stream unaffected by weather.  There has been consistent customer growth over the years.  As of March 31, 2022, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 4.5%, 1.2% and 28.1%, respectively, compared to March 31, 2021.  The non-utility customers enrolled in one of our three protections plans increased 5.1%.

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Strategic Direction

Our strategy is to increase customer growth, revenues, earnings and dividends by expanding our water, wastewater and SLP Plan services across the Delmarva Peninsula.  We remain focused on providing superior service to our customers and continuously seek ways to improve our efficiency and performance.  Our strategy has included a focus on building strategic partnerships with county governments, municipalities and developers.  By providing water and wastewater services, we believe we are positioned as the primary resource for developers and communities throughout the Delmarva Peninsula seeking to fill both needs simultaneously.  We believe we have a proven ability to acquire and integrate high growth, reputable entities, through which we have captured additional service territories that will serve as a base for future revenue.  We believe this experience presents a strong platform for further expansion and that our success to date also produces positive relationships and credibility with regulators, municipalities, developers and customers in both existing and prospective service areas.

In our regulated water division, our strategy is to focus on a wide spectrum of activities, which include strategic acquisitions of existing systems, expanding certificated service area, identifying new and dependable sources of supply, developing the wells, treatment plants and delivery systems to supply water to customers and educating customers on the wise use of water.  Our strategy includes focused efforts to expand through strategic acquisitions and in new regions added to our Delaware service territory over the last 10 years.  We plan to expand our regulated water service area in the Cecil County designated growth corridor and to expand our business through the design, construction, operation, management and acquisition of additional water systems.  The expansion of our exclusive franchise areas elsewhere in Maryland and the award of contracts will similarly enhance our operations within the state.

Our ability to develop partnerships with various county governments, municipalities and developers has provided a number of opportunities.  In the last four years, we completed seven acquisitions including asset purchase agreements with municipal and developer/homeowner association operated systems.

On February 16, 2022, Artesian Water signed an agreement, or the Asset Purchase Agreement, to purchase from the Town of Clayton, a Delaware municipality, or Clayton, substantially all of the operating assets of Clayton’s water system, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Water System.  Pursuant to the terms of the Asset Purchase Agreement, Clayton shall transfer to Artesian Water all of Clayton’s right, title and interest in and to substantially all of the municipal water utility, plant and equipment, associated real property, contracts, easements and permits possessed by Clayton at closing related to the Water System.  The total purchase price is $5.0 million, less the current payoff amount of any secured debt or debt associated with the Water System.  Closing on this transaction is expected in the second quarter of 2022, pending due diligence. The Delaware Public Service Commission approved the transfer of Clayton’s exclusive franchise territory on April 20, 2022.

We believe that Delaware's generally lower cost of living in the region, availability of development sites in relatively close proximity to the Atlantic Ocean in Sussex County, and attractive financing rates for construction and mortgages have resulted, and will continue to result, in increases to our customer base.  Delaware’s lower property and income tax rate make it an attractive region for new home development and retirement communities.  Substantial portions of Delaware currently are not served by a public water system, which could also assist in an increase to our customer base as systems are added.

In our regulated wastewater division, we foresee significant growth opportunities and will continue to seek strategic partnerships and relationships with developers and governmental agencies to complement existing agreements for the provision of wastewater service on the Delmarva Peninsula. There are numerous locations in Sussex County where Artesian Wastewater’s and Sussex County’s facilities are connected or integrated to allow for the movement and disposal of wastewater generated by one or the other’s system in a manner that most efficiently and cost effectively manages wastewater transmission, treatment and disposal.  In addition, Artesian Wastewater plans to utilize our larger regional wastewater facilities to expand service areas to new customers while transitioning our smaller treatment facilities into regional pump stations in order to gain additional efficiencies in the treatment and disposal of wastewater. We believe this will reduce operational costs at the smaller treatment facilities in the future because they will be converted from treatment and disposal plants to pump stations to assist with transitioning the flow of wastewater from one regional facility to another.  In addition, since closing the transaction with TESI noted below, Artesian Wastewater is the sole regional regulated wastewater utility in Delaware, which we believe will enable us to increase efficiencies in the treatment and disposal of wastewater and provide additional opportunities to expand our wastewater operations.

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On January 14, 2022, Artesian Wastewater acquired TESI, a wholly-owned subsidiary of Middlesex Water Company, or Middlesex, that provides regulated wastewater services in Delaware.  Artesian Wastewater purchased all of the stock of TESI from Middlesex for $6.4 million in cash and other consideration, including, forgiveness of a $2.1 million note due from Middlesex.  This acquisition more than doubled the number of wastewater customers served in Sussex County, Delaware and included all residents in the Town of Milton.

Artesian Wastewater began operating its Sussex Regional Recharge Facility in late June 2021, shortly after our large industrial customer received its process wastewater treatment operating permit.  The associated customer agreement includes a required minimum wastewater flow.  Pursuant to a settlement agreement, for the calendar year 2021 only, the minimum required volume of wastewater was prorated on a seven-month basis beginning June 1, 2021 and ending December 31, 2021.

The general need for increased capital investment in our water and wastewater systems is due to a combination of population growth, more protective water quality standards, aging infrastructure and acquisitions.  Our planned and budgeted capital improvements over the next three years include projects for water infrastructure improvements and expansion in both Delaware and Maryland and wastewater infrastructure improvements and expansion in Delaware.  The DEPSC and MDPSC have generally recognized the operating and capital costs associated with these improvements in setting water and wastewater rates for current customers and capacity charges for new customers.

In our non-regulated division, we continue pursuing opportunities to expand our contract operations.  Through Artesian Utility, we will seek to expand our contract design, engineering and construction services of water and wastewater facilities for developers, municipalities and other utilities.  We also anticipate continued growth due to our water, sewer and internal SLP Plans.  Artesian Development owns two nine-acre parcels of land, located in Sussex County, Delaware, which will allow for construction of a water treatment facility and wastewater treatment facility.  Artesian Storm Water was formed to expand contract work related to the design, installation, maintenance and repair services associated with existing or proposed storm water management systems in Delaware and the surrounding areas.

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

Operating Revenues

Revenues totaled $22.2 million for the three months ended March 31, 2022, $1.5 million, or 7.5%, more than revenues for the three months ended March 31, 2021. Water sales revenue increased $0.3 million, or 1.8%, for the three months ended March 31, 2022 from the corresponding period in 2021, primarily due to an increase in fixed fee revenue related to added customers and an increase in overall water consumption revenue.  We realized 81.8% and 86.4% of our total operating revenue for the three months ended March 31, 2022 and March 31, 2021, respectively, from the sale of water.

Other utility operating revenue increased approximately $1.1 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.  This increase is primarily due to an increase in wastewater revenue related to residential customer growth resulting from the acquisition of TESI in January 2022, industrial wastewater service revenue increased related to process wastewater operations that started in June 2021, and added residential customers.

Non-utility operating revenue increased approximately $0.1 million, or 5.6%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.  The increase is primarily due to an increase in Service Line Protection Plan revenue.

Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $1.1million, or 9.3%, for the three months ended March 31, 2022, compared to the same period in 2021.  Utility operating expenses increased $1.0 million and property and other taxes increased $0.1 million.

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Utility operating expenses increased $1.0 million, or 10.4%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.  The net increase is primarily related to the following.

Repair and maintenance costs increased $0.5 million, related to an increase in maintenance costs primarily associated with water treatment facilities and equipment, including an increase in water treatment filter replacements, an increase in tank painting costs under contract, and an increase in fuel costs.  In addition, overall maintenance costs increased related to the TESI acquisition.

Payroll and employee benefit costs increased $0.3 million, primarily related to an increase in overall compensation.

Administrative costs increased $0.2 million, primarily related to an increase in outside services and contractual services associated with the TESI acquisition.

Purchased power costs increased $0.1 million, primarily due to an increase in usage related to the additional operational costs associated with the TESI acquisition and upgraded wastewater treatment facilities, in addition to an increase in overall water operations.

Purchased water costs decreased $0.2 million, related to a decrease of water purchased under a new contract, effective January 2022, in which the minimum amount of water required to be purchased was reduced.

Property and other taxes increased $0.1 million, or 5.8%, primarily due to an increase in utility plant subject to taxation.  Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.

The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 58.3% for the three months ended March 31, 2022, compared to 57.4% for the three months ended March 31, 2021.

Depreciation and amortization expense increased $0.1 million, or 2.4%, primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water to customers and service to our wastewater customers.

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

Net Income

Our net income applicable to common stock increased $0.3 million, or 6.6%.  Total operating revenues increased $1.5 million, mostly offset by a $1.2 million increase in total operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary sources of liquidity for the three months ended March 31, 2022 were $11.8 million of cash provided by operating activities, $2.8 million in net contributions and advances from developers, and $0.5 million in net proceeds from the issuance of common stock.  Cash flow from operating activities is primarily provided by our utility operations, and is impacted by the timeliness and adequacy of rate increases and changes in water consumption as a result of year-to-year variations in weather conditions, particularly during the summer.  A significant part of our ability to maintain and meet our financial objectives is to ensure that our investments in utility plant and equipment are recovered in the rates charged to customers.  As such, from time to time, we file rate increase requests to recover increases in operating expenses and investments in utility plant and equipment.  We will continue to borrow on available lines of credit in order to satisfy current liquidity needs.  In addition, the Company has a long history of paying regular quarterly dividends as approved by our Board of Directors using net cash from operating activities.

Investment in Plant and Systems

The primary focus of our investments is to continue to provide high quality reliable service to our growing service territory.  Capital expenditures during the first three months of 2022 were $12.6 million compared to $6.3 million during the same period in 2021.  During the first three months of 2022, we continue to focus our investment through our rehabilitation program for transmission and distribution facilities by replacing aging or deteriorating mains, installation of new main, enhancing or improving existing treatment facilities and replacing aging wells and pumping equipment to better serve our customers.  We also continue to invest in wastewater projects including the acquisition of TESI.  Developers contributed $1.2 million of the total investment during the first three months of 2022.

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We depend on the availability of capital for expansion, construction and maintenance.  We have several sources of liquidity to finance our investment in utility plant and other fixed assets.  We estimate that future investments will be financed by our operations and external sources, including short-term borrowings under our revolving credit agreements discussed below. We expect to fund our activities for the next twelve months using our available cash balances, bank credit lines, projected cash generated from operations, state revolving fund loans and capital market financing.  We believe that internally generated funds along with existing credit facilities will be adequate to provide sufficient working capital to maintain normal operations and to meet our financing requirements.  However, because part of our business strategy is to expand through strategic acquisitions, we may seek additional debt financing or issue additional equity securities to finance future acquisitions or for other purposes.  There is no assurance that we will be able to secure funding on terms acceptable to us, or at all.  Our cash flows from operations are primarily derived from water sales revenues and may be materially affected by changes in water sales due to weather and the timing and extent of increases in rates approved by state public service commissions.

Lines of Credit and Long-Term Debt

At March 31, 2022, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all subsidiaries of Artesian Resources.  As of March 31, 2022, there was $30.6 million of available funds under this line of credit.  The interest rate for borrowings under this line is the London Interbank Offered Rate, or LIBOR, plus 1.00%.  It is expected that the LIBOR rate for USD currency will be discontinued after June 30, 2023.  As a result, it is possible that, in the future, the LIBOR rate may become unavailable or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on LIBOR Rate Loans.  In light of this eventuality, Citizens currently has initiatives underway to identify new or alternative reference rates to be used in place of the LIBOR rate.  This is a demand line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time.  The term of this line of credit expires on the earlier of May 22, 2022 or any date on which Citizens demands payment. The Company expects to renew this line of credit.

At March 31, 2022, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland.  As of March 31, 2022, there was $2.0 million of available funds under this line of credit.  The interest rate for borrowings under this line allows the Company to select either LIBOR plus 1.50% or a weekly variable rate established by CoBank; the Company has historically used the weekly variable interest rate.  The term of this line of credit expires on July 30, 2022. Artesian Water expects to renew this line of credit.

The Company’s material cash requirements include the following lines of credit commitments and contractual obligations:

Material Cash Requirements	Payments Due by Period
In thousands	Less than 1 Year		1-3 Years		4-5 Years		After 5 Years		Total
First mortgage bonds (principal and interest)	$	7,924	$	15,773	$	15,569	$	240,933	$	280,289
State revolving fund loans (principal and interest)		820		1,483		1,195		4,130		7,628
Lines of credit		27,409		---		---		---		27,409
Promissory note (principal and interest)		961		1,921		1,923		11,334		16,139
Operating leases		24		48		49		1,332		1,453
Operating agreements		59		77		82		814		1,032
Unconditional purchase obligations		1,043		1,539		1,286		---		3,868
Tank painting contractual obligation		392		490		---		---		882
Total contractual cash obligations	$	38,632	$	21,331	$	20,194	$	285,543	$	338,700

Artesian’s long-term debt agreements and revolving lines of credit contain customary affirmative and negative covenants that are binding on us (which are in some cases subject to certain exceptions), including, but not limited to, restrictions on our ability to make certain loans and investments, guarantee certain obligations, enter into, or undertake, certain mergers, consolidations or acquisitions, transfer certain assets or change our business.  As of March 31, 2022, we were in compliance with these covenants.

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Long-term debt obligations reflect the maturities of certain series of our first mortgage bonds, which we intend to refinance when due if not refinanced earlier.  One first mortgage bond is subject to redemption in a principal amount equal to $150,000 plus interest per calendar quarter.  The state revolving fund loan obligation and promissory note obligation have an amortizing mortgage payment payable over a 20-year period.  The first mortgage bonds, the state revolving fund loan and the promissory note have certain financial covenant provisions, the violation of which could result in default and require the obligation to be immediately repaid, including all interest.  We have not experienced conditions that would result in our default under these agreements.

On April 29, 2022, Artesian Water and CoBank, ACB entered into a Bond Purchase Agreement, or the Agreement, relating to the issue and sale by Artesian Water to CoBank of a $30 million principal amount First Mortgage Bond, Series W, or the Bond, due April 30, 2047, or the Maturity Date.  The Bond was issued pursuant to Artesian Water’s Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Fifth Supplemental Indenture dated as of April 29, 2022, or the Supplemental Indenture, from Artesian Water to Wilmington Trust Company, as Trustee.  The Supplemental Indenture is a first mortgage lien against substantially all of Artesian Water’s utility plant.  The proceeds from the sale of the Bond shall be used to pay down outstanding lines of credit of the Company and a loan payable to Artesian Resources, with any additional proceeds used to fund future capital investments in Artesian Water.  The Delaware Public Service Commission approved the issuance of the Bond on April 20, 2022.  The Bond carries an annual interest rate of 4.43% through but excluding the Maturity Date.  Interest is payable on June 30th, September 30th, December 30th and March 30th in each year and on the Maturity Date, beginning June 30, 2022, until Artesian Water’s obligation with respect to the payment of principal, premium (if any) and interest shall be discharged.  Overdue payments shall bear interest as provided in the Supplemental Indenture. The term of the Bond also includes certain limitations on Artesian Water’s indebtedness.

In order to control purchased power cost, in August 2018 Artesian Water entered into an electric supply contract with MidAmerican effective from September 2018 through May 2022.  In February 2021, Artesian Water entered into a new electric supply contract with MidAmerican that is effective from May 2021 to May 2025.  The fixed rate was lowered 5.6% starting in May 2021.  In August 2018, Artesian Water Maryland entered into an electric supply agreement with Constellation NewEnergy, Inc., effective from May 2019 through May 2022.  In February 2022, Artesian Water Maryland entered into an electric supply agreement with Constellation NewEnergy, Inc., effective from May 2022 through November 2025.  In January 2022, following the acquisition of Tidewater Environmental Services, Inc., TESI dba Artesian Wastewater assumed an electricity supply contract with WGL Energy that is effective through December 2024.

Payments for unconditional purchase obligations reflect minimum water purchase obligations based on rates that are subject to change under two interconnection agreements with the Chester Water Authority.  One agreement, that expired on December 31, 2021, had a “take or pay” clause requiring us to purchase 3 million gallons per day.  The other agreement is effective from January 1, 2022 through December 31, 2026, includes automatic five year renewal terms, unless terminated by either party, and has a “take or pay” clause requiring us to purchase water on a step down schedule through July 5, 2022, thereafter requiring us to purchase a minimum of 0.5 million gallons per day.  In addition, payments for unconditional purchase obligations reflect minimum water purchase obligations based on a contract rate under our interconnection agreement with the Town of North East, which expires June 26, 2024.

In April 2021, Artesian Water entered into a 3-year agreement with Worldwide Industries Corporation effective July 1, 2021 to paint elevated water storage tanks.  Pursuant to the agreement, the total expenditure for the three years is $1.2 million.

Critical Accounting Assumptions, Estimates and Policies; Recent Accounting Pronouncements

This discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our 2021 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the year ended December 31, 2021.  The preparation of those financial statements required management to make assumptions and estimates that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements as well as the reported amounts of revenues and expenses during the reporting periods.  Actual amounts or results could differ from those based on such assumptions and estimates.

Our critical accounting assumptions, estimates and policies are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2021.  There have been no changes in our critical accounting assumptions, estimates and policies.  Our significant accounting policies are described in our notes to the 2021 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021.

Information concerning our implementation and the impact of recent accounting pronouncements issued by the FASB is included in the notes to our 2021 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021 and also in the notes to our unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.  We did not adopt any accounting policy in the first three months of 2022 that had a material impact on our financial condition, liquidity or results of operations.

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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to the risk of fluctuating interest rates in the normal course of business.  Our policy is to manage interest rates through the use of fixed rate long-term debt and, to a lesser extent, short-term debt.  The Company's exposure to interest rate risk related to existing fixed rate, long-term debt is due to the term of the majority of our First Mortgage Bonds and the term of the promissory note, which have final maturity dates ranging from 2028 to 2049, and interest rates ranging from 4.24% to 5.96%, which exposes the Company to interest rate risk as interest rates may drop below the existing fixed rate of the long-term debt prior to such debt’s maturity.  In addition, the Company has interest rate exposure on $60 million of variable rate lines of credit, with two banks, under which the interim bank loans payable at March 31, 2022 were approximately $27.4 million.  An increase in the variable interest rates will result in an increase in the cost of borrowing on these variable rate lines of credit.  Also, changes in LIBOR could affect our operating results and liquidity.  We are also exposed to market risk associated with changes in commodity prices.  Our risks associated with price increases in chemicals, electricity and other commodities are mitigated by our ability to recover our costs through rate increases to our customers.  We have also sought to mitigate future significant electric price increases by signing multi-year supply contracts at fixed prices.

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report.  Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in providing reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  In addition, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to achieve the foregoing objectives. A control system cannot provide absolute assurance, however, that the objectives of the control system are met and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

Periodically, we are involved in other proceedings or litigation arising in the ordinary course of business.  We do not believe that the ultimate resolution of these matters will materially affect our business, financial position or results of operations.  However, we cannot ensure that we will prevail in any litigation and, regardless of the outcome, may incur significant litigation expense and may have significant diversion of management attention.

ITEM 1A – RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition or future results. There have been no material changes to the risk factors described in such Annual Report on Form 10-K.

28

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

(a)

On April 29, 2022, Artesian Water and CoBank, ACB, or CoBank, entered into a Bond Purchase Agreement, or the Agreement, relating to the issue and sale by Artesian Water to CoBank of a $30 million principal amount First Mortgage Bond, Series W, or the Bond, due April 30, 2047, or the Maturity Date.  The Bond was issued pursuant to Artesian Water’s Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Fifth Supplemental Indenture dated as of April 29, 2022, or the Supplemental Indenture, from Artesian Water to Wilmington Trust Company, as Trustee.  The Supplemental Indenture is a first mortgage lien against substantially all of Artesian Water’s utility plant.  The proceeds from the sale of the Bond shall be used to pay down outstanding lines of credit of the Company and a loan payable to Artesian Resources, with any additional proceeds used to fund future capital investments in Artesian Water.  The Delaware Public Service Commission approved the issuance of the Bond on April 20, 2022.

The Bond carries an annual interest rate of 4.43% through but excluding the Maturity Date.  Interest is payable on June 30th, September 30th, December 30th and March 30th in each year and on the Maturity Date, beginning June 30, 2022, until Artesian Water’s obligation with respect to the payment of principal, premium (if any) and interest shall be discharged.  Overdue payments shall bear interest as provided in the Supplemental Indenture. The term of the Bond also includes certain limitations on Artesian Water’s indebtedness.

The foregoing summaries of the Supplemental Indenture and the Bond Purchase Agreement do not purport to be complete and are qualified in their entirety by reference to the Supplemental Indenture and the Bond Purchase Agreement. Copies of the Supplemental Indenture and the Bond Purchase Agreement are filed as Exhibits 4.1 and 4.2 to this Quarterly Report on Form 10-Q and are incorporated herein by reference.

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ITEM 6 - EXHIBITS

Exhibit No.	Description
4.1	Twenty-Fifth Supplemental Indenture dated as of April 29, 2022, between Artesian Water Company, Inc. and Wilmington Trust Company, as trustee.*
4.2	Bond Purchase Agreement, dated April 29, 2022, by and between Artesian Water Company, Inc., and CoBank, ACB.
31.1	Certification of Chief Executive Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended.*
31.2	Certification of Chief Financial Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended.*
32	Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350).**
101.BAL	Inline XBRL Condensed Consolidated Balance Sheets (unaudited)*
101.OPS	Inline XBRL Condensed Consolidated Statements of Operations (unaudited)*
101.CSH	Inline XBRL Condensed Consolidated Statements of Cash Flows (unaudited)*
101.NTS	Inline XBRL Notes to the Condensed Consolidated Financial Statements (unaudited)*
104	The cover page from Artesian Resources Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, formatted in Inline XBRL (contained in exhibit 101).*

*   Filed herewith

** Furnished herewith

30

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ARTESIAN RESOURCES CORPORATION

Date: May 5, 2022	By:	/s/ DIAN C. TAYLOR
		Dian C. Taylor (Principal Executive Officer)

Date: May 5, 2022	By:	/s/ DAVID B. SPACHT
		David B. Spacht (Principal Financial Officer)

*   Filed herewith

** Furnished herewith

31

EX-4.1

Exhibit 4.1

ARTESIAN WATER COMPANY, INC.

TO

WILMINGTON TRUST COMPANY,

As Trustee

_____________________

TWENTY-FIFTH SUPPLEMENTAL INDENTURE

Dated as of April 29, 2022

_____________________

Supplemental to Indenture of Mortgage

Dated as of July 1, 1961

$30,000,000 First Mortgage Bonds, Series W

TWENTY-FIFTHSUPPLEMENTAL INDENTURE, dated as of April 29, 2022, made by and between ARTESIAN WATER COMPANY, INC. (successor to Artesian Resources Corporation, formerly named “Artesian Water Company,” under the Original Indenture hereinafter referred to), a corporation organized and existing under the laws of the State of Delaware, having its principal office and place of business at 664 Churchmans Road, Newark, Delaware (hereinafter called the “Company”), party of the first part, and WILMINGTON TRUST COMPANY, a Delaware trust company, having its corporate trust office at 1100 North Market Street, in the City of Wilmington, Delaware, as Trustee under the Original Indenture hereinafter referred to (hereinafter called the “Trustee”), party of the second part.

WHEREAS, the Company is a wholly-owned subsidiary of ARTESIAN RESOURCES CORPORATION (its name having been changed from “Artesian Water Company”), a corporation organized and existing under the laws of the State of Delaware (hereinafter called the “Corporation”); and

WHEREAS, the Corporation has heretofore executed and delivered to the Trustee an Indenture of Mortgage (hereinafter called the “Original Indenture”) dated as of July 1, 1961, and duly recorded the Original Indenture in the Recorder’s Office at Wilmington, in Mortgage Record A Volume 56, Page 1 etc., on the 13th day of November, A.D. 1961, for the purpose of securing First Mortgage Bonds of the Corporation to be issued from time to time in one or more series as therein provided; and

WHEREAS, there have been issued under the Original Indenture $1,600,000 principal amount of First Mortgage Bonds, Series A, 4½%, all of which were paid at maturity on November 1, 1978; and

-2-

WHEREAS, there have been issued under the Original Indenture $1,000,000 principal amount of First Mortgage Bonds, Series B, 5 3/8%, the $912,750 remaining outstanding principal amount of which was paid at maturity on July 1, 1986; and

WHEREAS, there have been issued under the Original Indenture as supplemented by a First Supplemental Indenture dated as of April 15, 1964 (hereinafter sometimes referred to as the “First Supplemental Indenture”), $1,250,000 principal amount of First Mortgage Bonds, Series C, 5 1/8%, the $1,225,000 remaining outstanding principal amount of which was paid at maturity on April 15, 1989; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Second Supplemental Indenture dated as of June 1, 1970 (hereinafter sometimes referred to as the “Second Supplemental Indenture”), $1,000,000 principal amount of First Mortgage Bonds, Series D, 9 3/4%, the $640,000 remaining outstanding principal amount of which was paid at maturity on June 1, 1990; and

WHEREAS, there have been issued under the Original Indenture as supplemented by a Third Supplemental Indenture dated as of January 1, 1973 (hereinafter sometimes referred to as the “Third Supplemental Indenture”), $800,000 principal amount of First Mortgage Bonds, Series E, 8 ½%, due January 1, 1998, all of which were redeemed on February 1, 1993; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Fourth Supplemental Indenture dated as of November 1, 1975 (hereinafter sometimes referred to as the “Fourth Supplemental Indenture”), $1,500,000 principal amount of First Mortgage Bonds, Series F, 10 7/8%, due November 1, 1995, the $225,000 remaining outstanding principal amount of which was redeemed on February 1, 1993; and

-3-

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Fifth Supplemental Indenture dated as of March 1, 1977 (hereinafter sometimes referred to as the “Fifth Supplemental Indenture”), $1,800,000 principal amount of First Mortgage Bonds, Series G, 8 7/8% due March 1, 1997, the $1,080,000 remaining outstanding principal amount of which was redeemed on February 1, 1993; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Sixth Supplemental Indenture dated as of December 1, 1978 (hereinafter sometimes referred to as the “Sixth Supplemental Indenture”), $1,800,000 principal amount of First Mortgage Bonds, Series H, 9 3/4%, due December 1, 1998, the $1,260,000 remaining outstanding principal amount of which was redeemed on February 1, 1993; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Seventh Supplemental Indenture dated as of November 1, 1981 (hereinafter sometimes referred to as the “Seventh Supplemental Indenture”), $3,000,000 principal amount of First Mortgage Bonds, Series I, 11 7/8%, due October 1, 1987, all of which were redeemed on October 1, 1986; and

WHEREAS, the Company was organized for stated purposes that encompass the stated purposes of the Corporation in order that the Company could acquire from the Corporation substantially all of the Mortgaged Property (as such term is defined in the Original Indenture) as an entirety and to operate the same; and

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WHEREAS, the Corporation, the Company and the Trustee entered into an Eighth Supplemental Indenture dated as of July 1, 1984 (hereinafter sometimes referred to as the “Original Eighth Supplemental Indenture”), providing for the succession and substitution of the Company to and for the Corporation with the same effect as if the Company had been named in the Original Indenture as the mortgagor, and providing for the assumption by the Company of, and the release and discharge of the Corporation from, all liability and obligation on and with respect to the Bonds and coupons issued under the Original Indenture and all the terms, covenants and conditions of the Original Indenture; and

WHEREAS, the Corporation, the Company and the Trustee executed a certain corrected Eighth Supplemental Indenture dated as of July 1, 1984 (hereinafter sometimes referred to as the “Corrected Eighth Supplemental Indenture”) which supplements and corrects certain descriptions of Mortgaged Property set forth in the Original Indenture (the Original Eighth Supplemental Indenture and the Corrected Eighth Supplemental Indenture being hereinafter sometimes referred to collectively as the “Eighth Supplemental Indenture”); and

WHEREAS, on July 1, 1984, the Corporation conveyed and transferred substantially all the Mortgaged Property as an entirety, subject to the lien of the Original Indenture and all supplemental indentures thereto, to the Company; and

WHEREAS, the Company has assumed and agreed that it will promptly pay or cause to be paid, the principal of and any premium that may be due and payable on and the interest on all the Bonds issued under the Original Indenture and all indentures supplemental thereto, and has agreed to perform, observe and fulfill, duly and punctually, all the terms, covenants and conditions of the Original Indenture and all indentures supplemental thereto stated therein to be performed, observed or fulfilled by the Corporation, and the Corporation has been released and discharged from all liability and obligation on and with respect to the Bonds and coupons issued under the Original Indenture and all terms, covenants and conditions of the Original Indenture and the Trustee has executed and delivered to the Company an instrument of partial defeasance dated April 4, 1986 pursuant to Article II of the Eighth Supplemental Indenture; and

-5-

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Ninth Supplemental Indenture dated as of December 1, 1986 (hereinafter sometimes referred to as the “Ninth Supplemental Indenture”), $5,000,000 principal amount of First Mortgage Bonds, Series J, 9.55%, all of which were paid at maturity on December 1, 1996; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Tenth Supplemental Indenture dated as of April 1, 1989 (hereinafter sometimes referred to as the “Tenth Supplemental Indenture”), $7,000,000 principal amount of First Mortgage Bonds, Series K, 10.17%, due April 1, 2009, all of which were redeemed on December 29, 2000; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Eleventh Supplemental Indenture dated as of February 1, 1993 (hereinafter sometimes referred to as the “Eleventh Supplemental Indenture”), $10,000,000 principal amount of First Mortgage Bonds, Series L, 8.03%, all of which were redeemed on January 31, 2003; and

WHEREAS, the Original Indenture has been further supplemented pursuant to a Twelfth Supplemental Indenture dated as of December 5, 1995 (hereinafter sometimes referred to as the “Twelfth Supplemental Indenture”), which provided for the release from the Indenture of certain assets of the Company; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Thirteenth Supplemental Indenture dated as of June 1, 1997 (hereinafter sometimes referred to as the “Thirteenth Supplemental Indenture”), $10,000,000 principal amount of First Mortgage Bonds, Series M, 7.84%, due December 31, 2007, all of which were redeemed on August 1, 2005; and

-6-

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Fourteenth Supplemental Indenture dated as of June 1, 1997 (hereinafter sometimes referred to as the “Fourteenth Supplemental Indenture”), $5,000,000 principal amount of First Mortgage Bonds, Series N, due December 31, 2007, all of which were redeemed on August 1, 2005; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Fifteenth Supplemental Indenture dated as of December 1, 2000 (hereinafter sometimes referred to as the “Fifteenth Supplemental Indenture”), $20,000,000 principal amount of First Mortgage Bonds, Series O, 8.17%, all of which were redeemed on January 18, 2017; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Sixteenth Supplemental Indenture dated as of January 31, 2003 (hereinafter sometimes referred to as the “Sixteenth Supplemental Indenture”), $25,000,000 principal amount of First Mortgage Bonds, Series P, 6.58%, all of which were redeemed on January 31, 2018; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Seventeenth Supplemental Indenture dated as of December 1, 2003 (hereinafter sometimes referred to as the “Seventeenth Supplemental Indenture”), $15,400,000 principal amount of First Mortgage Bonds, Series Q, 4.75%, all of which were redeemed on January 18, 2017; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by an Eighteenth Supplemental Indenture dated as of August 1, 2005 (hereinafter sometimes referred to as the “Eighteenth Supplemental Indenture”), $25,000,000 principal amount of First Mortgage Bonds, Series R, 5.96%, all of which are outstanding as of the date hereof; and

WHEREAS, there is no “Nineteenth Supplemental Indenture” supplementing the Original Indenture; and

-7-

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Twentieth Supplemental Indenture dated as of December 1, 2008 (hereinafter sometimes referred to as the “Original Twentieth Supplemental Indenture”), $15,000,000 principal amount of First Mortgage Bonds, Series S, 6.73%, of which $8,550,000 are outstanding as of the date hereof; and

WHEREAS, the Company and the Trustee executed a certain Twenty-First Supplemental Indenture dated as of November 20, 2009 (hereinafter sometimes referred to as the “Twenty-First Supplemental Indenture”), which supplements and updates certain provisions in the Original Twentieth Supplemental Indenture (the Original Twentieth Supplemental Indenture, as updated by the Twenty-First Supplemental Indenture, being hereinafter sometimes referred to collectively as the “Twentieth Supplemental Indenture”); and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Twenty-Second Supplemental Indenture dated as of January 18, 2017 (hereinafter sometimes referred to as the “Twenty-Second Supplemental Indenture”), $40,000,000 principal amount of First Mortgage Bonds, Series T, 4.24%, all of which are outstanding as of the date hereof; and

WHEREAS, the Company and the Trustee, with the required consent of the holders of Bonds then outstanding, executed a First Amendment to Indenture of Mortgage and to the Sixteenth, Eighteenth and Twentieth Supplemental Indentures, dated as of January 18, 2017 (hereinafter sometimes referred to as the “First Amendment”), which amends certain provisions of the Original Indenture and of the Sixteenth Supplemental Indenture, the Eighteenth Supplemental Indenture and the Twentieth Supplemental Indenture; and

WHEREAS, there have been issued under the Original Indenture, as supplemented by a Twenty-Third Supplemental Indenture dated as of January 31, 2018 (hereinafter sometimes referred to as the “Twenty-Third Supplemental Indenture”), $25,000,000 principal amount of First Mortgage Bonds, Series U, 4.71%, all of which are outstanding as of the date hereof; and

-8-

WHEREAS, there have been issued under the Original Indenture, as supplemented by the Twenty-Fourth Supplemental Indenture dated as of December 17, 2019 (hereinafter sometimes referred to as the “Twenty-Fourth Supplemental Indenture”), $30,000,000 principal amount of First Mortgage Bonds, Series V, 4.42%, all of which are outstanding as of the date hereof; and

WHEREAS, the Company proposes to issue and sell not more than $30,000,000 principal amount of a new series of bonds to be designated as First Mortgage Bonds, Series W, to be issued under and secured by the Original Indenture, as supplemented by this Twenty-Fifth Supplemental Indenture dated as of April 29, 2022 (hereinafter sometimes referred to as the “Twenty-Fifth Supplemental Indenture”); and

WHEREAS, the Company, pursuant to the provisions of the Original Indenture, has duly resolved and determined to make, execute and deliver to the Trustee this Twenty-Fifth Supplemental Indenture for the purpose of providing for the creation of the First Mortgage Bonds, Series W, to be issued under and secured by the Original Indenture, as supplemented and amended (the Original Indenture, the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh Supplemental Indenture, the Twelfth Supplemental Indenture, the Thirteenth Supplemental Indenture, the Fourteenth Supplemental Indenture, the Fifteenth Supplemental Indenture, the Sixteenth Supplemental Indenture, the Seventeenth Supplemental Indenture, the Eighteenth Supplemental Indenture, the Twentieth Supplemental Indenture, the Twenty-First Supplemental Indenture, the Twenty-Second Supplemental Indenture, the First Amendment, the Twenty-Third Supplemental Indenture, the Twenty-Fourth Supplemental Indenture, this Twenty-Fifth Supplemental Indenture and all indentures supplemental to, and all amendments to, the Original Indenture hereafter executed, being hereinafter sometimes called the “Indenture”); and

-9-

WHEREAS, all things necessary to make $30,000,000 aggregate principal amount of the First Mortgage Bonds, Series W, when duly executed by the Company and authenticated and delivered by the Trustee, legally valid and binding obligations of the Company entitled to the benefits and security of the Indenture, and to make this Twenty-Fifth Supplemental Indenture a legally valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, have been done and performed; and

WHEREAS, the issuance of the First Mortgage Bonds, Series W, as herein provided, has been in all respects duly authorized by the Company as provided in the Indenture.

NOW, THEREFORE, THIS INDENTURE WITNESSETH THAT ARTESIAN WATER COMPANY, INC., in consideration of the premises and of the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the First Mortgage Bonds, Series W, by CoBank, ACB (hereinafter sometimes referred to as “CoBank”) pursuant to the Bond Purchase Agreement dated as of April 29, 2022 (hereinafter sometimes referred to as the “Bond Purchase Agreement”) and of One Dollar to the Company duly paid by the Trustee at or before the ensealing and delivery of these presents, for itself and its successors, intending to be legally bound hereby, does hereby ratify and confirm its mortgage and pledge to the Trustee of all property described in the Original Indenture, the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth Supplemental Indenture, the Eighth Supplemental Indenture, the Thirteenth Supplemental Indenture, the Fifteenth Supplemental Indenture, the Sixteenth Supplemental Indenture, the Seventeenth Supplemental Indenture, the Twenty-Second Supplemental Indenture and the Twenty-Fourth Supplemental Indenture (except such thereof as may heretofore have been released from the lien of the Indenture in accordance with the terms thereof) and has granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed, and by these presents does grant, bargain, sell, release, convey, assign, transfer, mortgage, pledge, set over and confirm, unto Wilmington Trust Company, as Trustee, and to its successors in the trust, and their and each of their assigns forever, all and singular the pieces or parcels of land described on Exhibit A attached hereto;

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TOGETHER with all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid property and rights or any part thereof, with the reversion and reversions, remainder and remainders, and to the extent permitted by law, all tolls, rents, revenues, issues, income, product and profits thereof, and all the estate, right, title, interest and claim whatsoever, at law as well as in equity, that the Company now has or may hereafter acquire in and to the aforesaid premises, property and rights and every part and parcel thereof;

SAVING AND EXCEPTING, HOWEVER, from the property hereby mortgaged and pledged all of the property of every kind and type saved and excepted from the Original Indenture, by the terms thereof;

SUBJECT, HOWEVER, to the exceptions, reservations and matters of the kind and type recited in the Original Indenture;

TO HAVE AND TO HOLD all said premises, property and rights granted, bargained, sold, released, conveyed, transferred, assigned, mortgaged, pledged, set over and confirmed by the Company as aforesaid or intended so to be unto the Trustee and its successors in the trust and their assigns forever;

IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the Original Indenture for the equal and proportionate benefit and security of those who shall hold or own the bonds and coupons issued and to be issued under the Indenture, or any of them, without preference of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiation thereof or by reason of the date or maturity thereof, or for any other reason whatsoever; subject, however, to the provisions with respect to extended, pledged and transferred coupons contained in Section 4.02 of the Original Indenture.

-11-

AND THIS INDENTURE FURTHER WITNESSETH THAT, in consideration of the premises and of such acceptance or purchase of the First Mortgage Bonds, Series W, by CoBank, and of said sum of One Dollar to the Company duly paid by the Trustee at or before the ensealing and delivery of these presents, the Company, for itself and its successors, intending to be legally bound hereby does covenant to and agree with the Trustee and its successors in the trust, for the benefit of those who shall hold or own such Bonds, or any of them, as follows:

ARTICLE IFIRST MORTGAGE BONDS, SERIES W

Section 1.1          Designation and Amount.  A series of Bonds to be issued under the Original Indenture as heretofore amended, supplemented and as supplemented hereby and secured thereby and is hereby created which shall be designated as, and shall be distinguished from the Bonds of all other series by the title, “First Mortgage Bonds, Series W” herein referred to as the “Series W Bonds.”  The aggregate principal amount of the Series W Bonds shall not exceed $30,000,000.

Section 1.2          Bond Terms.  The Series W Bonds shall be dated the date of their authentication and shall bear interest from such date, except as otherwise provided for Bonds issued upon subsequent exchanges and transfers by Section 2.06 of the Indenture, shall mature on April 30, 2047 (the “Maturity Date”).

The Series W Bonds shall bear interest at 4.43% per annum, from the date of their authentication through and including the Maturity Date.

Interest on the Series W Bonds is payable in arrears on June 30^th, September 30^th, December 30^th and March 30^th of each year (or if such day is not a Business Day, such interest shall be payable on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment), beginning with June 30, 2022, and on the Maturity Date, until the Company’s obligation with respect to the payment of principal, premium (if any) and interest shall be discharged. “Business Day” shall mean any day that CoBank is open for business, except any day when Federal Reserve Banks are closed.

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The Series W Bonds shall be issuable as registered bonds without coupons in the denominations of Two Hundred Thousand Dollars ($200,000) and any multiple thereof, numbered WR-1 and upwards.

Unless otherwise agreed to in writing by the Company and the holders of the Series W Bonds, the payment of the principal of, premium (if any) and interest on, the Series WBonds shall be made by the Company by Automated Clearing House or wire transfer of immediately available funds for the advice and credit of CoBank to ABA No. 307088754, reference: CoBank for the benefit of Artesian Water Company, Inc. (or to such other account as CoBank may direct by notice).  Funds received by wire before 3:00 p.m. Eastern time shall be credited on the day received and funds received by wire after 3:00 p.m. Eastern time shall be credited the next Business Day.  The Trustee shall be fully protected in assuming the Company has made all payments due hereunder unless otherwise notified by the Company or the holder.

The Series W Bonds shall be redeemable as provided in the Indenture, in whole or in part, at any time or from time to time, either (i) at the option of the Company, or (ii) pursuant to any provision of the Indenture or the Bond Purchase Agreement requiring or authorizing such redemption.  Any redemption of the Series W Bonds shall be effected in accordance with the provisions of Article V of the Indenture (as it may be amended or modified from time to time) and the provisions of this Section 1.2.

In accordance with the provisions of Section 6.07 of the Indenture, in the event that either (i) all or substantially all the property of the Company at the time subject to the lien of the Indenture as a first mortgage lien thereon or (ii) all or substantially all of the property of the Company at the time subject to the lien of the Indenture as a first mortgage lien thereon that is used or useful in connection with the business of the Company as a water company or as a water utility shall be released from the lien of the Indenture under the provisions of Section 6.03 or Section 6.06 of the Indenture, then all of the Bonds then outstanding including the Series W Bonds are to be redeemed.

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The redemption of any or all of the Series W Bonds shall be at a redemption price equal to the sum of (i) the aggregate principal amount thereof to be redeemed, plus (ii) the interest accrued thereon to, but excluding, the date fixed for redemption, plus, (iii) a “Redemption Premium” (as hereinafter defined) determined three (3) Business Days prior to the date fixed for redemption.  CoBank will furnish notice to the Company and the Trustee, by telecopy or other same-day written communication, on a date at least two (2) Business Days prior to the date fixed for redemption of the Series W Bonds, of the Redemption Premium, if any, applicable to such redemption and the calculations, in reasonable detail, used to determine the amount of any such Redemption Premium.  As used herein, the term Redemption Premium shall mean, and be calculated as, the greater of:

(A) $300.00, and

(B) (1)          Determine the difference between: (a) CoBank’s cost of funds (determined in accordance with its standard methodology) on February 7, 2022, minus (b) CoBank’s cost of funds (determined in accordance with such methodology) on the redemption date or other date fixed for redemption to fund the purchase of new bonds for a period ending on the Maturity Date.  For the purposes of the remaining calculations, if such difference is negative, such difference shall be deemed to equal zero.

(2) Add ½ of 1% to such difference (such that the minimum result shall at all times be ½ of 1%).

(3) For each annual period (from each January 1) or part thereof during which the Series W Bonds being redeemed were scheduled to be outstanding, multiply the amount determined in (B)(2) above by the principal amount of the Series W Bonds being redeemed which was scheduled to be outstanding during such annual period.

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(4) Determine the present value of the amount determined in (B)(3) above based upon the scheduled time that interest on the Series W Bonds redeemed would have been payable and a discount rate equal to the rate referred to in (B) (1)(b) above.

The principal of the Series W Bonds may be declared or may become due and payable prior to the Maturity Date, in the manner and with the effect and subject to the conditions provided in the Indenture and this Twenty-Fifth Supplemental Indenture (i) upon the occurrence of an Event of Default as provided in the Indenture, or (ii) as provided in the Bond Purchase Agreement.  Upon the principal of the Series W Bonds becoming due and payable on (i) the Maturity Date or (ii) a date prior to the Maturity Date as provided in this Section 1.2 of this Twenty-Fifth Supplemental Indenture, any unpaid principal, premium (if any) and interest payment shall automatically accrue interest at 2% per annum in excess of the interest rate that would otherwise be in effect.

The Series W Bonds shall be registerable, transferable, and exchangeable as provided in Article II of the Indenture and this Section 1.2; provided that the Series W Bonds shall not be issued as coupon Bonds.

Section 1.3          Form of Bond.  The text of the registered Series W Bonds and of the authentication certificate of the Trustee upon said Bonds shall be, respectively, substantially as follows:

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FORM OF REGISTERED SERIES W BOND WITHOUT COUPONS

THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OTHERWISE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SAID SECURITIES ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

THIS BOND HAS BEEN ISSUED PURSUANT TO AND SUBJECT TO THE TERMS AND CONDITIONS OF A BOND PURCHASE AGREEMENT WITH THE COMPANY DATED AS OF APRIL 29, 2022, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

No. WR-__          $__________

ARTESIAN WATER COMPANY, INC.

FIRST MORTGAGE BONDS, SERIES W

Due April 30, 2047

ARTESIAN WATER COMPANY, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter called the “Company”, which term shall include any successor corporation as defined in the Indenture hereinafter referred to), for value received, hereby promises to pay to ______________________________________ or registered assigns, on April 30, 2047 (the “Maturity Date”), all then outstanding principal, in coin or currency of the United States of America that at the time of payment is legal tender for the payment of public and private debts, and to pay in like coin or currency interest thereon to the registered owner hereof, at a rate equal to 4.43% per annum, from and including the date of authentication and issuance and through but excluding the Maturity Date, but subject to the provisions of Section 2.06 of the Indenture (as defined below), such interest payable in arrears on June 30^th, September 30^th, December 30^th and March 30^th of each year (or if such day is not a Business Day (as defined below), such interest shall be payable on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment), beginning with June 30, 2022, and on the Maturity Date, until the Company’s obligation with respect to the payment of such principal, premium (if any) and interest shall be discharged.  “Business Day” shall mean any day that CoBank is open for business, except any day when Federal Reserve Banks are closed.  Overdue payments of principal, premium (if any) and interest shall bear interest as provided in the Twenty-Fifth Supplemental Indenture hereinafter mentioned.  Unless otherwise agreed to in writing by the Company and the holders of the Series W Bonds hereinafter mentioned, payments of principal, premium (if any) and interest are to be made by Automated Clearing House or wire transfer by the Company of immediately available funds for the advice and credit to CoBank to ABA No. 307088754, reference: CoBank for the benefit of Artesian Water Company, Inc. (or to such other account as CoBank may direct).

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This bond is one of an authorized issue of bonds of the Company known as its First Mortgage Bonds (herein called the “Bonds”), not limited in aggregate principal amount except as provided in the Original Indenture hereinafter mentioned, all issued and to be issued in one or more series under and equally secured by an Indenture of Mortgage dated as of July 1, 1961 (herein called the “Original Indenture”), executed by Artesian Resources Corporation (then named Artesian Water Company), a corporation organized and existing under the laws of the State of Delaware (hereinafter called the “Corporation”) and by Wilmington Trust Company, as trustee (herein called the “Trustee”).  The Original Indenture has heretofore been amended by one amendment (as so amended, the “Indenture”) and supplemented by twenty-four supplemental indentures, including an Eighth Supplemental Indenture dated as of July 1, 1984, pursuant to which the Company assumed all of the obligations of the Corporation under the Original Indenture, and by a Twenty-Fifth Supplemental Indenture dated as of April 29, 2022 (hereinafter called the “Twenty-Fifth Supplemental Indenture”).  Reference is hereby made to the Original Indenture as so amended and supplemented for a description of the property mortgaged and pledged, the nature and extent of the security, the terms and conditions upon which the Bonds are and are to be issued and secured and the rights of the holders or registered owners thereof and of the Trustee in respect of such security.  As provided in the Indenture, the Bonds may be issued in one or more series for various principal sums, may bear different dates and mature at different times, may bear interest at different rates and may otherwise vary as provided or permitted in the Indenture, as supplemented.  This Bond is one of the Bonds described in the Twenty-Fifth Supplemental Indenture and designated therein as “First Mortgage Bonds, Series W” (hereinafter called the “Series W Bonds”).  To the extent permitted by, and as provided in, the Indenture or any indenture supplemental thereto, modifications or alterations of the Indenture, or of an indenture supplemental thereto, and of the rights and obligations of the Company and of the rights of the holders of the Bonds issued and to be issued thereunder, may be made with the consent of the Company by an affirmative vote of the holders of not less than sixty-six and two-thirds percent (66 2/3%) in aggregate principal amount of the Bonds then outstanding under the Indenture and entitled to vote and affected by such modification or alteration, at a meeting of bondholders called and held as provided in the Indenture, and, in case one or more but less than all of the series of the Bonds then outstanding under the Indenture and entitled to vote would be affected by the modification or alteration differently from or without affecting the Bonds of any of the other series, by an affirmative vote of the holders of not less than sixty-six and two-thirds percent (66 2/3%) in aggregate principal amount of the Bonds of each series so affected, or in either case by the written consent of the holders of such percentages of Bonds; provided, however, that no such modification or alteration may be made that would extend the maturity of, or reduce the principal amount of, or reduce the rate of, or extend the time of payment of interest on, or reduce any premium payable upon any redemption of, this Bond, or modify the terms of payment of principal or interest, or reduce the percentage required for the taking of any such action, without the express consent of the holder hereof.

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No reference herein to the Indenture or to any indenture supplemental thereto and no provision of this Bond or of the Indenture or of any indenture supplemental thereto shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium (if any) and interest on this Bond at the time and place and at the rate and in the coin or currency herein prescribed.

The Series W Bonds shall be redeemable as provided in the Indenture and the Twenty-Fifth Supplemental Indenture.

The principal of the Series W Bonds may be declared or may become due prior to the Maturity Date, in the manner and with the effect and subject to the conditions provided in the Indenture and the Twenty-Fifth Supplemental Indenture.

This Bond is transferable by the registered owner hereof, in person or by duly authorized attorney, on books of the Company to be kept for that purpose at the principal office of the Trustee in the City of Wilmington, Delaware, or, if there be a successor trustee, at its principal office, upon surrender hereof at such office for cancellation and upon presentation of a written instrument of transfer duly executed, and thereupon the Company shall issue in the name of the transferee or transferees, and upon the receipt of an Authentication Order from the Company the Trustee shall authenticate and deliver, a new registered Bond or Series W Bonds, in an authorized denomination or denominations, of a like aggregate principal amount; and the registered owner of any registered Series W Bonds may surrender the same as aforesaid at said office in exchange for a like aggregate principal amount of Bonds of like form of other authorized denominations, all upon payment of the charges and subject to the terms and conditions specified in the Indenture.

The Company and the Trustee may deem and treat the person in whose name this Bond shall at the time be registered on the books of the Company as the absolute owner hereof for all purposes whatsoever (except as otherwise provided in Article XIV of the Indenture with respect to bondholders’ meetings and consents); and payment of or on account of the principal of, premium (if any) and interest on this Bond shall be made only to or upon the order in writing of such registered owner hereof; and all such payments shall be valid and effectual to satisfy and discharge the liability upon this Bond to the extent of the sum or sums so paid.

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No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in any indenture supplemental thereto, or in any Bond thereby secured, or because of any indebtedness thereby secured, shall be had against any incorporator or against any past, present or future stockholder, officer or director, as such, of the Company or of any successor corporation, either directly or through the Company or any successor corporation under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise; it being expressly agreed and understood that the Indenture, any indenture supplemental thereto and the obligations thereby secured, are solely corporate obligations, and that no personal liability whatever shall attach to, or be incurred by, any incorporators, stockholders, officers or directors, as such, of the Company or any successor corporation or any of them, because of the incurring of the indebtedness thereby authorized, or under or by reason of any of the obligations, covenants or agreements, expressed or implied, contained in the Indenture or in any indenture supplemental thereto or in any of the Bonds thereby secured.

This Bond shall not be entitled to any benefit under the Indenture or any indenture supplemental thereto, and shall not become valid or obligatory for any purpose until Wilmington Trust Company, as Trustee under the Indenture, or a successor trustee thereunder, shall have manually signed the form of authentication certificate endorsed hereon.

(Signatures On Next Page)

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IN WITNESS WHEREOF, ARTESIAN WATER COMPANY, INC., has caused this Bond to be signed in its name by its Chief Financial Officer and its corporate seal (or a facsimile thereof) to be hereto affixed and attested by its Secretary or an Assistant Secretary, and this Bond to be dated April 29, 2022.

ARTESIAN WATER COMPANY, INC.

By:____________________________

Attest:

___________________________

This Bond is one of the Bonds, of the series designated therein, described in the within-mentioned Indenture, as supplemented.

WILMINGTON TRUST COMPANY, as Trustee,

By:________________________________

     Authorized Officer

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ARTICLE IICOVENANTS OF THE COMPANY

The Company hereby covenants and agrees that, without the prior written consent of the holders of not less than sixty-six and two-thirds percent (66 2/3%) in principal amount of the Series W Bonds then outstanding, so long as any of the Series W Bonds are outstanding:

Section 2.1          Restrictions on Funded Indebtedness.  The Company shall not incur, assume, guarantee or in any other manner become liable, with respect to any Funded Indebtedness or permit any subsidiary to incur any Funded Indebtedness, if immediately thereafter the ratio of Funded Indebtedness to Total Permanent Capital would exceed 0.6667:1.0000.

Funded Indebtedness shall mean all bonds, debentures and other evidence of indebtedness of the Company and its subsidiaries, secured or unsecured, for money borrowed, but excluding (i) indebtedness maturing on demand or within one year from the date incurred and not renewable or extendable at the option of the debtor, (ii) indebtedness of the Company to any subsidiary and any indebtedness of a subsidiary to the Company, and (iii) indebtedness that has been called for redemption and for the payment of which monies have been irrevocably deposited with a trustee.  Funded Indebtedness shall include the portion of bonds, notes or other indebtedness maturing, or required to be redeemed, within one year from the date as of which Funded Indebtedness is being determined.

Total Permanent Capital shall mean for the Company and its subsidiaries:  (i) the sum of the par or stated value of all outstanding capital stock of the Company and all paid-in premiums thereon; (ii) all surplus, including capital and earned surplus but not including surplus from any revaluation of the Company’s assets after December 31, 2015; (iii) the minority interest (if any) in consolidated subsidiaries, but not including any earned surplus of subsidiaries prior to the date of acquisition of such subsidiaries; and (iv) all Funded Indebtedness of the Company and such subsidiaries.

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In all other respects, Funded Indebtedness and Total Permanent Capital shall be computed as they would be for a consolidated balance sheet of the Company and its subsidiaries on the applicable date, excluding all intercompany items, and in accordance with generally accepted accounting principles; provided that for purposes of computations under this Section 2.1, capitalized lease obligations shall be excluded from Funded Indebtedness.

Section 2.2          Transactions with Affiliates.  The Company will not, and will not permit any subsidiary to, engage in any material transaction with an “Affiliate” (as hereinafter defined), including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate, except upon terms that are at least as favorable to the Company or such subsidiary in all material respects as terms that could be obtained at the time in a comparable arms’ length transaction with a person other than an Affiliate.  For purposes of this Section 2.2, an Affiliate of any corporation shall mean any person or entity directly or indirectly controlling, controlled by, or under direct or indirect common control with such corporation; and a person or entity shall be deemed to control a corporation if such person or entity possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise.

ARTICLE IIITHE TRUSTEE

Section 3.1          Trustee Acceptance.  The Trustee hereby accepts the trust hereby declared and provided and agrees to perform the same upon the terms set forth in the Indenture as further supplemented by this Twenty-Fifth Supplemental Indenture.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Twenty-Fifth Supplemental Indenture or the due execution hereof by the Company or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely.

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ARTICLE IVMISCELLANEOUS

Section 4.1          Incorporation of Original Indenture Terms.  This instrument shall be construed as an indenture supplemental to the Indenture, and shall form a part thereof.  The Original Indenture as heretofore supplemented and amended by the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh Supplemental Indenture, the Twelfth Supplemental Indenture, the Thirteenth Supplemental Indenture, the Fourteenth Supplemental Indenture, the Fifteenth Supplemental Indenture, the Sixteenth Supplemental Indenture, the Seventeenth Supplemental Indenture, the Eighteenth Supplemental Indenture, the Twentieth Supplemental Indenture, the Twenty-First Supplemental Indenture, the Twenty-Second Supplemental Indenture, the First Amendment, the Twenty-Third Supplemental Indenture, the Twenty-Fourth Supplemental Indenture and as further supplemented by this Twenty-Fifth Supplemental Indenture is hereby ratified and confirmed.  Terms defined in the Indenture that are used herein and not otherwise defined herein are used as defined in the Indenture.

Section 4.2          Counterparts.  This Twenty-Fifth Supplemental Indenture may be simultaneously executed in any number of counterparts, each of which when so executed shall be deemed to be an original; but such counterparts shall together constitute but one and the same instrument.

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IN WITNESS WHEREOF, ARTESIAN WATER COMPANY, INC. has caused these presents to be signed in its corporate name by its Chief Financial Officer and sealed with its corporate seal, attested by its Secretary or one of its Assistant Secretaries, and WILMINGTON TRUST COMPANY, as Trustee, has caused these presents to be signed in its corporate name by one of its Vice Presidents and sealed with its corporate seal, attested by one of its Assistant Secretaries, all as of the day and year first above written.

ARTESIAN WATER COMPANY, INC.

By:____________________________________

 Name:  David B. Spacht

 Title:    Chief Financial Officer

        [SEAL]

Attest:  ___________________________

(Signatures continue on next page.)

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(Signatures continued from previous page.)

WILMINGTON TRUST COMPANY,

As Trustee,

By:_________________________________

      Name:

      Title:

        [SEAL]

Attest:  ________________________________

Name:

Title:

15636305.10

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STATE OF DELAWARE          )

)   SS.:

COUNTY OF NEW CASTLE          )

On this, the _____ day of April, 2022, before me, the undersigned, notary public, personally appeared David B. Spacht, who acknowledged himself to be the Chief Financial Officer of Artesian Water Company, Inc., a corporation organized under the laws of the State of Delaware, and that he as such officer, being authorized to do so, executed the foregoing Twenty-Fifth Supplemental Indenture for the purposes therein contained by signing the name of Artesian Water Company, Inc. by himself as Chief Financial Officer.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

___________________________ Notary Public

New Castle County

My Commission Expires

___________________________

[Seal]

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STATE OF DELAWARE          )

) SS.:

COUNTY OF NEW CASTLE          )

On this, the ______ day of April, 2022, before me, the undersigned, notary public, personally appeared ________________________________, who acknowledged himself/herself to be a ________________________________ of Wilmington Trust Company, a Delaware trust company, and that he/she as such officer, being authorized to do so, executed the foregoing Twenty-Fifth Supplemental Indenture for the purposes therein contained by signing the name of Wilmington Trust Company by himself/herself as __________________________________.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

___________________________, Notary Public

Wilmington, New Castle County

My Commission Expires

___________________________

[Seal]

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EXHIBIT A

LEGAL DESCRIPTIONS OF PROPERTIES

EXHIBIT A-1 - NEW CASTLE COUNTY PROPERTIES

EXHIBIT A-2 - KENT COUNTY PROPERTIES

EXHIBIT A-3 - SUSSEX COUNTY PROPERTIES

EXHIBIT A-1

LEGAL DESCRIPTIONS OF PROPERTIES IN NEW CASTLE COUNTY

TAX PARCEL NO. 22-008.00-055

321 Washington Street, Delaware City, Delaware 19706

ALL that certain lot, piece or parcel of land, situated in Delaware City, Red Lion Hundred, New Castle County, and the State of Delaware, being bounded on the northwest by Washington Street, on the northeast by lands of Charles Neel, on the southeast by lands of James L. Dennis and Cheryl A. Dennis and on the southeast by Fourth Street, and being more particularly described by a recent survey by Artesian Water Company, Inc.:

BEGINNING and commencing at a set pin at the northeast intersection of the northeastern right of way line of Washington Street and the southeastern right of way line of Fourth Street, thence from said point of beginning with the northeastern right of way line of Washington Street, North 40 deg 39 min 05 sec East 100.00 feet to a set pin at a corner for Charles Neel, thence with the lands of Charles Neel South 49 deg 20 min 55 sec East 104.00 feet to a set pin in the lands of James L. Dennis and Cheryl A. Dennis, thence with the lands of James L. Dennis and Cheryl A. Dennis, South 40 deg 39 min 05 sec West 100.00 feet to a set pin in the northeastern right of way line of Fourth Street, thence with the northeastern right of way line of Fourth Street North 49 deg 20 min 55 sec West 104.00 feet to the point and place of beginning.  Containing in said lot 10,400 square feet or 0.2388 acres of land more or less.

SUBJECT TO ALL covenants, conditions, restrictions, plans and easements of record with respect to the property described above, this reference to which shall not be construed to reimpose any such covenants, conditions, restrictions, plans and easements of record which have otherwise lapsed, expired or have otherwise been terminated in accordance with their terms or otherwise, as applicable.

TAX PARCEL NO. 11-023.00-121

1739 Pulaski Highway, Bear, Delaware 19701

Original Tax Parcel No. 11-023.00-037 (0 Pulaski Highway, Bear, Delaware 19701) included in the Twenty-Fourth Supplemental Indenture was subsequently subdivided into two new parcels:

(i)  Tax Parcel No. 11-023.00-121 (1739 Pulaski Highway, Bear, Delaware 19701); and

(ii) Tax Parcel No. 11-023.00-037 (1745 Pulaski Highway, Bear, Delaware 19701)

Tax Parcel No. 11-023.00-121 (1739 Pulaski Highway, Bear, Delaware 19701) is described as follows:

Lot “A”, Route 40 Booster Pump Station, Pencader Hundred, New Castle County, Delaware:

All that certain piece, parcel, or tract of land situate in Pencader Hundred, New Castle County, Delaware being lot “A” according to the Record Minor Land Development and Subdivision Plan for Route 40 Booster Pump Station as recorded in the Recorder of Deeds in and for New Castle County on instrument number 20210616-0070441, as more particularly described as follows, to wit:

BEGINNING at the point on the Northwesterly side of Pulaski Highway (N32) U.S. Route 40 (width varies), said point being a common corner for lot “B” and lands herein being described.

THENCE from the said Point of Beginning, the following six (6) courses and distances:

1. With the Northwesterly side of Pulaski Highway (N32) U.S. Route 40 (width varies) this and the next two courses and distances, S 49° 25' 47" W, 244.17 to a point, thence;

2. S 49° 24' 21" W, 128.81 feet to a point, thence;

3. S 48° 30' 54" W, 30.28 feet to a point 2.5 feet Northwest of a concrete monument, thence, in part with Pulaski Highway and in part with lands now or formerly of Becks Woods Associates V, LLC;

4. N 42° 07' 53" W, 227.97 feet to a corner for lot “B”, thence, with same the next two courses and distances;

5. N 50° 45' 26" E, 414.66 feet to a point, thence;

6. S 39° 14' 34" E, 217.80 feet to the Point of Beginning.

CONTAINING within said described metes and bounds 2.0894 acres of land, more or less (calculated – shown as 2.0733 on aforesaid record plan).

SUBJECT to a variable width easement for water mains crossing courses (2.), (3.), and (.5) above, a variable width cross access easement for lot “B” crossing courses (.4) and (.5) above, and to any and all other easements and restrictions as shown on the aforementioned Record Minor Land Development and Subdivision Plan for Route 40 Booster Pump Station.

TAX PARCEL NO. 11-023.00-037

1745 Pulaski Highway, Bear, Delaware 19701

Original Tax Parcel No. 11-023.00-037 (0 Pulaski Highway, Bear, Delaware 19701) included in the Twenty-Fourth Supplemental Indenture was subsequently subdivided into two new parcels:

(i)  Tax Parcel No. 11-023.00-121 (1739 Pulaski Highway, Bear, Delaware 19701); and

(ii) Tax Parcel No. 11-023.00-037 (1745 Pulaski Highway, Bear, Delaware 19701)

Tax Parcel No. 11-023.00-037 (1745 Pulaski Highway, Bear, Delaware 19701) is described as follows:

Lot “B”, Route 40 Booster Pump Station, Pencader Hundred, New Castle County, Delaware:

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All that certain piece, parcel, or tract of land situate in Pencader Hundred, New Castle County, Delaware being lot “B” according to the Record Minor Land Development and Subdivision Plan for Route 40 Booster Pump Station as recorded in the Recorder of Deeds in and for New Castle County on instrument number 20210616-0070441, as more particularly described as follows, to wit:

BEGINNING at the point on the Northwesterly side of Pulaski Highway (N32) U.S. Route 40 (width varies), said point being a common corner for lot “A” and lands herein being described.

THENCE from the said Point of Beginning, the following eleven (11) courses and distances:

1. With lot “A”, this and the next course and distance, N 39° 14' 34" W, 217.80 feet to a point, thence, with same;

2. S 50° 45' 26" W, 414.66 feet to a point on line of lands now or formerly of Becks Woods Associates IV, LLC, thence, with same;

3. N 42° 07' 53" W, 409.71 feet to a concrete monument at a corner for lands now or formerly of Beck Woods Maintenance Corp and Becks Woods private open space (M/F #10869), thence, with private open space;

4. N 35° 09' 47" E, 346.46 feet to a corner for lands now or formerly of Stuart L. & Deborah R. Anglin, thence, with same the next three courses and distances;

5. N 62° 16' 54" E, 101.95 feet to a point, thence;

6. S 66° 05' 11" E, 123.45 feet to a point, thence;

7. N 47° 01' 42" E, 127.27 feet to a point, thence, in part with lands of said Anglin and in part with lands now or formerly of Stoneycap, LLC;

8. S 31° 42' 57" E, 383.45 feet to a corner for Lot No. 2, Hillside Partners, L. P., thence, with same;

9. S 31° 11' 53" E, 217.71 feet to a point on the Northwesterly side of Pulaski Highway (N32) U.S. Route 40 (width varies), thence, with same the next two courses and distances;

10. S 49° 31' 33" W, 93.09 feet to a point, thence;

11. S 49° 25' 56" W, 7.32 feet to the Point of Beginning.

CONTAINING within said described metes and bounds 6.5210 acres of land, more or less (calculated – shown as 6.5467 on aforesaid record plan).

SUBJECT to any and all easements and restrictions as shown on the aforementioned Record Minor Land Development and Subdivision Plan for Route 40 Booster Pump Station.

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EXHIBIT A-2

LEGAL DESCRIPTIONS OF PROPERTIES IN KENT COUNTY

None

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EXHIBIT A-3

LEGAL DESCRIPTIONS OF PROPERTIES IN SUSSEX COUNTY

TAX PARCEL NO. 2-33-11.00-66.00

31818 Waples Street, Dagsboro, Delaware 19939

ALL that certain tract or parcel of land situate lying and being in the Town of Dagsboro, Dagsboro Hundred, Sussex County, Delaware, and being more particularly bounded and described according to a survey made by Peter E. Loewenstein and Associates, Inc., dated December, 1979, as follows, to-wit:

BEGINNING for the purpose of this description at the intersection of a ditch with the Westerly right-of-way line of Waples Street, said Beginning point being opposite the intersection of Warrington Street and Waples Street; thence by and with the said ditch the following 10 courses and distances:

1. North 84 degrees 07 minutes 55 seconds East, 96.11 feet;

2. South 59 degrees 21 minutes 11 seconds East, 118.22 feet;

3. North 79 degrees 07 minutes 57 seconds East, 63.26 feet;

4. North 86 degrees 44 minutes 20 seconds East, 70.83 feet;

5. South 46 degrees 31 minutes 25 seconds East, 151.09 feet;

6. South 01 degrees 22 minutes 46 seconds West, 87.36 feet;

7. South 41 degrees 54 minutes 36 seconds West, 89.81 feet;

8. South 38 degrees 02 minutes 37 seconds West, 104.05 feet;

9. South 57 degrees 34 minutes 45 seconds West, 43.61 feet;

10. South 77 degrees 35 minutes 14 seconds West, 96.13 feet to the Westerly right-of-way line of Waples Street; thence by and with the Westerly line of Waples Street, North 23 degrees 36 minutes 00 seconds West, 456.80 feet to the BEGINNING and containing 2.56 acres, more or less.

SUBJECT TO ALL covenants, conditions, restrictions, plans and easements of record with respect to the property described above, this reference to which shall not be construed to reimpose any such covenants, conditions, restrictions, plans and easements of record which have otherwise lapsed, expired or have otherwise been terminated in accordance with their terms or otherwise, as applicable.

SUBJECT FURTHER TO that certain Agreement of Lease dated May 1, 2004 between Grantor and The Town of Dagsboro (“Town of Dagsboro”), and recorded on March 8, 2005, in the Office of the Recorder of Deeds in and for Sussex County, State of Delaware, in Deed Book 3110, Page 223, which said lease was amended by an Amendment of Lease dated June 20, 2005, and recorded on July 5, 2005, in the Office of the Recorder of Deeds in and for Sussex County, State of Delaware, in Deed Book 3165, Page 304 (collectively, the “Ground Lease”), for the purpose of placing a water storage tank or tower and appurtenances on an approximately 18,503 square foot portion of the property described above, terminating on April 30, 2103.  Grantor assigns its right, title and interest in the Ground Lease to Grantee and Grantee assumes all of Grantor’s obligations to be performed from and after the date hereof.

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TAX PARCEL NO. 4-33-6.18-49.00

4 Carey Street, Frankford, Delaware 19945

ALL that certain lot, piece or parcel of land, situated in the Town of Frankford, Dagsboro Hundred, Sussex County, and the State of Delaware, being bounded east by Railroad Street, on the south by Carey Street, on the west by lands of Louis J. Travalini and on the north by other lands of JBAB, Inc., and being more particularly described by a recent survey by Artesian Water Company, Inc., dated February 18, 2020:

BEGINNING and commencing at the intersection of the western right of way line of Railroad Street and the southern right of way line of Carey Street, thence from said point of beginning with the northern right of way line of Carey Street, North 76 degrees 25 minutes 49 seconds West 191.15 feet to a set pin, thence with the lands of Louis J. Travalini the following three (3) courses: one (1) North 24 degrees 44 minutes 04 seconds West 4.24 feet to a set pin, thence two (2) North 65 degrees 15 minutes 56 seconds East 65.00 feet to a set pin, thence three (3) North 24 degrees 44 minutes 04 seconds West 250.58 feet to a set pin in the lands of JBAB, Inc., thence with lands of JBAB, Inc. North 65 degrees 15 minutes 57 seconds East 85.00 feet to a set pin in the western right of way line of Railroad Street, thence with the western right of way line of Railroad Street, South 24 degrees 44 minutes 04 seconds East 373.30 feet to the point and place of beginning.  Said lot containing 30,866 square feet or 0.7086 acres of land more or less.

SUBJECT TO ALL covenants, conditions, restrictions, plans and easements of record with respect to the property described above, this reference to which shall not be construed to reimpose any such covenants, conditions, restrictions, plans and easements of record which have otherwise lapsed, expired or have otherwise been terminated in accordance with their terms or otherwise, as applicable.

TAX PARCEL NO. 4-33-6.18-50.02

6 Carey Street, Frankford, Delaware 19945

ALL that certain lot, piece or parcel of land, situated in the Town of Frankford, Dagsboro Hundred, Sussex County, and the State of Delaware, being bounded north by Carey Street, on the east by other lands of the Town of Frankford and lands of Southern Comfort Delaware, LLC, on the south by lands of Theodore J. Banks and on the west by lands of the Louis J. Travalini, and being more particularly described by a recent survey by Artesian Water Company, Inc., dated February 18, 2020:

BEGINNING at the point in the southern right of way line of Carey Street, said point commencing North 77 degrees 23 minutes 07 seconds West 142.92 feet from the western right of way line of Frankford Avenue with the southern right of way line of Carey Street, thence from said point of beginning with other lands of the Town of Frankford,  South 12 degrees 41 minutes 37 seconds West 48.79 feet to a found pin, thence with the lands of the Town of Frankford South 77 degrees 19 minutes 50 seconds East 6.00 feet to a found pipe, thence with the lands of Southern Comfort Delaware, LLC, South 12 degrees 41 minutes 46 seconds West 69.20 feet to a found pipe in the lands of Theodore J. Banks, thence with other lands of the lands of Theodore J. Banks, North 80 degrees 42 minutes 00 seconds West 140.32 feet to a found pipe in the lands of Louis J. Travalini, thence with the lands of Theodore J. Travalini, North 10 degrees 48 minutes 31 seconds East 126.09 feet to a found pipe in the southern right of way line of Carey Street South 77 degrees 23 minutes 07 seconds East 138.19 feet to the point and place of beginning.  Said lot containing 17,060 square feet or 0.3916 acres of land more or less.

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SUBJECT TO ALL covenants, conditions, restrictions, plans and easements of record with respect to the property described above, this reference to which shall not be construed to reimpose any such covenants, conditions, restrictions, plans and easements of record which have otherwise lapsed, expired or have otherwise been terminated in accordance with their terms or otherwise, as applicable.

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RECORDATION

Recorded as follows:

1.          In the office of the Recorder of Deeds, in and for New Castle County and State of Delaware, in Mortgage Record ____________, Volume ______, Page _____, on the _____day of ________________, 2022.

2.          In the office of the Recorder of Deeds, in and for Kent County and State of Delaware, in Mortgage Record ____________, Volume ______, Page _____, on the _____day of ________________, 2022.

3.          In the office of the Recorder of Deeds, in and for Sussex County and State of Delaware, in Mortgage Record ____________, Volume ______, Page _____, on the _____day of ________________, 2022.

EX-4.2

Exhibit 4.1

ARTESIAN WATER COMPANY, INC.

BOND PURCHASE AGREEMENT

Dated as of April 29, 2022

RE:  $30,000,000 FIRST MORTGAGE BONDS, Series WDue April 30, 2047

TABLE OF CONTENTS

			Page
SECTION 1.		DESCRIPTION OF BONDS.	1
	Section 1.1	Series W Bonds	1
	Section 1.2	Definitions	1
SECTION 2.		SALE OF BONDS.	2
SECTION 3.		CLOSING.	2
	Section 3.1	Location	2
	Section 3.2	Payment	2
	Section 3.3	Denominations and Registration	2
SECTION 4.		REPRESENTATIONS.	2
	Section 4.1	Corporate Organization and Authority	2
	Section 4.2	Subsidiaries	3
	Section 4.3	Financial Statements	3
	Section 4.4	Litigation	3
	Section 4.5	Taxes	3
	Section 4.6	Liens	3
	Section 4.7	Title to Properties	4
	Section 4.8	Intellectual Property	4
	Section 4.9	Calamities, Strikes, Etc.	4
	Section 4.10	Restrictions on the Company	4
	Section 4.11	No Conflicts	5
	Section 4.12	No Defaults	5
	Section 4.13	Compliance with Laws	5
	Section 4.14	Validity	5
	Section 4.15	Full Disclosure	6
	Section 4.16	Use of Proceeds	6
	Section 4.17	ERISA	6
	Section 4.18	Principal Place of Business; Records	7
	Section 4.19	Rate Matters	7
	Section 4.20	System Condition; Water Rights	7
	Section 4.21	Condemnation Powers	7

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	Section 4.22	Investment Company Act	7
	Section 4.23	Anti-Corruption; Anti-Terrorism and Sanctions	8
SECTION 5.		CLOSING CONDITIONS.	9
	Section 5.1	Legal Opinions	9
	Section 5.2	Representations and Warranties	10
	Section 5.3	Fee and Expenses	10
	Section 5.4	PSC Approval	10
	Section 5.5	Bond Documents	11
	Section 5.6	Authorization	11
	Section 5.7	Approvals	11
	Section 5.8	Environmental Matters	11
	Section 5.9	No Material Adverse Effect	11
	Section 5.10	No Injunction	11
	Section 5.11	Event of Redemption	11
	Section 5.12	Officer's Certificate	11
	Section 5.13	Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions Documentation and Beneficial Ownership Certification	11
	Section 5.14	Financial Tests	12
	Section 5.15	Other Information; Etc.	12
SECTION 6.		PRIVATE PLACEMENT EXEMPTION.	12
	Section 6.1	Company Representation	12
	Section 6.2	Purchaser Representations and Agreement	12
SECTION 7.		PAYMENT OF EXPENSES; BROKERAGE FEES.	13
SECTION 8.		FAILURE OF CONDITIONS.	13
SECTION 9.		FURNISHING FINANCIAL AND OTHER INFORMATION.	14
SECTION 10.		COVENANTS.	17
	Section 10.1	Compliance With Laws and Agreements	17
	Section 10.2	CoBank Equities and Securities.	18
	Section 10.3	Licenses, Etc.	19
	Section 10.4	Water Rights	19
	Section 10.5	Loans and Investments	19
	Section 10.6	Guarantees	20
	Section 10.7	Mergers; Acquisitions; Etc.	20

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	Section 10.8	Transfer of Assets	20
	Section 10.9	Change in Business	20
	Section 10.10	Distributions	20
	Section 10.11	Calculation of Ratios	20
	Section 10.12	Anti-Corruption; Anti-Terrorism; Sanctions	21
SECTION 11.		REDEMPTION.	21
	Section 11.1	Events of Redemption Defined	21
	Section 11.2	Redemption	23
	Section 11.3	Suits for Enforcement	23
	Section 11.4	Remedies Cumulative	23
	Section 11.5	Remedies Not Waived	23
SECTION 12.		SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.	24
SECTION 13.		LOST BONDS.	24
SECTION 14.		PAYMENTS.	24
SECTION 15.		DELIVERY EXPENSE.	25
SECTION 16.		USE OF PROCEEDS COVENANT.	25
SECTION 17.		TAXES.	25
SECTION 18.		INDEMNIFICATION.	25
SECTION 19.		CONFIDENTIALITY.	26
SECTION 20.		MISCELLANEOUS.	26
	Section 20.1	Successors and Assigns; Legend	26
	Section 20.2	Notices	27
	Section 20.3	Governing Law	27
	Section 20.4	Counterparts	27
	Section 20.5	Amendments	27
	Section 20.6	Severability	27
	Section 20.7	Electronic Execution of Bond Documents	27

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ARTESIAN WATER COMPANY, INC.664 Churchmans RoadNewark, Delaware 19702

BOND PURCHASE AGREEMENT

Re: $30,000,000 First Mortgage Bonds, Series WDue April 30, 2047

Dated as ofApril 29, 2022

CoBank, ACB6340 S. Fiddlers Green CircleGreenwood Village, CO  80111

Attention:  Energy and Water Banking Group

Ladies and Gentlemen:

ARTESIAN WATER COMPANY, INC., a Delaware corporation (the “Company”) and CoBank, ACB (“CoBank” or the “Purchaser”) hereby agree as follows:

SECTION 1.          DESCRIPTION OF BONDS.

Section 1.1          Series W Bonds.  The Company proposes to issue $30,000,000 aggregate principal amount of the Series W Bonds (the “Bonds”), to be dated the date of their authentication, to mature, with all outstanding principal remaining due and payable, on April 30, 2047 (the “Maturity Date”), to bear interest from and including their date of authentication (except as otherwise provided in the “Indenture” (as hereinafter defined)) at 4.43% per annum, through but excluding the Maturity Date, such interest payable in arrears on June 30^th, September 30^th, December 30^th and March 30^th in each year and on the Maturity Date, beginning June 30, 2022, and to be issued as fully registered bonds without coupons under an Indenture of Mortgage (the “Original Indenture”) dated as of July 1, 1961, between the Company (successor to Artesian Resources Corporation, formerly named “Artesian Water Company”) and Wilmington Trust Company (the “Trustee”), as Trustee, as heretofore supplemented and amended, and as further supplemented by a Twenty-Fifth Supplemental Indenture (the “Twenty-Fifth Supplemental Indenture”) dated as of April 29, 2022, between the Company and the Trustee, providing for the creation and issuance of the Bonds.  The Twenty-Fifth Supplemental Indenture shall be substantially in the form of the draft attached hereto as Exhibit A.  The Original Indenture as heretofore supplemented and amended, and as further supplemented by the Twenty-Fifth Supplemental Indenture, is hereinafter referred to as the “Indenture.”

Section 1.2          Definitions.  Capitalized terms used and not otherwise defined herein have the respective meanings given to such terms in the Indenture.  Except as otherwise specified or as the context may otherwise require “Bond Documents” shall mean this Bond Purchase Agreement (this “Agreement”), the Indenture and the Bonds.

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SECTION 2.          SALE OF BONDS.

Subject to the terms and conditions herein set forth, including, without limitation, the conditions set forth in Section 5 of this Agreement, the Company agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Company, not more than $30,000,000 principal amount of Bonds at a price of 100% of the principal amount thereof.  Notwithstanding any provision of this Agreement to the contrary, the Purchaser shall have no obligation to purchase any Bond after May 7, 2022.

SECTION 3.          CLOSING.

Section 3.1          Location.  Delivery of, and payment for, the Bonds being purchased by the Purchaser shall be made at one closing (the “Closing”) to be held at the offices of Morris, Nichols, Arsht & Tunnell, LLP, 1201 North Market Street, Wilmington, Delaware 19801, on such date, or at such other location, as shall be mutually agreed upon by the Purchaser and the Company.

Section 3.2          Payment.  Payment shall be made by the Purchaser on the date of the Closing by the wire transfer of Federal or other U.S. funds immediately available in the amount of the applicable purchase price to such account or accounts as directed by the Company or in accordance with other wiring instructions furnished to you in writing by the Company no less than five (5) days prior to the Closing.

Section 3.3          Denominations and Registration.  Delivery of the Bonds shall be made to the Purchaser in the form of one or more fully registered definitive Bonds in the aggregate principal amount not to exceed $30,000,000, each registered in the Purchaser’s name, in such authorized denominations as the Purchaser may have specified to the Company at least five (5) days prior to the Closing.

SECTION 4.          REPRESENTATIONS.

The Company represents and warrants that:

Section 4.1          Corporate Organization and Authority.  The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with corporate power and authority to own and operate its properties and to carry on its business as now conducted, which consists of the gathering, purification, transportation, storage and distribution of water solely in the State of Delaware.  The Company is a wholly-owned subsidiary of Artesian Resources Corporation, a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware (the “Corporation”), which as part of a corporate restructuring in 1984 changed its name to Artesian Resources Corporation and transferred substantially all of the Mortgaged Property subject to the lien of the Indenture to the Company which assumed all of the Corporation’s obligations under the Indenture from which the Corporation has been released and discharged.  The Company has duly and lawfully obtained and maintains all licenses, certificates, permits, authorizations, approvals, and the like that are necessary to the conduct of its business, or which may be otherwise required by law.

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Section 4.2          Subsidiaries.  The Company has no subsidiaries.

Section 4.3          Financial Statements.  The consolidated balance sheets of the Company and any subsidiary as of December 31, 2020 and 2021 and the related consolidated statements of operations, and retained earnings, and cash flows for the years then ended on said dates, copies of all of which have been furnished to the Purchaser, accompanied by a report thereon containing an opinion unqualified as to scope limitations imposed by the Company and otherwise without qualification except as therein noted, by BDO USA, LLP, have been prepared in accordance with generally accepted accounting principles consistently applied and the applicable provisions of the regulatory authorities having jurisdiction in the premises except as therein noted, are correct and complete and present fully and fairly the financial position of the Company and each of its subsidiaries as of such dates and the results of their operations and changes in their financial position for such periods.

(a)          Since December 31, 2021, there has been no change in the condition, financial or otherwise, of the Company as shown on the consolidated balance sheet as of such date except increases, if any, in its current indebtedness to banks incurred for working capital and except changes in the ordinary course of business, none of which individually or in the aggregate has had a material adverse effect upon the condition (financial or otherwise), operations, properties or business of the Company.

(b)          All budgets, projections, feasibility studies, and other similar documentation submitted by the Company to the Purchaser in connection with the transactions contemplated by this Agreement were based upon assumptions that were reasonable and, as of the date hereof, no fact has come to light, and no event has occurred, that would cause any such assumption not to be reasonable.

Section 4.4          Litigation.  There are no actions, suits or proceedings pending or to the best of the knowledge of the Company threatened against or affecting the Company at law or in equity or before or by any federal, state, municipal or other governmental commission, board, bureau, agency or instrumentality, domestic or foreign, that would reasonably be expected to involve the possibility of any material judgment or liability against the Company, or may result in any material, adverse change in the business or assets or in the condition, financial or otherwise, of the Company.  The Company is not in default with respect to any order of any court or governmental commission, board, bureau, agency or instrumentality, domestic or foreign.

Section 4.5          Taxes.  The Company has filed prior to delinquency all required tax returns and paid all applicable federal, state and local taxes, other than taxes not yet due or that may hereafter be paid without penalty, and the Company has no knowledge of any material deficiency or additional assessment in connection therewith not provided for on the books of the Company.

Section 4.6          Liens.  Upon the execution, delivery and filing of the Twenty-Fifth Supplemental Indenture, the Indenture constitutes a valid and perfected first priority lien as to the Mortgaged Property, subject only to Permitted Encumbrances, enforceable against the Company and third parties and secures the obligations of the Company issued pursuant to the Indenture, including the Bonds, and upon the filing of the Twenty-Fifth Supplemental Indenture in the appropriate offices, all filings, recordations, and other actions necessary to establish and protect such lien as a first priority lien, subject only to Permitted Encumbrances, on the Mortgaged Property have been duly taken.

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Section 4.7          Title to Properties.  The Company has good and marketable title in fee simple to all real estate and fixed property specifically described in the Indenture, subject to the lien of the Indenture and Permitted Encumbrances, and the Company has good title to all its other property and assets reflected on the balance sheet of the Company as of December 31, 2021 (other than property or assets subsequently disposed of in the normal and ordinary course of business), except liens for current taxes not yet due and payable, subject only to liens or other encumbrances either not material in the aggregate or described in the financial statements (or notes or schedules thereto) of the Company referred to in Section 4.3 of this Agreement.  The real estate specifically described in the Indenture constitutes substantially all the real estate owned by the Company.  None of the real estate or fixed property subject to the lien of the Indenture is located outside of New Castle, Kent and SussexCounties, Delaware.  No real property or interests in real property of the Company necessary for utility purposes is subject to title defects (other than Permitted Encumbrances) that the Company does not have the right to cure by condemnation proceedings and that impair the use of such property by the Company.  The Permitted Encumbrances to which the Mortgaged Property is subject do not in the aggregate materially impair the use of the Mortgaged Property taken as a whole for the purposes for which it is to be used by the Company and do not materially affect adversely the value of the Mortgaged Property.

Section 4.8          Intellectual Property.  The Company and each of its subsidiaries owns or possesses all the patents, trademarks, copyrights, and any other assets of the Company or its subsidiaries as to which filing with the United States Patent and Trademark Office or United States Copyright Office is necessary or advisable for the perfection of a lien therein under applicable law and all service marks, trade names, domain names, licenses, registrations, franchises, permits and other rights necessary to own and operate its properties and to carry on its business as presently conducted and planned to be conducted by the Company and each of its subsidiaries, without known possible, alleged or actual conflict with the rights of others.

Section 4.9          Calamities, Strikes, Etc.  Since December 31, 2021, the business, properties and assets of the Company have not been adversely affected in any substantial way as the result of any fire, explosion, accident, windstorm, strike, labor disturbance, lockout, combination of workmen, requisition or taking of property by the United States or any agency thereof or by the State of Delaware or any municipality or other agency thereof, flood, drought, embargo, riot, war or act of God or the public enemy.

Section 4.10          Restrictions on the Company.  The Company is not a party to or bound by any contract, indenture, agreement or instrument, or any law, rule or regulation, any judgment or order of any court or governmental agency that restricts or limits the right or ability of the Company to issue the Bonds or comply with and perform this Agreement; and no approval, authorization, consent or withholding of objection on the part of any governmental authority or regulatory body is necessary in connection with the issuance of the Bonds or the entering into this Agreement by the Company, except the approval of the Delaware Public Service Commission which has been obtained and remains in full force and effect.  No action on the part of any shareholder of the Company is necessary in connection with the execution and delivery by the Company of and the performance by the Company of its obligations under the Bond Documents.

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Section 4.11          No Conflicts.  The execution and delivery of this Agreement and the consummation of the transactions herein contemplated, and the compliance with this Agreement by the Company, will not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or, except as contemplated by the Indenture, result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Company pursuant to the terms of, the charter or by-laws of the Company, or any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or the Corporation is a party, or by which the property or assets of either may be bound or affected.

Section 4.12          No Defaults.The Company is not in default under the Indenture or under any other agreement or instrument under which any indebtedness has been issued to the Company, and no event has occurred that, but for the giving of notice or lapse of time, would constitute an event of default thereunder.

Section 4.13          Compliance with Laws.

(a)          The Company is not (i) in default with respect to any order, writ, injunction or decree of any court or (ii) in default in any material respect under any law, ordinance, order, regulation, license or demand (including ERISA, the Occupational Safety and Health Act of 1970 and laws and regulations establishing quality criteria and standards for air, water, land and toxic waste) of any federal, state, municipal or other governmental agency, default under which would have consequences that would materially and adversely affect the condition (financial or otherwise), operations, properties or business of the Company or of the Company and its subsidiary on a consolidated basis.

(b)          The Company is not in violation of any applicable Federal, state or local laws, statutes, rules, regulations, ordinances, permit, licenses or authorizations relating to public health, safety or the environment, including, without limitation, relating to releases, discharges, emissions or disposals to air, water, land or ground water, to the withdrawal or use of ground water, to the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, crude oil or any fraction thereof or other hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or other controlled, prohibited or regulated substances which violation could have a material adverse effect on the business, prospects, profits, properties or condition (financial or otherwise) of the Company.  The Company does not know of any liability or class of liability of the Company under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), or the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.).

Section 4.14          Validity.  The Bonds, when executed, delivered, issued and authenticated and the purchase price therefor paid, all as contemplated by this Agreement, will be validly authorized, issued and outstanding under the Indenture, will constitute legally binding obligations of the Company, enforceable in accordance with their terms and will be entitled to the benefits of the Indenture, equally and ratably with all other bonds issued and outstanding thereunder in accordance with the terms thereof (subject to any applicable bankruptcy, insolvency, reorganization, moratorium or other laws or equitable principles affecting the enforcement of the rights of creditors).  This Agreement, when duly executed and delivered, will be a valid and legally binding instrument in accordance with its terms.

5

Section 4.15          Full Disclosure.  The financial statements referred to in Section 4.3 of this Agreement do not, nor does any other written statement furnished to the Purchaser by the Company in connection with the negotiation of the sale of the Bonds, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein not misleading.  There is no fact peculiar to the Company that the Company has not disclosed to the Purchaser in writing that materially affects adversely nor, so far as the Company now can reasonably foresee, will materially affect adversely the properties, business, prospects, profits or condition (financial or otherwise) of the Company.  The information included in the Beneficial Ownership Certification is true and correct in all respects.

As used herein:  “Beneficial Ownership Certification” means the certification regarding beneficial ownership as required by the Beneficial Ownership Regulations that was delivered to the Purchaser on April 18, 2022.  “Beneficial Ownership Regulation” means 31 C.F.R. Section 1010.230.

Section 4.16          Use of Proceeds.  The proceeds from the sale of the Bonds shall be used to pay down outstanding lines of credit of the Company and the loan payable to the Corporation, and any additional proceeds shall be used to fund future capital investment by the Company.  None of the transactions contemplated in the Agreement (including, without limitation, the use of proceeds from the issuance of the Bonds) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.  Neither the Company nor the Corporation (nor any of their respective Subsidiaries) engages or intends to engage principally, or as one of its important activities, in the business of extending credit for the purpose, immediately, incidentally or ultimately, of purchasing or carrying margin stock (within the meaning of Regulation G, U, T or X as promulgated by the Board).  No part of the proceeds from the sale of any Bonds has been or will be used, immediately, incidentally or ultimately, to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock or that is inconsistent with the provisions of the regulations of the Board.  Neither the Company nor the Corporation (nor any of their respective Subsidiaries) holds or intends to hold margin stock in such amounts that more than 25% of the reasonable value of the assets of any such entity are or will be represented by margin stock.  None of the proceeds from the sale of the Bonds will be used to purchase, or refinance any borrowing the proceeds of which were used to purchase, any “security” within the meaning of the Securities Exchange Act of 1934, as amended.

Section 4.17      ERISA.  The consummation of the transactions provided for in the Agreement and compliance by the Company with the provisions thereof will not involve any prohibited transaction within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or Section 4975 of the Internal Revenue Code of 1986, as amended.  Each “Plan” (as hereinafter defined) complies in all material respects with all applicable statutes and governmental rules and regulations, and (i) no “Reportable Event” (as hereinafter defined) has occurred and is continuing with respect to any Plan, (ii) the Company has not withdrawn from any Plan or instituted steps to do so, and (iii) no steps have been instituted to terminate any Plan.  No condition exists or event or transaction has occurred in connection with any Plan that could result in the incurrence by the Company of any material liability, fine or penalty.  No Plan maintained by the Company, nor any trust created thereunder, have incurred any “accumulated funding deficiency” as defined in Section 302 of ERISA nor does the present value of all benefits vested under all Plans exceed, as of the last annual valuation date, the value of the assets of the Plans allocable to such vested benefits.  The Company does not have any contingent liability with respect to any post-retirement “welfare benefit plans” (as such term is defined in ERISA) except as has been disclosed to the Purchaser.  As used herein, the following terms shall have the meanings set forth:  “Plan” shall mean a “pension plan,” as such term is defined in ERISA, established or maintained by the Company or as to which the Company contributed or is a member or otherwise may have any liability; and “Reportable Event” shall have the meaning given to such term in ERISA.

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Section 4.18          Principal Place of Business; Records.  The principal place of business and chief executive office of the Company and the place where the records of the Company are kept is at the address of the Company shown in Section 20 of this Agreement.

Section 4.19          Rate Matters.  The Company’s current rates for the provision of water services have been approved by all necessary governmental authorities, including, without limitation, the Delaware Public Service Commission.  There are no pending, nor to the Company’s knowledge, any threatened, proceedings before any governmental authority the objective or result of which is or could be to materially reduce or otherwise materially change adversely any of the Company’s rates for the provision of water services or otherwise have a material adverse effect on the condition, financial or otherwise, operations, properties or business of the Company.

Section 4.20          System Condition; Water Rights.  The Company’s utility facilities reasonably meet present demand in all material respects, are constructed in a good and workmanlike manner, are in good working order and condition, and comply in all material respects with all applicable laws.  The Company has water rights with such quantities, priorities and qualities as are necessary adequately to service the present and reasonably anticipated needs of its customers.  The Company controls, owns, or has access to all such water rights free and clear of the interest of any third party which would individually or in the aggregate materially adversely affect the Company’s intended use thereof and has not suffered or permitted any transfer or encumbrance of such water rights, has not abandoned such water rights, or any of them, and has not done any act or thing which would materially impair or cause a material loss of any such water rights.

Section 4.21          Condemnation Powers.  The Company has the right under Delaware law to exercise the power of eminent domain; in any proceeding pursuant to which the Company exercises its power of eminent domain, the compensation to be paid by the Company would be based only on the value of the property actually taken and would not include compensation for the value of improvements made by the Company to the property condemned.

Section 4.22          Investment Company Act.  The Company is not an “investment company” as that term is defined in, or otherwise subject to regulation under, the Investment Company Act of 1940, as amended.

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Section 4.23          Anti-Corruption; Anti-Terrorism and Sanctions.

(a)          The Company, its affiliates, and to the knowledge of the Company, their officers, directors, employees and agents are in compliance, in all respects, with all applicable (i) Anti-Corruption Laws, (ii) Anti-Terrorism Laws and (iii) Sanctions.

(b)          The Company has implemented and maintains in effect policies and procedures designed to ensure compliance by the Company, its affiliates, officers, directors, employees and agents with all applicable (i) Anti-Corruption Laws, (ii) Anti-Terrorism Laws and (iii) Sanctions.

(c)          None of the Company, its affiliates, and to the knowledge of the Company, their officers, directors, employees or agents are Sanctioned Persons or have engaged in, or are now engaged in, or will engage in, any dealings or transactions with any Sanctioned Person.

(d)          No Bonds, use of proceeds or other transaction contemplated by this Agreement will violate any applicable (i) Anti-Corruption Laws, (ii) Anti-Terrorism Laws or (iii) Sanctions.

(e)          The Company has provided to the Purchasers all information requested by the Purchasers regarding the Company and each of its subsidiaries, affiliates, officers, directors, employees and agents that is necessary for the Purchasers to collect to comply with applicable Anti-Corruption Laws, Anti-Terrorism Laws, Sanctions and other applicable laws.

As used herein: (i) “Anti-Corruption Laws” means any laws of any governmental authority concerning or relating to bribery or corruption applicable to or binding on the Company, any of its affiliates, or any of its or their properties or activities or to which the Company or its affiliates is or are otherwise subject; (ii) “Anti-Terrorism Laws” means any laws of any governmental authority concerning or relating to financing terrorism, “know your customer” or money laundering applicable to or binding on the Company, any of its affiliates, or any of its or their properties or activities or to which the Company or its affiliates is or are otherwise subject; (iii) “Sanctioned Person” means at any time, (A) any person or entity listed in any Sanctions-related list of designated persons maintained by any governmental authority, (B) any person or entity operating, organized or resident in a country, territory or sector that is, or whose government is, the subject or target of any Sanctions or that is, or whose government is, the subject of any list-based or territorial or sectorial Sanctions, (C) any person or entity that is otherwise subject to any Sanctions, or (D) any person or entity, directly or indirectly, 50% or more in the aggregate owned by, otherwise controlled by, or acting for the benefit or on behalf of, any person or persons described in clause (A), (B) or (C) of this definition; and (iv) “Sanctions” means any economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by any governmental authority applicable to or binding on the Company, any of its affiliates, or any of its or their properties or activities or to which the Company or its affiliates is or are otherwise subject.

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SECTION 5.          CLOSING CONDITIONS.

The Purchaser’s obligation to purchase the Bonds shall be subject to the satisfaction of the following conditions on or prior to the date of the Closing:

Section 5.1          Legal Opinions.  The Purchaser shall have received opinions of counsel for the Company and the Corporation in form and content acceptable to the Purchaser and the Purchaser’s special counsel, as to such matters related to the transactions contemplated hereby as the Purchaser or the Purchaser’s special counsel may reasonably request, including, without limitation, from Morris, Nichols, Arsht & Tunnell, LLP, counsel for the Company, an opinion, as to the following:

(a)          The Twenty-Fifth Supplemental Indenture has been duly authorized, executed and delivered by the Company and constitutes a legally valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to any applicable bankruptcy, insolvency, reorganization, receivership, fraudulent conveyance, moratorium or other laws or equitable principles affecting the enforcement of creditors’ rights and remedies, as from time to time in effect (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(b)          The Bonds have been duly authorized, executed, authenticated and delivered in accordance with the terms of the Indenture, and are legally valid and binding obligations of the Company enforceable in accordance with their terms, and are entitled to the benefits and security of the Indenture equally and ratably with all other bonds issued thereunder in accordance with its terms, subject to any applicable bankruptcy, insolvency, reorganization, receivership, fraudulent conveyance, moratorium or other laws or equitable principles affecting the enforcement of creditors’ rights and remedies, as from time to time in effect (regardless of whether such enforceability is considered in a proceeding in equity or at law).  Without limiting the generality of the preceding sentence, the Bonds are subject to redemption in accordance with the terms of this Agreement.

(c)          This Agreement has been duly authorized, executed and delivered by the Company and constitutes a legally valid and binding obligation of the Company enforceable against the Company in accordance with its terms subject to any applicable bankruptcy, insolvency, reorganization, receivership, fraudulent conveyance, moratorium or other laws or equitable principles affecting the enforcement of creditors’ rights and remedies, as from time to time in effect (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(d)          It is not necessary in connection with the sale of the Bonds to the Purchaser under the circumstances contemplated by this Agreement that such Bonds be registered under the Securities Act of 1933, as now in effect, or that the Indenture be qualified under the Trust Indenture Act of 1939, as now in effect.

(e)          The Company is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware and the Company has full corporate power and authority to carry on its business as now conducted and to enter into and perform the transactions contemplated by this Agreement.

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(f)          The Company has filed with the Delaware Public Service Commission all information and documents required by law in connection with the issuance and sale of the Bonds by the Company and all necessary approvals of such commission in connection therewith have been obtained.  No other approval of, or filing with, any public body is required in connection with such issuance and sale, except for a report to said commission following issuance of the Bonds.  The order entered by said commission authorizing the issuance and sale of the Bonds is not subject to any suspension, modification, or appeal that would affect the terms or the validity of such Bonds.

(g)          The authorization, execution, delivery and performance of this Agreement, the Twenty-Fifth Supplemental Indenture and the Bonds will not violate or constitute a default under any law, requirement or restriction imposed on the Company by any judicial or governmental instrumentality, the charter or bylaws of the Company or, to the best of the knowledge of such counsel after due inquiry, any agreement or instrument to which the Company is a party or by which it or its property and assets may be bound or affected.

(h)          The Indenture is in proper form, and is effective, to create in favor of the Trustee, for the benefit of the Purchaser and the holders of other Bonds and as security for the Bonds, a valid mortgage lien and security interest under Article 9 of the Uniform Commercial Code in effect in the State of Delaware (the “Delaware UCC”) in the real property and interests in such personal property and fixtures constituting personal property described in the Indenture in which a security interest may be created under Article 9 of the Delaware UCC and the real property described in the Indenture.

(i)          The Indenture and all necessary Uniform Commercial Code financing statements have been duly filed for recordation in such manner and in such places as are required by law in order to perfect the lien of the Indenture in, on and to such personal property and fixtures constituting personal property described in the Indenture in which a security interest may be perfected by the filing a financing statement under Article 9 of the Delaware UCC and all real property and interests in real property described in the Indenture.

(j)          No transfer, exercise, mortgage, intangible, documentary stamp or other similar taxes are or will be payable to any governmental authority in the State of Delaware upon the execution, delivery, recording or filing of any of the Bond Documents, or the creation of the indebtedness and obligations evidenced or secured thereby, except for nominal recording fees.

Section 5.2          Representations and Warranties.  The representations and warranties of the Company contained in Sections 4 and 6 of this Agreement shall be true at and as of the date of the Closing with the same effect as if made at and as of said date.

Section 5.3          Fee and Expenses.  Concurrently with consummation of the Closing hereunder, the Company shall pay the expenses required to be paid by the Company pursuant to Section 7 of this Agreement.

Section 5.4          PSC Approval.  The Delaware Public Service Commission shall have approved (subject to no condition or conditions deemed by the Company or the Purchaser to be unduly burdensome to the Company) the issuance and sale of the Bonds and the order entered by said Commission authorizing the issuance and sale of such Bonds shall be in effect on the date of the Closing and shall not be subject to any suspension, modification or appeal that would adversely affect the terms or the validity of such Bonds.

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Section 5.5          Bond Documents.  The Purchaser shall have received duly executed originals of this Agreement, the Twenty-Fifth Supplemental Indenture and the Bonds.

Section 5.6          Authorization.  The Purchaser shall have received copies of all corporate documents and proceedings of the Company authorizing the execution, delivery and performance of the Bond Documents.

Section 5.7          Approvals.  The Purchaser shall have received evidence reasonably satisfactory to the Purchaser that all federal and state consents and approvals that are necessary for the execution and delivery of, or required as a condition of the validity and enforceability of, the Bond Documents or the creation or perfection of the liens and security interests identified therein have been obtained and are in full force and effect.

Section 5.8          Environmental Matters.  The Purchaser shall have received from the Company such information regarding environmental compliance and conditions associated with the Company’s assets as the Purchaser shall reasonably require, all such information to be reasonably satisfactory to the Purchaser.

Section 5.9          No Material Adverse Effect.  From December 31, 2021, to the date of the Closing, there shall not have occurred any event that has had or could have a material adverse effect on the condition, financial or otherwise, operations, properties or business of the Company.

Section 5.10          No Injunction.  No court or other government body or public authority shall have issued an order that shall then be in effect restraining or prohibiting the completion of the transactions contemplated hereby.

Section 5.11          Event of Redemption.  No Event of Redemption (as that term is defined in Section 11 of this Agreement) shall have occurred or exist, and there shall have occurred no event that with the passage of time or the giving of notice, or both, could become an Event of Redemption.

Section 5.12          Officer’s Certificate.  The Purchaser shall have received a certificate, in form and substance reasonably satisfactory to the Purchaser, signed by an officer of the Company certifying as to the continuing truth and accuracy of the representations and warranties of the Company under the Bond Documents, the satisfaction of each of the conditions to the Closing and such other matters as Purchaser shall reasonably require.

Section 5.13          Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions Documentation and Beneficial Ownership Certification.  At least five (5) Business Days prior to the Closing, (A) all documentation and other information requested by (or on behalf of) the Purchaser in order to comply with requirements of Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions and (B) if the Company qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, a Beneficial Ownership Certification.

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Section 5.14          Financial Tests.  The Purchaser shall have received a certificate from the Company’s President, Chief Financial Officer, Treasurer or Controller setting forth the calculations, calculated on a pro forma basis, of (a) the Interest Coverage Ratio for the previous four fiscal quarters for which the relevant information is available (but including four quarters of interest on the Bonds), evidencing an Interest Coverage Ratio of not less than 2.50 to 1.00, and (b) the ratio of Funded Debt to Total Permanent Capital as of the most recent date for which the relevant information is available, evidencing a ratio of not greater than 0.6667 to 1.0000.

Section 5.15          Other Information; Etc.  All instruments incident to the authorization, issue and sale of the Bonds and all proceedings taken in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Purchaser and the Purchaser’s special counsel, and the Purchaser shall have received such other information regarding the condition, financial or otherwise, and operations of the Company as the Purchaser shall reasonably request and such other opinions, certificates or documents as the Purchaser shall reasonably request.

SECTION 6.          PRIVATE PLACEMENT EXEMPTION.

Section 6.1          Company Representation.  The Company represents and warrants that it has not, directly or indirectly, sold or offered, or attempted to offer or dispose of, any of the Bonds to or solicited any offers to buy any of the Bonds from, or otherwise approached or negotiated in respect thereof with, any person or persons other than the Purchaser.

Section 6.2          Purchaser Representations and Agreement.  The Purchaser represents, acknowledges and agrees as follows:

(a)          The Purchaser is an “accredited investor” as defined in Rule 501(a) of the Securities Act of 1933.

(b)          This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s acceptance hereof and by the Purchaser’s purchase of the Bonds hereunder the Purchaser confirms, that the Purchaser is purchasing the Bonds for the Purchaser’s own account, for investment and with no present intention of distributing the Bonds or any part thereof, but without prejudice, however, to the Purchaser’s right at all times to sell or otherwise dispose of all or any part of the Bonds under a registration under the Securities Act of 1933, as amended, or under an exemption from such registration available under such Act.  It is understood that the disposition of the Purchaser’s property shall at all times be and remain within the Purchaser’s control.  The Purchaser further represents that either:  (i) no part of the funds to be used by the Purchaser to purchase the Bonds constitutes assets allocated to any separate account maintained by the Purchaser; or (ii) no part of the funds to be used by the Purchaser to purchase the Bonds constitutes assets allocated to any separate account maintained by the Purchaser such that the application of such funds constitutes a prohibited transaction under Section 406 of ERISA; or (iii) all or a part of such funds constitute assets of one or more separate accounts maintained by the Purchaser, and the Purchaser has disclosed to the Company the names of such employee benefit plans whose assets in such separate account or accounts exceed 10% of the total assets of such separate account as of the date of such purchase and the Company has advised the Purchaser in writing (and in making the representations set forth in this clause (iii) the Purchaser is relying on such advice) that the Company is not a party-in-interest nor are the Bonds employer securities with respect to the particular employee benefit plan disclosed to the Company by the Purchaser as aforesaid (for the purpose of this clause (iii), all employee benefit plans maintained by the same employer or employee organizations are deemed to be a single plan).  As used in this Section 6.2, the terms “separate account,” “party-in-interest,” “employer securities” and “employee benefit plan” shall have the respective meanings assigned to them in ERISA.  The Company’s obligation to sell the Bonds to the Purchaser hereunder is subject to the condition that at the Closing the Purchaser confirms, by accepting delivery of the Bonds, the aforesaid representations as if made at such time.

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(c)          The Purchaser acknowledges that the Purchaser has been informed that the Bonds will not be registered under the Securities Act of 1933, as amended, by reason of their issuance in a transaction exempt from the registration requirements of said Act pursuant to Section 4(2) thereof, and accordingly, must be held indefinitely unless (i) such Bonds are registered under said Act and the Indenture is qualified under the Trust Indenture Act (neither of which the Company has any obligation to do), or (ii) such Bonds are sold or transferred in a transaction that qualifies as an exempt transaction under the Act and any other applicable securities laws and all rules and regulations promulgated thereunder and, to the extent requested by the Company, the Purchaser provides an opinion of counsel reasonably satisfactory to the Company to such effect.

(d)          The Purchaser agrees that the instrument or instruments representing the Bonds and issued to the Purchaser pursuant hereto may bear the following legend:

THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SAID SECURITIES ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

SECTION 7.          PAYMENT OF EXPENSES; BROKERAGE FEES.

Whether or not the transaction herein contemplated is consummated, the Company agrees to pay (i) all expenses in connection with the printing, issuance and delivery of the Bonds, (ii) the reasonable fees and out-of-pocket disbursements of Eversheds Sutherland (US) LLP, the Purchaser’s special counsel in connection with the preparation, execution and delivery of this Agreement, (iii) the Purchaser’s reasonable out-of-pocket expenses incident to the preparation, execution and delivery of this Agreement, and so long as the Purchaser holds any of the Bonds, all such expenses relating to any amendment, waivers or consents to this Agreement or the Indenture, whether the same are actually executed and delivered, (iv) the cost of obtaining a private placement number, and (v) all expenses incurred by the Purchaser in connection with proceedings brought to enforce compliance by the Company with respect to any of its obligations under this Agreement or the Bonds.  The Company also agrees to pay the cost of delivering to the Purchaser’s home office or to the office of the custodian of the Purchaser’s securities, insured to the Purchaser’s satisfaction, the Bonds purchased by the Purchaser.  The Company agrees to protect and indemnify the Purchaser against any liability for any and all brokerage fees and commissions payable or claimed to be payable in connection with the transactions contemplated by this Agreement.  The Purchaser represents that the Purchaser has not engaged any broker or securities dealer in connection with the Purchaser’s purchase of the Bonds.

SECTION 8.          FAILURE OF CONDITIONS.

In the event that the sale of the Bonds herein contemplated is not carried out by reason of the inability of either party to fulfill any of the conditions specified in Section 5 of this Agreement, neither party shall be responsible to the other for damages, or the expenses of the other party, or otherwise by reason of such inability except as otherwise provided in Section 7 of this Agreement.

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SECTION 9.          FURNISHING FINANCIAL AND OTHER INFORMATION.

The Company agrees so long as the Purchaser, or any institutional holder (that is an “accredited investor” as defined in Rule 501(a) of the Securities Act of 1933) or other holder, hold any of the Bonds then outstanding, as follows:

(a)          Annual Financial Statements of the Company.  As soon as available and in any event within one hundred twenty (120) days after the close of each fiscal year of the Company, the Company will deliver to the Purchaser (and any such institutional or other holder), copies in duplicate of:

(i)          consolidated balance sheets of the Company and each of its subsidiaries as of the close of such fiscal year, and

(ii)          consolidated statements of operations and retained earnings and cash flows of the Company and each of its subsidiaries for such fiscal year,

in each case setting forth in comparative form the consolidated figures for the preceding fiscal year, all in reasonable detail and accompanied by an opinion thereon of a firm of independent public accountants of recognized national standing selected by the Company to the effect that the consolidated financial statements have been prepared in conformity with generally accepted accounting principles consistently applied and present fairly the financial condition of the Company and each of its subsidiaries as of the end of such fiscal year and the results of their operations for the fiscal year then ended and a written statement from such accountants that their examination in connection with such financial statements has been made in accordance with generally accepted auditing standards and auditing procedures as were considered necessary in the circumstances, and, to the extent applicable, disclosing all defaults by the Company in the performance of any obligation or under its certificate of incorporation of which they have obtained knowledge in making the examination necessary to their opinion.

(b)          Financial Statements of the Corporation.

(i)          Quarterly Statements.  As soon as available and in any event within forty five (45) days after the end of each quarterly fiscal period (except the last) of each fiscal year, the Company will deliver to the Purchaser (and any such institutional or other holder) copies of:

(A)          condensed consolidated balance sheets of the Corporation and its subsidiaries as of the close of such quarterly period, and

(B)          condensed consolidated statements of operations, changes in stockholders’ equity and cash flows of the Corporation and its subsidiaries, for such quarterly period and for the portion of the fiscal year ending with such period,

in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as presenting fairly the financial condition of the Corporation and its subsidiaries as of the end of such period and the results of their operations for such period, subject to changes resulting from year-end adjustments, by the chief financial officer of the Corporation.

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(ii)          Annual Statements.  As soon as available and in any event within one hundred twenty (120) days after the close of each fiscal year of the Corporation, the Company will deliver to the Purchaser (and any such institutional or other holder), copies in duplicate of:

(A)          consolidated balance sheets of the Corporation and its subsidiaries as of the close of such fiscal year, and

(B)          consolidated statements of operations, changes in stockholders’ equity and cash flows of the Corporation and its subsidiaries for such fiscal year,

in each case setting forth in comparative form the consolidated figures for the preceding fiscal year, all in reasonable detail and accompanied by an opinion thereon of a firm of independent public accountants of recognized national standing selected by the Corporation to the effect that the consolidated financial statements have been prepared in conformity with generally accepted accounting principles consistently applied and present fairly the financial condition of the Corporation and its subsidiaries as of the end of such fiscal year and the results of their operations for the fiscal year then ended and a written statement from such accountants that their examination in connection with such financial statements has been made in accordance with generally accepted auditing standards and auditing procedures as were considered necessary in the circumstances, and, to the extent applicable, disclosing all defaults by the Corporation in the performance of any obligation or under its certificate of incorporation of which they have obtained knowledge in making the examination necessary to their opinion.

(c)          SEC and Other Related Reports.  The Company will deliver to the Purchaser (and any such institutional holder), promptly upon their becoming available, copies of all registration and proxy statements and reports that the Company or the Corporation shall file with the Securities and Exchange Commission or any successor and corresponding governmental agency, and copies of such financial statements, reports, proxy statements and returns as it, or the Corporation, shall send to its or their stockholders or to the Trustee or file with any securities exchange.

(d)          Requested Information.  The Company with reasonable promptness shall furnish the Purchaser (and any such institutional holder) such other data and information as may reasonably be requested.

(e)          Officer’s Annual Certificate.  Concurrently with delivery of the financial statements referred to in clause (a) of this Section 9, the Company will deliver to the Purchaser (and any such institutional or other holder) a certificate of its President, Chief Financial Officer, Treasurer or Controller stating that after a review of the Company’s affairs to the best of his or her knowledge after due inquiry, the Company is not in default under this Agreement or any covenant of the Indenture nor is there any Event of Default or any Event of Redemption hereunder, or other event or condition that with the passage of time or the giving of notice would result in such an Event of Default or Event of Redemption.

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(f)          Inspection.  The Company will permit the Purchaser (and any such institutional holder), or such person or persons as the Purchaser (or such institutional holder) may designate in writing, to visit and inspect any of the properties of the Company and to examine its books of account and discuss its affairs, finances and accounts with its officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss with the Purchaser the finances and affairs of the Company), all at such reasonable times and as often as the Purchaser (or such institutional holder) may desire; provided that the Purchaser (or such institutional holder) shall bear the cost of any such inspection.

(g)          Notice of Default.  Promptly after becoming aware thereof, the Company will deliver to the Purchaser notice of (i) the occurrence of any (a) Event of Redemption or (b) any event that with the passage of time or the giving of notice, or both, could become an Event of Redemption, (c) any Event of Default, or (d) any event that with the passage of time or the giving of notice, or both, could become an Event of Default, or (ii) the occurrence of any material breach, default, event of default, or event that with the giving of notice or lapse of time, or both, could become a breach, default, or event of default under any agreement, indenture, mortgage, or other instrument (other than the Bond Documents) to which the Company is a party or by which it or any of its property is bound or affected if the effect of such breach, default, event of default or event is to accelerate, or to permit the acceleration of, the maturity of any indebtedness in excess of Five Hundred Thousand Dollars ($500,000) under such agreement, indenture, mortgage, or other instrument provided, however, that the failure to give such notice shall not affect the Purchaser’s rights and power to exercise any and all of the remedies specified herein.

(h)          Notice of Non-Environmental Litigation.  Promptly after the commencement thereof, the Company will deliver to the Purchaser notice of the commencement of all actions, suits, or proceedings before any court, arbitrator, or governmental department, commission, board, bureau, agency, or instrumentality affecting it that, if adversely determined, could have a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company.

(i)          Notice of Environmental Matters.  Without limiting the provisions of clause (h) above, promptly after receipt thereof, the Company will deliver to the Purchaser notice of its receipt of all pleadings, orders, complaints, indictments, or other written communications alleging a condition that would reasonably be expected to require the Company to undertake or to contribute to a cleanup or other response under any Environmental Law, or that seeks material penalties, damages, injunctive relief, or criminal sanctions related to alleged violations of any Environmental Law, or that makes any material claim for personal injury or property damage as a result of environmental factors or conditions or that, if adversely determined, could otherwise have a material adverse effect on the Company.

(j)          ERISA Reportable Events.Within 10 days after the Company becomes aware of the occurrence of any Reportable Event (as defined in Section 4043 of ERISA) with respect to the Company, a statement describing such Reportable Event and the actions proposed to be taken in response to such Reportable Event.

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SECTION 10.          COVENANTS.

The Company covenants and agrees that on and after the date hereof, so long as any Bond shall be outstanding and shall be held by the Purchaser, without the Purchaser’s prior written consent:

Section 10.1           Compliance With Laws and Agreements.

(a)          The Company will, and will cause each of its subsidiaries to, comply with (i) all applicable statutes, rules, regulations, orders and restrictions of all governmental authorities and of any court, arbitrator or grand jury, in respect of the conduct of their respective businesses and the ownership of their respective properties (including, without limitation, applicable statutes, rules, regulations, orders and restrictions relating to equal employment opportunities), the violation of which could reasonably be expected to have a material adverse effect on the business or assets or the condition, financial or otherwise, of the Company; and (ii) all agreements, indentures, mortgages and other instruments to which it is a party or by which it or any of its property is bound, the violation of which could reasonably be expected to have a material adverse effect on the business or assets or the condition, financial or otherwise, of the Company.

(b)          The Company will and will cause (A) each of its subsidiaries, and (B) to the extent acting on behalf of the Company or any of its subsidiaries, each of their affiliates, officers, directors, employees and agents to comply, in all respects, with all applicable (i) Anti-Corruption Laws, (ii) Anti-Terrorism Laws and (iii) Sanctions.  The Company shall implement and maintain in effect policies and procedures designed to ensure compliance by the Company, its affiliates, officers, directors, employees and agents with all applicable (i) Anti-Corruption Laws, (ii) Anti-Terrorism Laws and (iii) Sanctions.

(c)          The Company shall (i) conduct its operations and keep and maintain its real property in compliance in all material respects with all Environmental Laws and environmental permits; (ii) obtain and renew all environmental permits necessary for its operations and properties; and (iii) implement any and all investigation, remediation, removal and response actions that are necessary to comply with Environmental Laws pertaining to any of its real property (provided, however, that the Company shall not be required to undertake any such investigation, remediation, removal, response or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and adequate reserves have been set aside and are being maintained by the Company with respect to such circumstances in accordance with generally accepted accounting principles). As used herein: (i) “Environmental Laws” means any and all applicable current and future federal, state, local and foreign laws and any consent decrees, concessions, permits, grants, franchises, licenses, agreements or other restrictions of a Governmental Authority or common law causes of action binding on or applicable to the Company, its subsidiaries or their properties relating to: (a) protection of the environment or natural resources from, or emissions, discharges, releases or threatened releases of, any materials, including Hazardous Materials, in the environment including ambient air, surface, water, ground water or land, (b) the generation, handling, use, labeling, disposal, transportation, reclamation and remediation of Hazardous Materials; (c) human health or safety; (d) the protection of endangered or threatened species; and (e) the protection of environmentally sensitive areas; (ii) “Hazardous Materials” means (a) any explosive or radioactive substances, materials or wastes, (b) any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under, or that could reasonably be expected to give rise to liability under, any applicable Environmental Law, including, asbestos or asbestos containing materials, infectious or medical waste, polychlorinated biphenyls, radon gas, urea-formaldehyde insulation, gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products and (c) all other substances, materials or wastes of any nature regulated under or with respect to which liability or standards of conduct are imposed pursuant to any Environmental Law; (iii) “Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank), including the Delaware Public Service Commission.

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Section 10.2          CoBank Equities and Securities.

(a)        So long as the Bonds are outstanding, the Company shall acquire equity in the Purchaser in such amounts and at such times as the Purchaser may require in accordance with the Purchaser’s Bylaws and Capital Plan (as each may be amended from time to time), except that the maximum amount of equity that the Company may be required to purchase in the Purchaser in connection with the Bonds purchased by the Purchaser (or its affiliate) may not exceed the maximum amount permitted by the Bylaws and the Capital Plan at the time this Agreement is entered into. The Company acknowledges receipt of a copy of (i) the Purchaser’s most recent annual report, and if more recent, the Purchaser’s latest quarterly report, (ii) the Purchaser’s Notice to Prospective Stockholders and (iii) the Purchaser’s Bylaws and Capital Plan, which describe the nature of all of the CoBank Equities as well as capitalization requirements, and agrees to be bound by the terms thereof.

(b)          Each party hereto acknowledges that the Purchaser’s Bylaws and Capital Plan (as each may be amended from time to time) shall govern (i) the rights and obligations of the parties with respect to the CoBank Equities and any patronage refunds or other distributions made on account thereof or on account of the Company’s patronage with the Purchaser, (ii) the Company’s eligibility for patronage distributions from the Purchaser (in the form of CoBank Equities and cash) and (iii) patronage distributions, if any, in the event of a sale of a participation interest. The Purchaser reserves the right to assign or sell participations in all or any part of its (or its affiliate’s) commitments hereunder on a non-patronage basis.

(c)          Notwithstanding anything herein or in any other Bond Document to the contrary, each party hereto acknowledges that: (i) the Purchaser has a statutory first lien pursuant to the Farm Credit Act of 1971 (as amended from time to time) on all the CoBank Equities that the Company may now own or hereafter acquire, which statutory lien shall be for the Purchaser’s (or its affiliate’s) sole and exclusive benefit; (ii) during the existence of any Event of Redemption, the Purchaser may at its sole discretion, but shall not be required to, foreclose on its statutory first lien on the CoBank Equities and/or set off the value thereof or of any cash patronage against the Company’s obligations to the Purchaser; (iii) during the existence of any Event of Redemption, the Purchaser may at its sole discretion, but shall not be required to, without notice except as required by applicable law, retire and cancel all or part of the CoBank Equities owned by or allocated to the Company in accordance with the Farm Credit Act of 1971 (as amended from time to time) and any regulations promulgated pursuant thereto in total or partial liquidation of the Company’s obligations to the Purchaser for such value as may be required pursuant applicable law and the Purchaser’s Bylaws and Capital Plan (as each may be amended from time to time); (iv) the CoBank Equities shall not constitute security for the Company’s obligations to the Purchaser; (v) to the extent that any of the Bond Documents create a lien on the CoBank Equities, such lien shall be for the Purchaser’s (or its affiliate’s) sole and exclusive benefit and shall not be subject to pro rata sharing hereunder; (vi) any setoff effectuated pursuant to the preceding clauses (ii) or (iii) may be undertaken whether or not the Company’s obligations to the Purchaser are currently due and payable; and (vii) the Purchaser shall have no obligation to retire the CoBank Equities upon any Event of Redemption, Event of Default or any other default by the Company, or at any other time, either for application to the obligations or otherwise. The Company acknowledges that any corresponding tax liability associated with the Purchaser’s application of the value of the CoBank Equities to any portion of the obligations is the sole responsibility of the Company. As used herein: “CoBank Equities” means any of the Company’s stock, patronage refunds issued in the form of stock or otherwise constituting allocated units, patronage surplus (including any such surplus accrued by the Purchaser for the account of the Company) and other equities in the Purchaser acquired in connection with, or because of the existence of, the Company’s patronage loan from the Purchaser (or its affiliate), and the proceeds of any of the foregoing.

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Section 10.3          Licenses, Etc.  The Company will, and will cause each of its subsidiaries to, duly and lawfully obtain and maintain in full force and effect all licenses, certificates, permits, authorizations, approvals and the like that are material to the conduct of its business or that otherwise may be required by laws, to the extent the failure to do so could have a material adverse effect on its business, assets or condition, financial or otherwise.

Section 10.4          Water Rights.  The Company will maintain and procure water rights with such quantities, priorities and qualities as are necessary adequately to serve the present and reasonably anticipated needs of its customers.  The Company will continue to control, own or have access to all such water rights free and clear of the interest of any third party, will not suffer or permit any transfer or encumbrance of such water rights, will not abandon such water rights, or any of them, and will not do any act or thing which would impair or cause the loss of such water rights.

Section 10.5          Loans and Investments.  The Company will not, after the date hereof, make any loan or advance to, invest in, purchase or make any commitment to purchase any commercial paper, stock, bonds, notes, or other securities of any person or entity (each, whether made directly or indirectly (an “Investment”), other than:

(a)          commercial paper maturing not in excess of one year from the date of acquisition and rated “P1” by Moody’s Investors Service, Inc., or “A1” by Standard & Poor’s Corporation on the date of acquisition;

(b)          certificates of deposit in North American commercial banks rated “C” or better by Keefe, Bruyette & Woods, Inc., or “3” or better by Cates Consulting Analysts, maturing not in excess of one year from the date of acquisition;

(c)          securities or deposits issued, guaranteed, or fully insured as to payment by the United States government or any agency thereof, and Class C Stock or other securities of the Purchaser;

(d)          repurchase agreements of any bank or trust company incorporated under the laws of the United States of America or any state thereof and fully secured by a pledge of obligations issued or fully and unconditionally guaranteed by the United States government;

(e)          stocks and other voting securities that are not included within the scope of clauses (a) through (d) above and are issued by corporations or other entities not engaged in any business other than the water or wastewater utility business and that are incorporated or organized under the laws of the United State of America or any state thereof; provided that prior to or as a result of such investment the Company holds not less than seventy five percent (75%) of the voting securities of such corporation or entity;

(f)          commercial paper, bonds, stocks or other securities that are not included within the scope of clauses (a) through (e) above and are issued by corporations or other entities incorporated or organized under the laws of the United State of America or any state thereof (collectively, “Other Investments”); provided that the aggregate amount (calculated based on cost) of all such Other Investments shall not at any time exceed One Million Dollars ($1,000,000); and

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(g)          the CoBank Equities and any other stock or securities of, or Investments in, CoBank or its investment services or programs.

Section 10.6          Guarantees.  The Company will not, and will not permit any of its subsidiaries to, guarantee, assume or otherwise become obligated or liable with respect to the indebtedness or other obligations of any person or entity, other than in the ordinary course of its business.

Section 10.7          Mergers; Acquisitions; Etc.  The Company will not, and will not permit any of its subsidiaries to, merge or consolidate with any other entity unless the Company or, solely to the extent the Company is not a party to such merger or consolidation, the applicable subsidiary, shall be the continuing and surviving corporation and, after such merger or consolidation, there shall exist no Event of Redemption or event that, with the passage of time or giving of notice, or both, would constitute an Event of Redemption, or commence operations under any other name, organization or entity, including any joint venture.

Section 10.8          Transfer of Assets.  The Company will not, and will not permit any of its subsidiaries to, sell, transfer, lease, enter into any contract for the sale, transfer or lease of, or otherwise dispose of, any of its assets, except in the ordinary course of its business.  The Company shall not engage in, allow or be party to any Division.  As used herein:  “Division” shall mean, in reference to any entity, the division of such entity into two (2) or more separate entities with the dividing entity either continuing or terminating its existence as part of the division including as contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited liability companies formed under Delaware Law or any analogous action taken pursuant to any applicable law with respect to any corporation, limited liability company, partnership or other entity.

Section 10.9          Change in Business.  The Company will not, and will not permit any of its subsidiaries to, engage in any business activity or operation different from or unrelated to its current business activities or operations.

Section 10.10          Distributions.  The Company will not make, declare or pay, directly or indirectly, any dividend or other distribution of assets to shareholders of the Company, or retire, redeem, purchase or otherwise acquire for value any shares of stock of the Company, if (a) an Event of Default or Event of Redemption shall have occurred and be continuing, or would result from such dividend, distribution, retirement, redemption, purchase or acquisition, or (b) the Company shall have failed to maintain, calculated for the four full fiscal quarters immediately preceding such dividend, distribution, retirement, redemption, purchase or acquisition, an Interest Coverage Ratio of not less than 2.50 to 1.00, or (c) the Company would have a ratio of Funded Indebtedness to Total Permanent Capital that exceeds 0.6667 to 1.0000 on the date of and after giving effect to such dividend, distribution, retirement, redemption, purchase or acquisition.

Section 10.11          Calculation of Ratios.  In calculating the ratio of Funded Indebtedness to Total Permanent Capital pursuant to Section 10.10 hereof and Section 2.1 of the Twenty-Fifth Supplemental Indenture, the Company will (i) calculate ‘earned surplus’ using the amounts as of the most recent financial statements of the Company then available, and (ii) calculate all other components of the ratio of Funded Indebtedness to Total Permanent Capital using the amounts as of the date of the relevant action in Section 10.10 hereof and Section 2.1 of the Twenty-Fifth Supplemental Indenture.

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Section 10.12          Anti-Corruption; Anti-Terrorism; Sanctions.

(a)          None of (i) the Company or its subsidiaries, nor (ii) any affiliates, officers, directors, employees or agents of the Company or its subsidiaries when acting on behalf of the Company or a subsidiary of the Company, will engage in any dealings or transactions with any Sanctioned Person or in violation of any applicable Anti-Corruption Laws, Anti-Terrorism Laws or Sanctions.

(b)          The Company will not fund all or any part of any payment under this Agreement or any other Bond Document out of proceeds derived from transactions that violate Sanctions, or with any Sanctioned Person, or with or connected to any Sanctioned Country. As used herein: “Sanctioned Country” means, at any time, a country, territory or sector that is, or whose government is,  the subject or target of any Sanctions or that is, or whose government is, the subject of any list-based or territorial or sectorial Sanction.

SECTION 11.          REDEMPTION.

Section 11.1          Events of Redemption Defined.  The following events are herein called “Events of Redemption”:

(a)          Representations and Warranties.  Any representation or warranty made by the Company herein shall prove to have been false or misleading in any material respect on or as of the date made; or

(b)          Certain Covenants.  The failure by the Company to perform or comply with any covenant set forth in Section 9 (excluding Sections 9(g), (h) and (i)), Section 10, Section 16, Section 17, or Section 18 of this Agreement, and such failure continues for thirty (30) days after written notice thereof shall have been delivered by the Purchaser to the Company; or

(c)          Other Covenants.  The failure by the Company to perform or comply with any other covenant or agreement set forth in Section 9(g), 9(h) or 9(i) of this Agreement; or

(d)          Cross-Default.  The occurrence of a default or event of default under, or lapse of or failure on the part of the Company to observe, keep, or perform any covenant or agreement contained in any other agreement (other than the Bond Documents) between the Company and the Purchaser, including, without limitation, any guaranty, loan agreement, security agreement, pledge agreement, indenture, mortgage or other agreement; or

(e)          Other Indebtedness.  Default under any bond, debenture, note or other evidence of indebtedness for any money borrowed by the Company in excess of Five Hundred Thousand Dollars ($500,000) or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness of the Company  in excess of Five Hundred Thousand Dollars ($500,000), whether such indebtedness exists or shall hereafter be created, which default has not been waived and shall constitute a failure to pay any portion of the interest accruing on or the principal of such indebtedness when due and payable after the expiration of any applicable grace period with respect thereto or shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled; or

(f)          Judgment.  The rendering against the Company of a judgment for the payment of moneys in excess of Five Hundred Thousand Dollars ($500,000) and the continuance of such judgment unsatisfied and without stay of execution thereon for a period of  forty-five (45) days after the entry of such judgment, or the continuance of such judgment unsatisfied for a period of forty-five (45) days after the termination of any stay of execution thereon entered within such first mentioned forty-five (45) days; or

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(g)          Bankruptcy, Etc.  The occurrence of any of the following with respect to the Company (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or for any part of its property or order the winding up or liquidation of its affairs, or (ii) an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect is commenced against the and such petition remains un stayed and in effect for a period of 60 consecutive days; or (iii) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any substantial part of its property or make any general assignment for the benefit of creditors; or (iv) the Company shall become insolvent or shall admit in writing its inability to pay its debts generally as they become due or any action shall be taken by the Company in furtherance of any of the aforesaid purposes; or

(h)          ERISA.  The occurrence of any of the following events or conditions if the same, individually or in the aggregate, would be reasonably expected to result in a liability of an amount greater than or equal to $500,000: (i) any “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of the Code (as hereinafter defined), whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of the Company or any ERISA Affiliate (as hereinafter defined) in favor of the Pension Benefit Guaranty Corporation (as defined in ERISA) (“PBGC”) or a Plan; (ii) a Termination Event (as hereinafter defined) shall occur with respect to a Single Employer Plan (as hereinafter defined), which is, in the reasonable opinion of the Purchaser, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (iii) a Termination Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan (as hereinafter defined), which is in the reasonable opinion of the Purchaser, likely to result in (x) the termination of such Plan for purposes of Title IV of ERISA, or (y) the Company or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency (within the meaning of Section 4245 of ERISA) of such Plan; or (iv) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which would be reasonably expected to subject the Company or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(1) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Company or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability. As used herein, the following terms shall have the meanings set forth: (1) “Code”shall mean the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder from time to time; (2) “ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code; (3) “Multiemployer Plans” shall mean any Plan that is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA); (4) “Multiple Employer Plan” shall mean a Plan covered by Title IV of ERISA, other than a Multiemployer Plan, which the Company or any ERISA Affiliate and at least one employer other than the Company or any ERISA Affiliate are contributing sponsors; (5) “Single Employer Plan” shall mean any Plan which is covered by Title 1V of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan; and (6) “Termination Event” shall mean (A) with respect to any Single Employer Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA), (B) the withdrawal of the Company or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, (C) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041 (a)(2) or 4041A of ERISA, (D) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA, (E) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (F) the complete or partial withdrawal of the Company or any ERISA Affiliate from a Multiemployer Plan; or

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(i)          Indenture; Security.  (i) An “Event of Default” (as defined in the Indenture) shall exist or (ii) any lien purported to be created under the Indenture or any other security document shall cease to be, or shall be asserted by the Company not to be, a valid or perfected lien on any portion of the collateral or mortgage property, with the priority required by the Indenture or the applicable security document, except (i) as a result of a release pursuant to the Indenture, or (ii) as a result of the sale or other disposition of the applicable collateral or mortgaged property in a transaction permitted under the Bond Documents.

Section 11.2          Redemption.  In the event that any Event of Redemption shall have occurred and be continuing, the Purchaser shall have the right to require the Company, and the Company shall be obligated, to redeem all Bonds then held by the Purchaser.  Any such redemption shall be made by the Company on the “Mandatory Redemption Date” (as hereinafter defined), as specified in the “Notice of Redemption” (as hereinafter defined).  Notice of Redemption shall mean written notice (i) signed by the President or any Vice President of the Purchaser, (ii) sent to the Company and the Trustee, (iii) dated the date it is sent to the Company and the Trustee, (iv) specifying the Mandatory Redemption Date, which shall be no less than thirty (30) days from the date of such notice, and (v) specifying the Event of Redemption or Events of Redemption requiring such redemption under this Section 11.  The Notice of Redemption shall be sent to the Company and the Trustee at its Corporate Trust Office by express mail or overnight courier service.  The Bonds shall be redeemed at a purchase price equal to the redemption price for such Bonds specified in the Twenty-Fifth Supplemental Indenture.

Section 11.3          Suits for Enforcement.  If any Event of Redemption shall have occurred and be continuing, in addition to its rights under Section 11.2 of this Agreement, the Purchaser may proceed to protect and enforce its rights, either by suit in equity or by action at law, or both, whether for the specific performance of any covenant or agreement contained in this Agreement or in aid of the exercise of any power granted in this Agreement, or the Purchaser may proceed to enforce the payment of all sums due upon any Bond held by the Purchaser or to enforce any other legal or equitable right of the Purchaser.

The Company covenants that, if it shall default in the making of any payment due under any Bond or in the performance or observance of any agreement contained in this Agreement and other Bond Documents, it will pay to the Purchaser such further amounts, to the extent lawful, as shall be sufficient to pay the reasonable costs and expenses of collection or of otherwise enforcing the Purchaser’s rights, including reasonable counsel fees.

Section 11.4          Remedies Cumulative.  No remedy herein conferred upon the Purchaser (including, without limitation, the rights under this Section 11) is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under any other Bond Document or now or hereafter existing at law or in equity or by statute or otherwise.

Section 11.5          Remedies Not Waived.  No course of dealing between the Company and the Purchaser and no delay or failure in exercising any right hereunder or under any Bond and other Bond Document in respect thereof shall operate as a waiver of any of the rights of the Purchaser.

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SECTION 12.          SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.

All covenants, agreements and representations made by the Company or by the Purchaser herein or in any certificate delivered pursuant hereto shall be deemed to have been relied upon by the party hereto for whose benefit such covenant, agreement or representation was made and shall survive delivery of and payment for the Bonds.  The Purchaser’s obligation to purchase the Bonds shall, however, remain subject to the accuracy of the Company’s representations contained herein without modification unless and until the Purchaser shall have so accepted such modification.  It is understood that in entering into this Agreement the Purchaser has not relied on any oral representation or warranty or information made or given to the Purchaser orally by anyone acting on behalf of the Company.

SECTION 13.          LOST BONDS.

If the Purchaser (or any institutional holder that is an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933) is the registered owner of any Bond, then an affidavit of the Purchaser’s (or such institutional holder’s) authorized officer setting forth the fact of loss, theft or destruction and of the Purchaser’s (or such institutional holder’s) ownership of any such Bond at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no indemnity, other than the Purchaser’s (or such institutional holder’s) written agreement to indemnify the Company and the Trustee, shall be required as a condition to the issuance of a new Bond or the making of any payment under Section 2.12 of the Original Indenture.

SECTION 14.          PAYMENTS.

All payments of principal, interest and premium, if any, upon any Bond registered in the Purchaser’s name or in the name of any nominee designated by you shall be made by  Automated Clearing House or wire transfer of immediately available funds for advice to and credit of CoBank to ABA No. 3070-88754, reference:  CoBank for the benefit of Artesian Water Company, Inc. (or to such other account as the Purchaser may direct by notice).  Funds received by wire before 3:00 p.m. Eastern time shall be credited on the day received and funds received by wire after 3:00 p.m. Eastern time shall be credited on the next business day.  The Purchaser or the Purchaser’s nominee shall not be required to present or surrender any of the Bonds for notation of partial payments or redemptions in order to receive payment of any monies then due thereon.  All other notices to the Purchaser shall be given in accordance with the provisions of Section 20.2(b) hereof.  The Company will make payments or cause them to be made by the Trustee in accordance with the foregoing without requiring such prior presentation or surrender of such Bonds.  The Purchaser agrees that neither the Purchaser nor any nominee designated by the Purchaser will dispose of any such Bond without having first noted thereon the amounts of any payment made thereon other than interest; the Purchaser will also notify the Company and the Trustee of the name and address of any transferee of such Bond.  The Purchaser agrees to reimburse the Company and/or the Trustee for any loss suffered by either of them by reason of payments so made without requiring prior presentation or surrender of any such Bond.

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SECTION 15.          DELIVERY EXPENSE.

If the Purchaser surrenders any Bond to the Company or a transfer agent of the Company for exchange for Bonds of other denominations or for registration in another name or names, the Company will pay the reasonable cost of insurance and delivery to such place as the Purchaser may designate from the Company or its transfer agent of the Bond or Bonds issued in substitution or replacement for the surrendered Bond.

SECTION 16.          USE OF PROCEEDS COVENANT.

The Company hereby covenants and agrees that the Company shall use the proceeds of the sale of the Bonds to pay down outstanding lines of credit of the Company and the loan payable to the Corporation, and any additional proceeds shall be used to fund future capital investment by the Company.

SECTION 17.          TAXES.

The Company will pay all taxes (including interest and penalties) that may be payable in respect of the execution and delivery of this Agreement or the Indenture or of the execution and delivery (but not the transfer) of any of the Bonds or of any amendment of, or waiver or consent under or with respect to, this Agreement, the Indenture or any of the Bonds and will hold the Purchaser harmless against any loss or liability resulting from nonpayment or delay in payment of any such tax.  The obligations of the Company under this Section 17 shall survive the payment of the Bonds.

SECTION 18.          INDEMNIFICATION.

The Company hereby agrees to indemnify, exonerate and hold the Purchaser and each of the Purchaser’s officers, directors, employees and agents (collectively herein called the “Indemnitees” and individually called an “Indemnitee”) free and harmless from and against any and all actions, causes of action, suits, citations, losses, liabilities, damages and expenses, including, without limitation, reasonable attorney’s fees and disbursements (collectively herein called the “Indemnified Liabilities”) incurred, suffered, sustained or required to be paid by the Indemnitees or any of them as a result of, or arising out of, or relating to (a) the issuance or sale hereunder of the Bonds (including any requirements to register or qualify the Bonds under any applicable securities law), (b) transactions financed in whole or in part directly or indirectly with proceeds of any of the Bonds, (c) the exercise, protection or enforcement of your rights, remedies, powers or privileges under this Agreement, or (d) the failure of the Company to comply with the provisions of this Agreement or the presence of Hazardous Materials on, or the escape, seepage, leakage, spillage, discharge, emission or release of Hazardous Materials from, any of the properties of the Company or any site, facility or location to which any material, products, wastes or other substances from or attributable to the business or operations of the Company have been transported for treatment, disposal, storage or deposit or the applicability of any Environmental Law relating to Hazardous Materials to any such property, site, facility or location, except for any such Indemnified Liabilities arising on account of such Indemnitee’s negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.  The obligations of the Company under this Section 18 shall survive the payment of the Bonds.

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SECTION 19.          CONFIDENTIALITY.

The Purchaser (and any such institutional or other holder) shall keep the information obtained pursuant to Section 4 and Section 9 (to the extent not otherwise publicly disclosed) confidential and shall not disclose the same, except:

(a)          as may be appropriate in connection with enforcing compliance with the terms and conditions of this Agreement,

(b)          as may be required or appropriate in any report, statement or testimony submitted to or required by any municipal, state, or Federal regulatory body, agency, authority or commission having or claiming to have jurisdiction over you or such institutional or other holder, or

(c)          as may be necessary in connection with any sale of or participation in the Bonds to or by any prospective bona fide purchaser or participant;

and at the Purchaser’s request the Company will furnish duplicate copies of any of such financial statements, information or reports.

SECTION 20.          MISCELLANEOUS.

Section 20.1          Successors and Assigns; Legend.  The Company may not transfer or assign any of its rights or obligations hereunder without the Purchaser’s prior written consent, which consent shall not be unreasonably withheld.  From time to time, the Purchaser may sell to one or more banks, financial institutions or other lenders a participation in one or more of the loans or other extensions of credit made pursuant to this Agreement.  However, no such participation shall relieve the Purchaser of any commitment made to the Company hereunder.  In connection with the foregoing, the Purchaser may disclose information concerning the Company and each of its subsidiaries, if any, to any participant or prospective participant, provided that such participant or prospective participant agrees to keep such information confidential.  A sale of a participation interest may include certain voting rights of the participants regarding the loans hereunder (including without limitation the administration, servicing and enforcement thereof).  The Purchaser agrees to give written notification to the Company of any sale of a participation interest.  All agreements herein by or on behalf of the Purchaser shall bind and inure to the benefit of the Purchaser’s successors, transferees and assigns (including, but not limited to, any purchaser or transferee of the Bonds) and the Purchaser agrees that the instrument or instruments representing the Bonds issued to the Purchaser pursuant hereto may bear the following legend:

THIS BOND HAS BEEN ISSUED PURSUANT TO AND IS SUBJECT TO THE TERMS AND CONDITIONS OF THE BOND PURCHASE AGREEMENT DATED AS OF APRIL 29, 2022 BETWEEN THE COMPANY AND COBANK, ACB, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

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Section 20.2          Notices.  All communications provided for hereunder shall be in writing, and

(a)          if to the Company, mailed by “Express Mail” or certified mail to:

Artesian Water Company, Inc.664 Churchmans RoadNewark, Delaware 19702

in each case to the attention of its Secretary and Chief Financial Officer, or at such other address as shall be set forth in a notice given in the same manner.

(b)          if to the Purchaser, similarly mailed or delivered to the Purchaser as set forth in Schedule I hereto, or at such other address as shall be set forth in a notice given in the same manner.

Section 20.3          Governing Law.  This Agreement, the Indenture and the Bonds shall be governed by the laws of the State of Delaware.

Section 20.4          Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Section 20.5          Amendments.  This Agreement may not be amended except by an instrument in writing signed by the parties hereto, and the respective rights and obligations set forth in this Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns.

Section 20.6          Severability.  Should any part of this Agreement for any reason be declared invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid portion thereof eliminated.

Section 20.7Electronic Execution of Bond Documents. The words “execution,” “signed,” “signature,” and words of like import in this Agreement and the other Bond Documents including any assignment and assumption shall be deemed to include electronic signatures or electronic records, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

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If the foregoing is in accordance with the Purchaser’s understanding of our agreement, please sign and return to the Company the enclosed copy hereof, whereupon this Agreement shall become a binding agreement between us.

Very truly yours,

ARTESIAN WATER COMPANY, INC.

By:          

      Name: David B. Spacht

      Title:          Chief Financial Officer

Attest:          

           Its General Counsel

(Signatures Continued On Next Page)

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(Signatures Continued From Previous Page)

ACKNOWLEDGED AND AGREED TO THIS 29th DAY OF APRIL, 2022. COBANK, ACB       By:                 Name: Title:   Assistant Corporate Secretary    

15635303.8

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SCHEDULE I(to Bond Purchase Agreement)

NAME AND ADDRESS OF PURCHASER	PRINCIPAL AMOUNT OF BONDS TO BE PURCHASED
COBANK, ACB6340 S. Fiddlers Green CircleGreenwood Village, CO  80111Attention:  Energy and Water Banking GroupTelefacsimile:  (303) 224-2556Confirmation:  (303) 740-4310	$30,000,000 (Series W)

All notices concerning payment on or in respect of the Bonds, to:

CoBank, ACB6340 S. Fiddlers Green CircleGreenwood Village, CO  80111Attention:  Energy and Water Banking Group

All notices and communications other than those in respect

to payments to be addressed as first provided above.

Name of Nominee in which Bonds are to be issued:  None

Taxpayer ID # 84-1286705

EXHIBIT A(to Bond Purchase Agreement)

EX-31.1

Exhibit 31.1
Certification of Chief Executive Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended
I, Dian C. Taylor, certify that:
1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2022 of Artesian Resources Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  May 5, 2022			/s/ DIAN C. TAYLOR
			Dian C. Taylor
			Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2
Certification of Chief Financial Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended
I, David B. Spacht, certify that:
1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2022 of Artesian Resources Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 5, 2022			/s/ DAVID B. SPACHT
			David B. Spacht
			Chief Financial Officer (Principal Financial Officer)

EX-32

Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
I, Dian C. Taylor, Chief Executive Officer, and David B. Spacht, Chief Financial Officer, of Artesian Resources Corporation, a Delaware corporation (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on our knowledge:
(1)	The Company's Quarterly Report on Form 10-Q for the period ended March 31, 2022 (the " Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m(a) or Section 78o(d)), as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.
Date:  May 5, 2022

CHIEF EXECUTIVE OFFICER:	CHIEF FINANCIAL OFFICER:
/s/ DIAN C. TAYLOR	/s/ DAVID B. SPACHT
Dian C. Taylor	David B. Spacht
These certifications accompany the Report to which they relate, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2022	May 02, 2022
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Document Transition Report	false
Entity File Number	000-18516
Entity Registrant Name	ARTESIAN RESOURCES CORPORATION
Entity Central Index Key	0000863110
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	51-0002090
Entity Address, Address Line One	664 Churchmans Road
Entity Address, City or Town	Newark
Entity Address, State or Province	DE
Entity Address, Postal Zip Code	19702
City Area Code	302
Local Phone Number	453 – 6900
Title of 12(b) Security	Common Stock
Trading Symbol	ARTNA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Class A Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		8,557,003
Class B Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		881,452

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
ASSETS
Utility plant, at original cost (less accumulated depreciation - 2022 - $168,815; 2021 - $159,385)	$ 618,424	$ 590,431
Current assets
Cash and cash equivalents	478	92
Accounts receivable (less allowance for doubtful accounts - 2022 - $444; 2021 - $590)	6,440	8,367
Income tax receivable	977	2,234
Unbilled operating revenues	1,504	1,080
Materials and supplies	2,852	1,933
Prepaid property taxes	1,057	2,306
Prepaid expenses and other	2,328	2,652
Total current assets	15,636	18,664
Other assets
Non-utility property (less accumulated depreciation - 2022- $938; 2021 - $919)	3,756	3,751
Other deferred assets	8,134	5,097
Operating lease right of use assets	446	451
Total other assets	12,336	9,299
Regulatory assets, net	6,362	6,321
Total Assets	652,758	624,715
Stockholders' equity
Common stock	9,438	9,414
Preferred stock	0	0
Additional paid-in capital	105,551	104,989
Retained earnings	65,572	63,607
Total stockholders' equity	180,561	178,010
Long-term debt, net of current portion	142,908	143,259
Total stockholders' equity and long term debt	323,469	321,269
Current liabilities
Lines of credit	27,409	26,703
Current portion of long-term debt	1,563	1,591
Accounts payable	12,441	10,206
Accrued expenses	4,282	4,038
Overdraft payable	133	30
Accrued interest	1,339	917
Income taxes payable	244	0
Customer and other deposits	2,372	2,273
Other	2,141	1,448
Total current liabilities	51,924	47,206
Commitments and contingencies (Note 11)
Deferred credits and other liabilities
Net advances for construction	4,310	4,295
Operating lease liabilities	440	440
Regulatory liabilities	21,732	21,260
Deferred investment tax credits	451	456
Deferred income taxes	53,370	53,133
Total deferred credits and other liabilities	80,303	79,584
Net contributions in aid of construction	197,062	176,656
Total Liabilities and Stockholders' Equity	$ 652,758	$ 624,715

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
ASSETS
Utility Plant, accumulated depreciation	$ 168,815	$ 159,385
Current assets
Accounts receivable, allowance for doubtful accounts	444	429
Other assets
Non-utility Property, accumulated depreciation	$ 938	$ 919

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Operating revenues
Total Operating Revenues	$ 22,187	$ 20,645
Operating expenses
Utility operating expenses	10,495	9,505
Non-utility operating expenses	943	915
Depreciation and amortization	3,085	3,012
State and federal income taxes	1,419	1,351
Property and other taxes	1,502	1,420
Total Operating Expenses	17,444	16,203
Operating income	4,743	4,442
Other income, net
Allowance for funds used during construction (AFUDC)	181	244
Miscellaneous (expense) income	1,446	1,402
Income before interest charges	6,370	6,088
Interest charges	1,887	1,882
Net income applicable to common stock	$ 4,483	$ 4,206
Income per common share:
Basic (in dollars per share)	$ 0.48	$ 0.45
Diluted (in dollars per share)	$ 0.47	$ 0.45
Weighted average common shares outstanding:
Basic (in shares)	9,423	9,368
Diluted (in shares)	9,455	9,407
Cash dividends per share of common stock (in dollars per share)	$ 0.2675	$ 0.2571
Water Sales [Member]
Operating revenues
Total Operating Revenues	$ 18,143	$ 17,830
Other Utility Operating Revenue [Member]
Operating revenues
Total Operating Revenues	2,525	1,376
Non-Utility Operating Revenue [Member]
Operating revenues
Total Operating Revenues	$ 1,519	$ 1,439

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 4,483	$ 4,206
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,085	3,012
Deferred income taxes, net	34	(1,236)
Stock compensation	49	43
AFUDC, equity portion	(125)	(164)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts	1,878	1,347
Income tax receivable	1,257	623
Unbilled operating revenues	(60)	15
Materials and supplies	(919)	135
Prepaid property taxes	1,827	869
Prepaid expenses and other	333	254
Other deferred assets	(499)	(463)
Regulatory assets	92	91
Regulatory liabilities	(109)	(125)
Income taxes payable	244	2,036
Accounts payable	(2)	(51)
Accrued expenses	(137)	(809)
Accrued interest	422	395
Deposits and other	(34)	64
NET CASH PROVIDED BY OPERATING ACTIVITIES	11,819	10,242
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)	(9,776)	(6,272)
Investment in acquisitions, net of cash acquired	(2,842)	0
Proceeds from sale of assets	2	7
NET CASH USED IN INVESTING ACTIVITIES	(12,616)	(6,265)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under lines of credit agreements	706	(4,097)
Deferred debt issuance cost	(30)	0
Increase (decrease) in overdraft payable	103	(78)
Net advances and contributions in aid of construction	2,764	2,751
Net proceeds from issuance of common stock	537	601
Dividends paid	(2,518)	(2,406)
Principal repayments of long-term debt	(379)	(527)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	1,183	(3,756)
NET INCREASE IN CASH AND CASH EQUIVALENTS	386	221
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	92	28
CASH AND CASH EQUIVALENTS AT END OF PERIOD	478	249
Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions	1,878	1,991
Dividends declared but not paid	0	0
Amounts included in accounts payable and accrued payables related to capital expenditures	684	3,074
Supplemental Cash Flow Information:
Interest paid	1,465	1,487
Income taxes paid	$ 0	$ 30

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands		Common Stock [Member] Common Shares Class A Non-Voting [Member]		Common Stock [Member] Common Shares Class B Voting [Member]		Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2020		$ 8,475		$ 882		$ 103,463	$ 56,606	$ 169,426
Balance (in shares) at Dec. 31, 2020		8,475	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		$ 0		$ 0		0	4,206	4,206
Cash dividends declared
Common stock		0		0		0	(2,406)	(2,406)
Issuance of common stock
Dividend reinvestment plan		$ 3		$ 0		95	0	98
Dividend reinvestment plan (in shares)		3	[1],[2],[3]	0	[4]
Employee stock options and awards	[3]	$ 22		$ 0		438	0	460
Employee stock options and awards (in shares)	[3]	22	[1],[2]	0	[4]
Employee Retirement Plan	[1]	$ 2		$ 0		84	0	86
Employee Retirement Plan (in shares)	[1]	2	[2],[3]	0	[4]
Balance at Mar. 31, 2021		$ 8,502		$ 882		104,080	58,406	171,870
Balance (in shares) at Mar. 31, 2021		8,502	[1],[2],[3]	882	[4]
Balance at Dec. 31, 2021		$ 8,532		$ 882		104,989	63,607	178,010
Balance (in shares) at Dec. 31, 2021		8,532	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		$ 0		$ 0		0	4,483	4,483
Cash dividends declared
Common stock		0		0		0	0	0
Issuance of common stock
Dividend reinvestment plan		$ 2		$ 0		87	0	89
Dividend reinvestment plan (in shares)		2	[1],[2],[3]	0	[4]
Employee stock options and awards	[3]	$ 22		$ 0		475	0	497
Employee stock options and awards (in shares)	[3]	22	[1],[2]	0	[4]
Employee Retirement Plan	[1]	$ 0		$ 0		0	0	0
Employee Retirement Plan (in shares)	[1]	0	[2],[3]	0	[4]
Balance at Mar. 31, 2022		$ 8,556		$ 882		$ 105,551	$ 65,572	$ 180,561
Balance (in shares) at Mar. 31, 2022		8,556	[1],[2],[3]	882	[4]

[1] Artesian Resources Corporation registered 200,000 shares of Class A Common Stock, subsequently adjusted for stock splits, available for purchase through the Artesian Retirement Plan and the Artesian Supplemental Retirement Plan.

[2] At March 31, 2022, and March 31, 2021, Class A Common Stock had 15,000,000 shares authorized.  For the same periods, shares issued, inclusive of treasury shares, were 8,585,947 and 8,531,099, respectively.

[3] Under the Equity Compensation Plan, effective December 9, 2015, or the 2015 Plan, Artesian Resources Corporation authorized up to 331,500 shares of Class A Common Stock for issuance of grants in the form of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the 2015 Plan. Includes stock compensation expense for March 31, 2022 and March 31, 2021, see Note 5-Stock Compensation Plans.

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

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	Mar. 31, 2022	Mar. 31, 2021	Dec. 09, 2015
Common Shares Class A Non-Voting [Member]
Common stock, par value (in dollars per share)	$ 1.00
Common stock, shares authorized (in shares)	15,000,000
Common Stock Shares Issued (in shares)	8,556,970	8,502,122
Common Shares Class B Voting [Member]
Common stock, par value (in dollars per share)	$ 1.00
Common stock, shares authorized (in shares)	1,040,000
Common Stock Shares Issued (in shares)	881,452	881,452
Common Stock [Member] | Common Shares Class A Non-Voting [Member]
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	15,000,000	15,000,000
Common Stock Shares Issued (in shares)	8,585,947	8,531,099
Shares available for purchase through retirement plans (in shares)	200,000
Shares authorized for issuance of grants under equity compensation plan (in shares)			331,500
Common Stock [Member] | Common Shares Class B Voting [Member]
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	1,040,000	1,040,000
Common Stock Shares Issued (in shares)	881,452	881,452

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GENERAL

3 Months Ended

Mar. 31, 2022

GENERAL [Abstract]

GENERAL

NOTE 1 – GENERAL

Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all of our wholly owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.

DELAWARE REGULATED SUBSIDIARIES

Artesian Water Company, Inc., or Artesian Water, our principal subsidiary, distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware.  In addition, Artesian Water provides services to other water utilities, including operations and billing functions, and has contract operation agreements with private and municipal water providers.  Artesian Water also provides water for public and private fire protection to customers in our service territories.

Artesian Wastewater Management, Inc., or Artesian Wastewater, began providing wastewater services in Sussex County, Delaware in July 2005.  Artesian Wastewater is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Delaware as a regulated public wastewater service company.

In January 2022, Artesian Wastewater acquired Tidewater Environmental Services, Inc.  Artesian Wastewater operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI.  TESI was incorporated in 2004 and is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Sussex County, Delaware as a regulated public wastewater service company.  Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company, or Middlesex, for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex.  This acquisition more than doubled the number of wastewater customers served in Sussex County, Delaware and included all residents within the Town of Milton.

MARYLAND REGULATED SUBSIDIARIES

Artesian Water Maryland, Inc. began operations in August 2007. Artesian Water Maryland distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland.

Artesian Wastewater Maryland, Inc. was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in the State of Maryland.  It is currently not providing these services.

PENNSYLVANIA REGULATED SUBSIDIARY

Artesian Water Pennsylvania, Inc. began operations in 2002.  It provides water service to a residential community in Chester County, Pennsylvania.

OTHER SUBSIDIARIES

Our three other subsidiaries, none of which are regulated, are Artesian Utility Development, Inc., or Artesian Utility, Artesian Development Corporation, or Artesian Development, and Artesian Storm Water Services, Inc., or Artesian Storm Water.

Artesian Utility was formed in 1996 and designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions.  Artesian Utility also evaluates land parcels, provides recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities, and operates water and wastewater facilities in Delaware for municipal and governmental agencies.  Artesian Utility also contracts with developers and government agencies for design and construction of wastewater infrastructure throughout the Delmarva Peninsula.  In addition, as further discussed below, Artesian Utility operates the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan.

Artesian Utility currently operates wastewater treatment facilities for the town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039.  The Company currently operates three wastewater treatment systems with a combined capacity of up to approximately 3.8 million gallons per day. The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.

Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan, and the ISLP Plan. The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up to an annual limit. The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit.  The ISLP Plan enhances available coverage to include water and wastewater lines within customers' residences up to an annual limit.

Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware.  The facility consists of approximately 10,000 square feet of office space along with nearly 10,000 square feet of warehouse space.

Artesian Storm Water, incorporated in 2017, was formed to provide design, installation, maintenance and repair services related to existing or proposed storm water management systems in Delaware and the surrounding areas.  The ability to offer storm water services will complement the primary water and wastewater services that we provide.  Artesian Storm Water is not actively seeking new opportunities.

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BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

BASIS OF PRESENTATION

NOTE 2 – BASIS OF PRESENTATION

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q.  Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.  Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes in the Company's annual report on Form 10-K for fiscal year 2021 as filed with the SEC on March 11, 2022.

The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly owned subsidiaries, including its principal operating company, Artesian Water.  In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of March 31, 2022, the results of its operations for the three-month periods ended March 31, 2022 and March 31, 2021, its cash flows for the three-month periods ended March 31, 2022 and March 31, 2021 and the changes in stockholders’ equity for the three-month periods ended March 31, 2022 and March 31, 2021.  The December 31, 2021 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2021 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements.

The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods.

Use of Estimates

The condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S., which require management to make certain estimates and assumptions regarding the reported amounts of assets and liabilities including unbilled revenues, credit losses and reserves for bad debt, regulatory asset recovery, lease agreements and contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from management's estimates.

All additions to utility plant are recorded at cost.  Business combinations pursuant to ASC Topic 805 may result in a purchase price allocation and the acquired assets are required to be evaluated by the applicable regulatory agency.  Artesian Wastewater acquired TESI in January 2022.  As of March 31, 2022, the accounting for the transaction was preliminary.  Management’s preliminary determination of fair value of the tangible assets acquired using the cost method requires management to make significant estimates and assumptions related to economic lives of the assets, replacement costs, and physical characteristics of the tangible assets acquired.  A third party valuation specialist will assist with the valuation of the assets acquired.  The purchase price allocation is expected to be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.

Reclassification

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.  These reclassifications had no effect on net income or stockholders' equity.

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REVENUE RECOGNITION

3 Months Ended

Mar. 31, 2022

REVENUE RECOGNITION [Abstract]

REVENUE RECOGNITION

NOTE 3 – REVENUE RECOGNITION

Background

Artesian’s operating revenues are primarily attributable to contract services based upon tariff rates approved by the Delaware Public Service Commission, or DEPSC, the Maryland Public Service Commission, or MDPSC, and the Pennsylvania Public Utility Commission, or PAPUC.  Tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent stand-alone selling prices.  Our non-tariff contract revenues consist of Service Line Protection Plan, or SLP Plan, fees, water and wastewater contract operations, design and installation contract services, and wastewater inspection fees.  Other operating revenue primarily consists of developer guarantee contributions for wastewater and rental income for antenna agreements, which are not considered in the scope of Accounting Standards Codification 606, Revenue from Contracts with Customers.

Tariff Contract Revenues

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory.  We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period.  As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.

Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware.  We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred.  These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue.  The contract also provides for a minimum required volume of wastewater flow to our facility.  At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue.  Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year.  Pursuant to a settlement agreement, the minimum required volume was prorated on a seven month basis beginning June 1, 2021 and ending December 31, 2021.

Artesian generates revenue from metered wastewater services provided to customers in Sussex County, Delaware.  We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of the last meter reading to the end of the accounting period.  As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s volume in the same period, the previous billing period’s volume, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of these wastewater customers are billed for the volume of water transferred on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next monthly cycle.

Artesian generates fixed fee revenue for water and wastewater services provided to customers once a customer requests service in our territory.  Our wastewater territory is located in Sussex County, Delaware.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service.  These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis.  For contract services billed in arrears, we record unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle.  For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  This deferred revenue is netted with unbilled operating revenue on the Condensed Consolidated Balance Sheet.

Artesian generates service charges primarily from non-payment fees, such as water shut off and reconnection fees and finance charges.  These fees are billed and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed.  There is no contract asset or liability associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements.  This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period.  This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement.  Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed fee revenue.

Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.  However, due to the COVID-19 pandemic causing hardships for many utility customers, the Company experienced longer receivable cycles throughout 2020 and into 2021 and made an adjustment to increase the reserve for bad debt by $0.5 million in 2020.  In June 2021 we made an adjustment to reduce the reserve by $0.3 million.  We will continue to monitor factors that affect the reserve for bad debt.

Non-tariff Contract Revenues

Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customer’s residence, up to an annual limit.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services.  These contract services are billed in advance on a monthly or quarterly basis.  As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total SLP Plan contract revenue.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates contract operation revenue from water and wastewater operation services provided to customers.  We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services over time as customers receive and consume the benefits of such services performed. These services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with these revenues.  An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness.  The related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract.  We recognize revenue from these services over time as services are performed using the percentage-of-completion method based on an input method of incurred costs (cost-to-cost).  These services are invoiced at the end of every month based on incurred costs to date.  As of March 31, 2022, there is no associated contract asset or liability.  There is no allowance for doubtful accounts or bad debt expense associated with this revenue.

Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities.  These fees are paid by developers in advance when a service is requested for a new phase of a development.  Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed.  As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected.  There are no accounts receivable, allowance for doubtful accounts or bad debt expense associated with inspection fee contracts.

Sales Tax

The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax.  Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax.  Therefore, no sales tax is collected on revenues.

Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

(in thousands)	Three months ended March 31, 2022		Three months ended March 31, 2021
Tariff Revenue
Consumption charges	$	10,566	$	10,418
Fixed fees		7,778		6,999
Service charges		156		201
DSIC		1,182		1,172
Metered wastewater services		140		—
Industrial wastewater services		407		6
Total Tariff Revenue	$	20,229	$	18,796
Non-Tariff Revenue
Service line protection plans	$	1,222	$	1,096
Contract operations		211		230
Design and installation		123		151
Inspection fees		41		84
Total Non-Tariff Revenue	$	1,597	$	1,561
Other Operating Revenue	$	361	$	288
Total Operating Revenue	$	22,187	$	20,645

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	March 31, 2022		December 31, 2021
Contract Assets – Tariff	$	2,424	$	2,144
Deferred Revenue
Deferred Revenue – Tariff	$	1,085	$	1,227
Deferred Revenue – Non-Tariff		246		287
Total Deferred Revenue	$	1,331	$	1,514

For the three months ended March 31, 2022, the Company recognized revenue of $1.2 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.3 million from amounts that were included in Deferred Revenue – Non- Tariff at the beginning of the year.

The changes in Contract Assets and Deferred Revenue are primarily due to normal timing differences between our performance and customer payments.

Remaining Performance Obligations

As of March 31, 2022 and December 31, 2021, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months.

As of March 31, 2022 and December 31, 2021, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months and one year for the SLP Plan revenue and inspection fee revenue, respectively.

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LEASES

3 Months Ended

Mar. 31, 2022

LEASES [Abstract]

LEASES

NOTE 4 – LEASES

The Company leases land and office equipment under operating leases from non-related parties.  Our leases have remaining lease terms of 20 years to 74 years, some of which include options to automatically extend the leases for up to 66 years.  Payments made under operating leases are recognized in the consolidated statement of operations on a straight-line basis over the period of the lease.  The annual lease payments for the land operating leases increase each year either by the most recent increase in the Consumer Price Index or by 3%, as applicable based on the lease agreements.  Periodically, the annual lease payment for one operating land lease is determined based on the fair market value of the applicable parcel of land.  None of the operating leases contain contingent rent provisions.  The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment.  The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.

Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right of use asset and liability amounts for the operating leases.  As our leases do not provide an implicit rate, we use our incremental borrowing rates for long term and short term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments.

Rent expense for all operating leases except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2022			March 31, 2021
Minimum rentals		$	7		$	7
Contingent rentals			–			–
		$	7		$	7

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2022			March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	7	$	7
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	446	$	455

Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	March 31, 2022			December 31, 2021
Operating Leases:
Operating lease right-of-use assets	$	446		$	451
Other current liabilities	$	2			6
Operating lease liabilities		440			440
Total operating lease liabilities	$	442		$	446
Weighted Average Remaining Lease Term
Operating leases	61 years			61 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

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

	(in thousands)
	Operating Leases
Year
2023	$	24
2024		24
2025		24
2026		24
2027		25
Thereafter		1,332
Total undiscounted lease payments	$	1,453
Less effects of discounting		(1,011	)
Total lease liabilities recognized	$	442

As of March 31, 2022, we have not entered into operating or finance leases that will commence at a future date.

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STOCK COMPENSATION PLANS

3 Months Ended

Mar. 31, 2022

STOCK COMPENSATION PLANS [Abstract]

STOCK COMPENSATION PLANS

NOTE 5 – STOCK COMPENSATION PLANS

On December 9, 2015, the Company's stockholders approved the 2015 Equity Compensation Plan, or the 2015 Plan. The 2015 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2015 Plan is administered and interpreted by the Compensation Committee, or the Committee, of the Board of Directors of the Company, or the Board. The Committee has the authority to determine the individuals to whom grants will be made under the 2015 Plan, the type, size and terms of the grants, the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2015 Plan), and deal with any other matters arising under the 2015 Plan. The Committee presently consists of three directors, each of whom is a non-employee director of the Company. All of the employees of the Company and its subsidiaries and non-employee directors of the Company are eligible for grants under the 2015 Plan. 

Compensation expense of $49,000, related to the May 2021 issue of restricted stock awards, was recorded for the three months ended March 31, 2022.  Compensation expense of $43,000 was recorded for the three months ended March 31, 2021 for restricted stock awards issued in May 2020.  Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards.

There was no stock compensation cost capitalized as part of an asset.

On May 4, 2021, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards.  The fair value per share was $40.11, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 4, 2021.  Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the three months ended March 31, 2022:

	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards		Weighted Average Grant Date Fair Value
Plan options/restricted stock awards
Outstanding at January 1, 2022		83,000		$	21.65			$	2,048		5,000	$	40.11
Granted		—			—				—		—		—
Exercised/vested and released		(22,250	)		20.12				600		—		—
Expired/cancelled		—			—				—		—		—
Outstanding at March 31, 2022		60,750		$	22.22		1.659	$	1,600		5,000	$	40.11
Exercisable/vested at March 31, 2022		60,750		$	22.22		1.659	$	1,600		—		—

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

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

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

As of March 31, 2022, there was $18,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.  The cost will be recognized over 0.09 years, the remaining vesting period for the restricted stock awards.

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OTHER DEFERRED ASSETS

3 Months Ended

Mar. 31, 2022

OTHER DEFERRED ASSETS [Abstract]

OTHER DEFERRED ASSETS

NOTE 6 – OTHER DEFERRED ASSETS

The investment in CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements.  Other deferred assets is primarily associated with the acquisition of TESI in January 2022 based on the preliminary purchase price allocation.  The purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.  In addition, other deferred assets includes the Mountain Hill Water Company acquisition.

In thousands	March 31, 2022	December 31, 2021
Investment in CoBank	$5,351	$4,850
Other deferred assets	2,783	247
	$8,134	$5,097

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REGULATORY ASSETS

3 Months Ended

Mar. 31, 2022

REGULATORY ASSETS [Abstract]

REGULATORY ASSETS

NOTE 7 - REGULATORY ASSETS

The FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC.

The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed.

Debt related costs include debt issuance costs and other debt related expense.  The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations.

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

Expense	Years Amortized
Deferred contract costs and other	5
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory assets, net of amortization, comprise:
	(in thousands)
	March 31, 2022		December 31, 2021
Deferred income taxes	$	481	$	355
Deferred contract costs and other		273		288
Debt related costs		4,844		4,902
Goodwill		271		273
Deferred acquisition and franchise costs		493		503
	$	6,362	$	6,321

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REGULATORY LIABILITIES

3 Months Ended

Mar. 31, 2022

REGULATORY LIABILITIES [Abstract]

REGULATORY LIABILITIES

NOTE 8 – REGULATORY LIABILITIES

FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency.  Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC.  Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties.  Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability.  Each year the liability is increased by an annual amount authorized by the DEPSC.    

Pursuant to the enactment of the Tax Cuts and Jobs Act, or TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 11) resulting in a decrease in the net deferred income tax liability of $24.3 million, of which $22.8 million was reclassified to a regulatory liability related to Artesian Water and Artesian Water Maryland.  The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes.  On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date. This audit is currently underway by the DEPSC, with no final ruling yet made.  The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers.

Regulatory liabilities comprise:
	(in thousands)
	March 31, 2022		December 31, 2021
Utility plant retirement cost obligation	$	158	$	149
Deferred income taxes (related to TCJA)		21,574		21,111
	$	21,732	$	21,260

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NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

3 Months Ended

Mar. 31, 2022

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE [Abstract]

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

NOTE 9 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards.

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

	For the Three Months Ended March 31,
	2022		2021
	(in thousands)
Weighted average common shares outstanding during the period for Basic computation		9,423		9,368
Dilutive effect of employee stock options and awards		32		39
Weighted average common shares outstanding during the period for Diluted computation		9,455		9,407

For the three months ended March 31, 2022 and 2021, no shares of restricted stock awards were excluded from the calculations of diluted net income per share.

The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of March 31, 2022, 8,556,970 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of March 31, 2021, 8,502,122 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. The par value for both classes is $1.00 per share.

Equity per common share was $19.16 and $18.94 at March 31, 2022 and December 31, 2021, respectively. These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on March 31, 2022 and December 31, 2021, respectively.

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REGULATORY PROCEEDINGS

3 Months Ended

Mar. 31, 2022

REGULATORY PROCEEDINGS [Abstract]

REGULATORY PROCEEDINGS

NOTE 10 - REGULATORY PROCEEDINGS

Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state Public Service Commissions through a rate setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the requested level of rates by the Company.

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

• The DEPSC, regulates both Artesian Water and Artesian Wastewater.

• The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland.

• The PAPUC, regulates Artesian Water Pennsylvania.

Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws.  These laws and regulations establish criteria and standards for drinking water and for wastewater discharges.  Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates.

Water and Wastewater Rates

Our regulated utilities periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business.  In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15% of gross water sales.  Should the rate case not be completed within seven months, by law, the utility may put the entire requested rate relief, up to 15% of gross water sales, in effect under bond until a final resolution is ordered and placed into effect.  If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest.  The timing of our rate increase requests is therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase.  We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.

Other Proceedings

Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at  7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within any 12-month period.

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

Application Date	11/20/2020
DEPSC Approval Date	12/14/2020
Effective Date	01/01/2021
Cumulative DSIC Rate	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014
Eligible Plant Improvements – Installed Ending Date	04/30/2019

The rate reflects the eligible plant improvements installed through April 30, 2019.  The DSIC rate effective January 1, 2021 is still subject to audit by the DEPSC at a later date. For each of the three months ended March 31, 2022 and March 31, 2021, we earned approximately $1.2 million in DSIC revenue.

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INCOME TAXES

3 Months Ended

Mar. 31, 2022

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 11 – INCOME TAXES

Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated utilities recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate.  Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.

Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes.  The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known.  The statute of limitations for the 2017 Corporate tax returns lapsed during the fourth quarter of 2021, which resulted in the reversal of the reserve in the amount of approximately $26,000.  The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense.  The Company has accrued approximately $5,000 in penalties and interest for the three months ended March 31, 2022. The Company remains subject to examination by federal and state authorities for the tax years 2018 through 2021.

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

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2022

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 12 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Current Assets and Liabilities

For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments.

Long-term Financial Liabilities

All of Artesian Resources’ outstanding long-term debt as of March 31, 2022 and December 31, 2021 was fixed-rate.  The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.  Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements.  Level 2 is valued using observable inputs other than quoted prices.  The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates.  The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

In thousands
	March 31, 2022		December 31, 2021
Carrying amount	$	144,471	$	144,850
Estimated fair value	$	147,505	$	163,182

The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts.  Refund payments are based on the water sales to new customers in the particular development constructed.  The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing.

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2022

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 13 – RELATED PARTY TRANSACTIONS

Mr. Michael Houghton currently serves as a director.  During 2021, Mr. Houghton was a Partner in the law firm of Morris, Nichols, Arsht & Tunnell LLP, or MNAT, in Wilmington, Delaware.  Mr. Houghton retired from MNAT as a Partner, effective January 1, 2022, however, Mr. Houghton continues to perform legal services for MNAT as an independent contractor and non-partner.  In the normal course of business, the Company utilized the services of MNAT in 2021 for various regulatory, real estate and public policy matters.  Approximately $13,000 was paid to MNAT during the three months ended March 31, 2021, for legal and director related services.

As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer, any director, any person known to be the beneficial owner of more than 5% of any class of the Company's voting securities or any other related person that would potentially require disclosure.  In its review and approval of the related party transactions with MNAT, the Audit Committee considered the nature of the related person's interest in the transactions; the satisfactory performance of work contracted with the related party prior to the election of Mr. Houghton as a director; and the material terms of the transactions, including, without limitation, the amount and type of transactions, the importance of the transactions to the related person, the importance of the transactions to the Company and whether the transactions would impair the judgment of a director or officer to act in the best interest of the Company.  The Audit Committee approves only those related person transactions that are in, or are consistent with, the best interests of the Company and its stockholders.

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BUSINESS COMBINATIONS

3 Months Ended

Mar. 31, 2022

BUSINESS COMBINATIONS [Abstract]

BUSINESS COMBINATIONS

NOTE 14 – BUSINESS COMBINATIONS

As part of the Company’s growth strategy, on January 14, 2022 Artesian Wastewater completed its agreement to acquire TESI, which provides regulated wastewater services in Delaware.  Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company for $6.4 million in cash and other consideration, including, forgiveness of a $2.1 million note due from Middlesex, consisting of $3.1 million paid at closing.  This acquisition more than doubled the number of wastewater customers served in Sussex County, Delaware.  The acquisition is being accounted for as a business combination under ASC Topic 805, “Business Combinations,” in accordance with the acquisition method whereby the total purchase price consideration will be allocated to intangible assets and utility plant assets acquired and liabilities assumed based on their respective estimated fair values.  The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed in a business purchase combination be recognized at their fair values as of the acquisition date.  The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions.  The Company is still gathering detailed records for valuing utility plant assets and related contributions in aid of construction at replacement cost adjusted for depreciation and valuing real property using a comparative sales approach in order to complete the purchase price allocation for the items as well as some of the assumed liabilities.  The purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date. Any goodwill as a result of the transaction is not expected to be deductible for tax purposes.

The TESI acquisition was approved by the DEPSC on October 27, 2021, subject to the DEPSC determining the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Wastewater Management’s next base rate case.

The Company reflected revenue of $0.7 million for the three months ended March 31, 2022 in its condensed consolidated statement of operations related to the acquisition.  The pro forma revenue for the three months ended March 31, 2022 is estimated to be approximately $0.7 million.  The Company anticipates the pro forma effects of revenue for the three months ended March 31, 2022 to be approximately the same given there has not been any changes in the rates.  The pro forma information is not necessarily indicative of the Company’s future results.  Any pro forma effects of earnings is not practicable, as we continue to integrate TESI operations and adjust the operating cost structure as it relates to operating expenses reflective of synergies of the combined operations, and therefore would not present an accurate comparison.

The table below sets forth the preliminary purchase price allocation of this acquisition as of March 31, 2022.  The preliminary purchase price allocation is provisional and there could be material changes to the estimates below.

(In thousands)
		TESI
	Utility plant	$	19,455
	Cash		280
	Other assets		2,565
	Total assets		22,300
	Less: Liabilities and contributions in aid of construction (CIAC)
	Liabilities		2,521
	CIAC		16,657
	Net cash purchase price	$	3,122

Additionally, as part of the Company’s growth strategy, on February 16, 2022, Artesian Water signed an agreement, or the Asset Purchase Agreement, to purchase from the Town of Clayton, a Delaware municipality, or Clayton, substantially all of the operating assets of Clayton’s water system, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Water System.  Pursuant to the terms of the Asset Purchase Agreement, Clayton shall transfer to Artesian Water all of Clayton’s right, title and interest in and to substantially all of the municipal water utility, plant and equipment, associated real property, contracts, easements and permits possessed by Clayton at closing related to the Water System.  The total purchase price is $5.0 million, less the current payoff amount of any secured debt or debt associated with the Water System.  Closing on this transaction is expected in the second quarter of 2022, pending due diligence.  The DEPSC approved the transfer of Clayton’s exclusive franchise territory on April 20, 2022.

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GEOGRAPHIC CONCENTRATION OF CUSTOMERS

3 Months Ended

Mar. 31, 2022

GEOGRAPHIC CONCENTRATION OF CUSTOMERS [Abstract]

GEOGRAPHIC CONCENTRATION OF CUSTOMERS

NOTE 15 - GEOGRAPHIC CONCENTRATION OF CUSTOMERS

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC.  As of March 31, 2022, Artesian Water was serving approximately 92,000 customers, Artesian Water Maryland was serving approximately 2,600 customers and Artesian Water Pennsylvania was serving approximately 40 customers.

Artesian Wastewater provides wastewater utility service to customers within its established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC.  As of March 31, 2022, Artesian Wastewater was serving approximately 3,400 customers, including one large industrial customer. Effective January 14, 2022, following the acquisition of TESI, the number of wastewater customers served more than doubled.  All wastewater customers are located in Sussex County, Delaware.

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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2022

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 16 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued new guidance that provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as the market transitions from reference rates that are expected to be discontinued, such as the London Inter-bank Offered Rate, or LIBOR.  The guidance was effective upon issuance and may be applied prospectively to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued, evaluated on or before December 31, 2022, beginning during the reporting period in which the guidance has been elected.  It is expected that the LIBOR rate will no longer be published for most currencies as of December 31, 2021, however, publication for USD currency should continue through June 30, 2023.  LIBOR is expected to be phased out completely by June 30, 2023.  As a result, it is possible that, in the future, the LIBOR rate may become unavailable or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on LIBOR Rate Loans.  The guidance is optional and may be elected over time as reference rate reform activities occur.  In light of this eventuality, one of the banks with which we have a line of credit arrangement, currently has initiatives underway to identify new or alternative reference rates to be used in place of the LIBOR rate.  The Company is evaluating the impact of the new guidance on our financial position, results of operations and cash flows.

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SUBSEQUENT EVENT

3 Months Ended

Mar. 31, 2022

SUBSEQUENT EVENT [Abstract]

SUBSEQUENT EVENT

NOTE 17 - SUBSEQUENT EVENT

On April 29, 2022, Artesian Water and CoBank, ACB, or CoBank, entered into a Bond Purchase Agreement, or the Agreement, relating to the issue and sale by Artesian Water to CoBank of a $30 million principal amount First Mortgage Bond, Series W, or the Bond, due April 30, 2047, or the Maturity Date.  The Bond was issued pursuant to Artesian Water’s Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Fifth Supplemental Indenture dated as of April 29, 2022, or the Supplemental Indenture, from Artesian Water to Wilmington Trust Company, as Trustee.  The Supplemental Indenture is a first mortgage lien against substantially all of Artesian Water’s utility plant.  The proceeds from the sale of the Bond shall be used to pay down outstanding lines of credit of the Company and a loan payable to Artesian Resources, with any additional proceeds used to fund future capital investments in Artesian Water.  The Delaware Public Service Commission approved the issuance of the Bond on April 20, 2022.

The Bond carries an annual interest rate of 4.43% through but excluding the Maturity Date.  Interest is payable on June 30th, September 30th, December 30th and March 30th in each year and on the Maturity Date, beginning June 30, 2022, until Artesian Water’s obligation with respect to the payment of principal, premium (if any) and interest shall be discharged.  Overdue payments shall bear interest as provided in the Supplemental Indenture. The term of the Bond also includes certain limitations on Artesian Water’s indebtedness.

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REVENUE RECOGNITION (Tables)

3 Months Ended

Mar. 31, 2022

REVENUE RECOGNITION [Abstract]

Disaggregation of Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

(in thousands)	Three months ended March 31, 2022		Three months ended March 31, 2021
Tariff Revenue
Consumption charges	$	10,566	$	10,418
Fixed fees		7,778		6,999
Service charges		156		201
DSIC		1,182		1,172
Metered wastewater services		140		—
Industrial wastewater services		407		6
Total Tariff Revenue	$	20,229	$	18,796
Non-Tariff Revenue
Service line protection plans	$	1,222	$	1,096
Contract operations		211		230
Design and installation		123		151
Inspection fees		41		84
Total Non-Tariff Revenue	$	1,597	$	1,561
Other Operating Revenue	$	361	$	288
Total Operating Revenue	$	22,187	$	20,645

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	March 31, 2022		December 31, 2021
Contract Assets – Tariff	$	2,424	$	2,144
Deferred Revenue
Deferred Revenue – Tariff	$	1,085	$	1,227
Deferred Revenue – Non-Tariff		246		287
Total Deferred Revenue	$	1,331	$	1,514

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LEASES (Tables)

3 Months Ended

Mar. 31, 2022

LEASES [Abstract]

Rent Expense for All Operating Leases Except Those with Terms of 12 Months or Less

Rent expense for all operating leases except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2022			March 31, 2021
Minimum rentals		$	7		$	7
Contingent rentals			–			–
		$	7		$	7

Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2022			March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	7	$	7
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	446	$	455

Supplemental Balance Sheet Information Related to Leases

Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	March 31, 2022			December 31, 2021
Operating Leases:
Operating lease right-of-use assets	$	446		$	451
Other current liabilities	$	2			6
Operating lease liabilities		440			440
Total operating lease liabilities	$	442		$	446
Weighted Average Remaining Lease Term
Operating leases	61 years			61 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

Maturities of Operating Lease Liabilities

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

	(in thousands)
	Operating Leases
Year
2023	$	24
2024		24
2025		24
2026		24
2027		25
Thereafter		1,332
Total undiscounted lease payments	$	1,453
Less effects of discounting		(1,011	)
Total lease liabilities recognized	$	442

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STOCK COMPENSATION PLANS (Tables)

3 Months Ended

Mar. 31, 2022

STOCK COMPENSATION PLANS [Abstract]

Changes in Shares of Class A Common Stock Underlying Options and Restricted Stock Awards

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the three months ended March 31, 2022:

	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards		Weighted Average Grant Date Fair Value
Plan options/restricted stock awards
Outstanding at January 1, 2022		83,000		$	21.65			$	2,048		5,000	$	40.11
Granted		—			—				—		—		—
Exercised/vested and released		(22,250	)		20.12				600		—		—
Expired/cancelled		—			—				—		—		—
Outstanding at March 31, 2022		60,750		$	22.22		1.659	$	1,600		5,000	$	40.11
Exercisable/vested at March 31, 2022		60,750		$	22.22		1.659	$	1,600		—		—

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OTHER DEFERRED ASSETS (Tables)

3 Months Ended

Mar. 31, 2022

OTHER DEFERRED ASSETS [Abstract]

Other Deferred Assets

In thousands	March 31, 2022	December 31, 2021
Investment in CoBank	$5,351	$4,850
Other deferred assets	2,783	247
	$8,134	$5,097

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REGULATORY ASSETS (Tables)

3 Months Ended

Mar. 31, 2022

REGULATORY ASSETS [Abstract]

Amortization Period of Other Regulatory Expense

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

Expense	Years Amortized
Deferred contract costs and other	5
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory Assets, Net of Amortization, Comprise

Regulatory assets, net of amortization, comprise:
	(in thousands)
	March 31, 2022		December 31, 2021
Deferred income taxes	$	481	$	355
Deferred contract costs and other		273		288
Debt related costs		4,844		4,902
Goodwill		271		273
Deferred acquisition and franchise costs		493		503
	$	6,362	$	6,321

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REGULATORY LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2022

REGULATORY LIABILITIES [Abstract]

Regulatory Liabilities

Regulatory liabilities comprise:
	(in thousands)
	March 31, 2022		December 31, 2021
Utility plant retirement cost obligation	$	158	$	149
Deferred income taxes (related to TCJA)		21,574		21,111
	$	21,732	$	21,260

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NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE (Tables)

3 Months Ended

Mar. 31, 2022

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE [Abstract]

Shares Used in Computing Basic and Diluted Net Income Per Share

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

	For the Three Months Ended March 31,
	2022		2021
	(in thousands)
Weighted average common shares outstanding during the period for Basic computation		9,423		9,368
Dilutive effect of employee stock options and awards		32		39
Weighted average common shares outstanding during the period for Diluted computation		9,455		9,407

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REGULATORY PROCEEDINGS (Tables)

3 Months Ended

Mar. 31, 2022

REGULATORY PROCEEDINGS [Abstract]

Eligible Plant Improvements

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

Application Date	11/20/2020
DEPSC Approval Date	12/14/2020
Effective Date	01/01/2021
Cumulative DSIC Rate	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014
Eligible Plant Improvements – Installed Ending Date	04/30/2019

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2022

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

Carrying Amount and Fair Value of Long-Term Debt

All of Artesian Resources’ outstanding long-term debt as of March 31, 2022 and December 31, 2021 was fixed-rate.  The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.  Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements.  Level 2 is valued using observable inputs other than quoted prices.  The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates.  The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

In thousands
	March 31, 2022		December 31, 2021
Carrying amount	$	144,471	$	144,850
Estimated fair value	$	147,505	$	163,182

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BUSINESS COMBINATIONS (Tables)

3 Months Ended

Mar. 31, 2022

BUSINESS COMBINATIONS [Abstract]

Preliminary Purchase Price Allocation

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

(In thousands)
		TESI
	Utility plant	$	19,455
	Cash		280
	Other assets		2,565
	Total assets		22,300
	Less: Liabilities and contributions in aid of construction (CIAC)
	Liabilities		2,521
	CIAC		16,657
	Net cash purchase price	$	3,122

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GENERAL (Details) gal / d in Millions	3 Months Ended
	Mar. 31, 2022 gal / d Squarefeet Plan Facility Subsidiary
Business Operations [Abstract]
Number of subsidiaries not regulated | Subsidiary	3
Artesian Development purchased area of office space (in square feet)	10,000
Artesian Development purchased area of warehouse space (in square feet)	10,000
Artesian Utility [Member]
Business Operations [Abstract]
Capacity of wastewater treatment facilities | gal / d	3.8
Initial contract period of operating wastewater treatment facilities in Middletown	20 years
Number of wastewater treatment systems facility operations in Middletown | Facility	3
Number of protection plans offered to customers | Plan	3

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REVENUE RECOGNITION, Disaggregated Revenues (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Jun. 30, 2021
REVENUE RECOGNITION [Abstract]
Minimum number of days for accounts receivable from tariff contract customers	25 days
Adjustment in reserve for bad debt			$ 500	$ (300)
Minimum number of days due for accounts receivable from SLP Plan customer	25 days
Minimum number of days customers services invoiced in advance	30 days
Disaggregation of Revenue [Abstract]
Other Operating Revenue not in scope of ASC 606	$ 361	$ 288
Total Operating Revenues	22,187	20,645
Tariff Revenue [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	20,229	18,796
Tariff Revenue [Member] | Consumption Charges [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	10,566	10,418
Tariff Revenue [Member] | Fixed Fees [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	7,778	6,999
Tariff Revenue [Member] | Service Charges [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	156	201
Tariff Revenue [Member] | DSIC [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	1,182	1,172
Tariff Revenue [Member] | Metered Wastewater Services [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	140	0
Tariff Revenue [Member] | Industrial Wastewater Services [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	407	6
Non-Tariff Revenue [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	1,597	1,561
Non-Tariff Revenue [Member] | Service Line Protection Plans [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	1,222	1,096
Non-Tariff Revenue [Member] | Contract Operations [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	211	230
Non-Tariff Revenue [Member] | Design and Installation [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	123	151
Non-Tariff Revenue [Member] | Inspection Fees [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	$ 41	$ 84

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REVENUE RECOGNITION, Contract Assets and Contract Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Contract with Customer, Asset and Liability [Abstract]
Total Deferred Revenue	$ 1,331	$ 1,514
Tariff Revenue [Member]
Contract with Customer, Asset and Liability [Abstract]
Contract Assets	2,424	2,144
Total Deferred Revenue	1,085	1,227
Tariff Deferred Revenue	1,200
Non-Tariff Revenue [Member]
Contract with Customer, Asset and Liability [Abstract]
Total Deferred Revenue	246	$ 287
Tariff Deferred Revenue	$ 300

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LEASES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Operating Lease, Description [Abstract]
Percentage of increase in annual lease payments	3.00%
Rent Expense [Abstract]
Minimum rentals	$ 7	$ 7
Contingent rentals	0	0
Rent expenses	7	7
Cash paid for amounts included in the measurement of lease liabilities [Abstract]
Operating cash flows from operating leases	7	7
Right-of-use assets obtained in exchange for lease obligations [Abstract]
Operating leases	446	$ 455
Operating leases [Abstract]
Operating lease right-of-use assets	446		$ 451
Operating lease, liability [Abstract]
Other current liabilities	2		6
Operating lease liabilities	440		440
Total operating lease liabilities	$ 442		$ 446
Weighted Average Remaining Lease Term [Abstract]
Operating leases	61 years		61 years
Weighted Average Discount Rate [Abstract]
Operating leases	5.00%		5.00%
Maturities of Operating Lease Liabilities [Abstract]
2023	$ 24
2024	24
2025	24
2026	24
2027	25
Thereafter	1,332
Total undiscounted lease payments	1,453
Less effects of discounting	(1,011)
Total lease liabilities recognized	$ 442		$ 446
Minimum [Member]
Operating Lease, Description [Abstract]
Remaining lease term	20 years
Maximum [Member]
Operating Lease, Description [Abstract]
Remaining lease term	74 years
Option to extend lease term	66 years

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STOCK COMPENSATION PLANS (Details)		3 Months Ended
	May 04, 2021 $ / shares shares	Mar. 31, 2022 USD ($) Director $ / shares shares	Mar. 31, 2021 USD ($)
Stock Compensation Plans [Abstract]
Compensation expense		$ 49,000	$ 43,000
Number of directors in committee | Director		3
Total intrinsic value of options exercised		$ 600,000
Shares of Class A Non-Voting Common Stock under option [Abstract]
Exercised/vested and released, aggregate intrinsic value		600,000
Class A Stock [Member] | Stock Options [Member]
Stock Compensation Plans [Abstract]
Total intrinsic value of options exercised		$ 600,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at beginning of period, option shares (in shares) | shares		83,000
Granted, option shares (in shares) | shares		0
Exercised/vested and released, option shares (in shares) | shares		(22,250)
Expired/cancelled, option shares (in shares) | shares		0
Outstanding at end of period, option shares (in shares) | shares		60,750
Exercisable/vested at end of period, option share (in shares) | shares		60,750
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Outstanding at beginning of period, weighted average exercise price (in dollars per shares) | $ / shares		$ 21.65
Granted, weighted average exercise price (in dollars per share) | $ / shares		0
Exercised/vested and released, weighted average exercise price (in dollars per shares) | $ / shares		20.12
Expired/cancelled, weighted average exercise price (in dollars per share) | $ / shares		0
Outstanding at end of period, weighted average exercise price (in dollars per shares) | $ / shares		22.22
Options exercisable at year end (in dollars per shares) | $ / shares		$ 22.22
Shares of Class A Non-Voting Common Stock under option [Abstract]
Outstanding at end of period, weighted average remaining life		1 year 7 months 27 days
Exercisable/vested at end of period, weighted average remaining life		1 year 7 months 27 days
Outstanding at beginning of period, aggregate intrinsic value		$ 2,048,000
Granted, aggregate intrinsic value		0
Exercised/vested and released, aggregate intrinsic value		600,000
Expired/cancelled, aggregate intrinsic value		0
Outstanding at end of period, aggregate intrinsic value		1,600,000
Exercisable/vested at end of period, aggregate intrinsic value		1,600,000
Class A Stock [Member] | Stock Options [Member] | 2015 Equity Compensation Plan [Member]
Stock Compensation Plans [Abstract]
Unrecognized expense related to non-vested option shares		0
Class A Stock [Member] | Restricted Stock [Member]
Stock Compensation Plans [Abstract]
Compensation expense		$ 49,000	$ 43,000
Fair value per share (in dollars per share) | $ / shares	$ 40.11
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Granted, option shares (in shares) | shares	5,000
Shares [Roll Forward]
Outstanding at beginning of year (in shares) | shares		5,000
Granted (in shares) | shares		0
Exercised/vested and released, restricted stock awards (in shares) | shares		0
Cancelled (in shares) | shares		0
Unvested Outstanding at end of year (in shares) | shares		5,000
Weighted Average Grant Date Fair Value [Abstract]
Outstanding at beginning of year (in dollars per shares) | $ / shares		$ 40.11
Granted, weighted average grant date fair value (in dollars per share) | $ / shares		0
Vested and released, weighted average grant date fair value (in dollars per shares) | $ / shares		0
Cancelled, weighted average grant date fair value (in dollars per share) | $ / shares		0
Unvested Outstanding at end of year (in dollars per shares) | $ / shares		$ 40.11
Class A Stock [Member] | Restricted Stock [Member] | 2015 Equity Compensation Plan [Member]
Stock Compensation Plans [Abstract]
Unrecognized expense related to non-vested option shares		$ 18,000
Period over which unvested options cost will recognized		1 month 2 days

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OTHER DEFERRED ASSETS (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Other Deferred Assets [Abstract]
Investment in CoBank	$ 5,351	$ 4,850
Other deferred assets	2,783	247
Other deferred assets	$ 8,134	$ 5,097

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REGULATORY ASSETS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Amortization period of other regulatory expense [Abstract]
Deferred contract costs and other	5 years
Rate case studies	5 years
Goodwill	50 years
Deferred acquisition costs	20 years
Franchise costs	80 years
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	$ 6,362	$ 6,321
Maximum [Member]
Amortization period of other regulatory expense [Abstract]
Debt related cost	30 years
Minimum [Member]
Amortization period of other regulatory expense [Abstract]
Debt related cost	15 years
Delaware [Member]
Amortization period of other regulatory expense [Abstract]
Regulatory rate proceedings	2 years 6 months
Maryland [Member]
Amortization period of other regulatory expense [Abstract]
Regulatory rate proceedings	5 years
Deferred Income Taxes [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	$ 481	355
Deferred Contract Costs and Other [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	273	288
Debt Related Costs [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	4,844	4,902
Goodwill [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	271	273
Deferred Acquisition and Franchise Costs [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	$ 493	$ 503

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REGULATORY LIABILITIES (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2020	Dec. 31, 2021	Jan. 31, 2019
REGULATORY LIABILITIES [Abstract]
Federal corporate tax rate	21.00%	34.00%
Decrease in the net deferred income tax liability	$ 24,300
Regulatory Liabilities [Abstract]
Regulatory liabilities	$ 21,732	$ 22,800	$ 21,260
DEPSC [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities				$ 22,200
Regulatory liabilities, amortization period	49 years 6 months
MDPSC [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities	$ 600
Utility Plant Retirement Cost Obligation [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities	158		149
Deferred Income Taxes [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities	$ 21,574		$ 21,111

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NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE (Details) - $ / shares	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Shares used in computing basic and diluted net income per share [Abstract]
Weighted average common shares outstanding during the period for Basic computation (in shares)	9,423,000	9,368,000
Dilutive effect of employee stock options and awards (in shares)	32,000	39,000
Weighted average common shares outstanding during the period for Diluted computation (in shares)	9,455,000	9,407,000
Class A Stock [Member]
Common Stock [Abstract]
Common stock, shares authorized (in shares)	15,000,000
Common stock, shares issued (in shares)	8,556,970	8,502,122
Common stock, shares outstanding (in shares)	8,556,970	8,502,122
Common stock, par value (in dollars per share)	$ 1.00
Earnings Per Share [Abstract]
Equity per common share (in dollars per share)	$ 19.16		$ 18.94
Class B Stock [Member]
Common Stock [Abstract]
Common stock, shares authorized (in shares)	1,040,000
Common stock, shares issued (in shares)	881,452	881,452
Common stock, shares outstanding (in shares)	881,452	881,452
Common stock, par value (in dollars per share)	$ 1.00
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Abstract]
Shares excluded from calculations of diluted net income per share (in shares)		0

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REGULATORY PROCEEDINGS (Details) - USD ($) $ in Millions		3 Months Ended
	Nov. 20, 2020	Mar. 31, 2022	Mar. 31, 2021
Other Proceedings [Abstract]
Cumulative DSIC Rate	7.50%
Net Eligible Plant Improvements - Cumulative Dollars	$ 43.1
Delaware [Member]
Rate Proceedings [Abstract]
Percentage of gross water sales		15.00%
Period to complete rate case by law		7 months
Delaware [Member] | Maximum [Member]
Rate Proceedings [Abstract]
Temporary annual rate increase subject to 15% gross water sales limitation		$ 2.5
Percentage of rate relief allowed should a rate case not complete		15.00%
Other Proceedings [Abstract]
Distribution System Improvement Charge rate increase applied between base rate filings		7.50%
Distribution System Improvement Charge rate increase within a 12-month period		5.00%
Artesian Water [Member]
Other Proceedings [Abstract]
Revenue earned in DSIC rate increases		$ 1.2	$ 1.2

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INCOME TAXES (Details)	3 Months Ended
	Mar. 31, 2022 USD ($)
Income Taxes [Abstract]
Reversal of reserve related to uncertain tax positions	$ 26,000
Income tax penalties and interest accrued for unrecognized tax position	$ 5,000
State Authorities [Member]
Income Taxes [Abstract]
Tax year open to examination	2018 2019 2020 2021
Federal Authorities [Member]
Income Taxes [Abstract]
Tax year open to examination	2018 2019 2020 2021

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Carrying Amount [Member]
Long-term Financial Liabilities [Abstract]
Long-term debt	$ 144,471	$ 144,850
Estimated Fair Value [Member]
Long-term Financial Liabilities [Abstract]
Long-term debt	$ 147,505	$ 163,182

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RELATED PARTY TRANSACTIONS (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2022
Related Party Transactions [Abstract]
Stock ownership required to be disclosed, minimum		5.00%
Morris Nichols Arsht & Tunnell LLP [Member]
Related Party Transactions [Abstract]
Amount paid for legal services	$ 13,000

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BUSINESS COMBINATIONS (Details) - USD ($) $ in Thousands			3 Months Ended
	Feb. 16, 2022	Jan. 14, 2022	Mar. 31, 2022	Mar. 31, 2021
Business Combinations [Abstract]
Purchase price			$ 2,842	$ 0
Revenue from acquisition			22,187	$ 20,645
Preliminary purchase price allocation [Abstract]
Utility plant			19,455
Cash			280
Other assets			2,565
Total assets			22,300
Less: Liabilities and contributions in aid of construction (CIAC) [Abstract]
Liabilities			2,521
CIAC			16,657
Net cash purchase price			3,122
Tidewater Environmental Services Inc [Member]
Business Combinations [Abstract]
Consideration transferred		$ 6,400
Note forgiven		2,100
Purchase price		$ 3,100
Revenue from acquisition			700
Pro forma revenue			$ 700
Clayton [Member]
Business Combinations [Abstract]
Purchase price	$ 5,000

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GEOGRAPHIC CONCENTRATION OF CUSTOMERS (Details)	3 Months Ended
	Mar. 31, 2022 Customer County
Concentration Risks [Abstract]
Number of counties in which water utility service provided | County	3
Large Industrial Customer [Member]
Concentration Risks [Abstract]
Number of customers	1
Artesian Water [Member]
Concentration Risks [Abstract]
Number of customers	92,000
Artesian Water Maryland [Member]
Concentration Risks [Abstract]
Number of customers	2,600
Artesian Water Pennsylvania [Member]
Concentration Risks [Abstract]
Number of customers	40
Artesian Wastewater [Member]
Concentration Risks [Abstract]
Number of customers	3,400

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SUBSEQUENT EVENT (Details) - Subsequent Event [Member] - CoBank [Member] $ in Millions	Apr. 29, 2022 USD ($)
Subsequent Events [Abstract]
Principal amount	$ 30
Interest rate	4.43%