<HTML> <HEAD> <META NAME="Generator" CONTENT="Corel WordPerfect 8"> <TITLE></TITLE> </HEAD> <BODY TEXT="#000000" LINK="#0000ff" VLINK="#551a8b" ALINK="#ff0000" BGCOLOR="#c0c0c0"> <P><FONT SIZE="-1"> <STRONG>UNITED STATES</STRONG></FONT></P> <P><FONT SIZE="-1"><STRONG> SECURITIES AND EXCHANGE COMMISSION</STRONG></FONT></P> <P><FONT SIZE="-1"><STRONG> Washington, D.C. 20549</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG> FORM 10-Q</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">(Mark One)</FONT></P> <P><FONT SIZE="-1">X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">For the quarterly period ended June 30, 1999</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> or</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">__ TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES</FONT></P> <P><FONT SIZE="-1"> EXCHANGE ACT OF 1934</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> For the transaction period from to </FONT></P> <P><FONT SIZE="-1">Commission file number 0-18516</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>ARTESIAN RESOURCES CORPORATION</STRONG></FONT></P> <P><FONT SIZE="-1"> (exact name of registrant as specified in its charter)</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">State or other jurisdiction of incorporation or organization: Delaware</FONT></P> <P><FONT SIZE="-1">I.R.S. Employer Identification Number: 51-0002090</FONT></P> <P><FONT SIZE="-1">Address of principal executive officers: 664 Churchmans Road, Newark, Delaware</FONT></P> <P><FONT SIZE="-1">Zip Code: 19702</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">Registrant's telephone number, including area code: (302) 453-6900</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Indicate by check mark whether the registrant (1) has filed all reports</FONT></P> <P><FONT SIZE="-1">required to be filed by Section 13 or 15(d) of the Securities Exchange Act of</FONT></P> <P><FONT SIZE="-1">1934 during the preceding 12 months (or for such shorter period that the </FONT></P> <P><FONT SIZE="-1">registrant was required to file such reports), and (2) has been subject to</FONT></P> <P><FONT SIZE="-1">such filing requirements for the past 90 days. X Yes No</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> As of August 6, 1999, 1,602,188 shares and 389,393 shares of Class A </FONT></P> <P><FONT SIZE="-1">Non-Voting Common Stock and Class B Common Stock, respectively, were </FONT></P> <P><FONT SIZE="-1">outstanding.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>ARTESIAN RESOURCES CORPORATION</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> INDEX TO FORM 10-Q</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>Part I - Financial Information:</STRONG> Page(s)</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Item 1 - Financial Statements</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Consolidated Balance Sheet -</FONT></P> <P><FONT SIZE="-1"> June 30, 1999 and December 31, 1998 3</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Consolidated Statement of Income for </FONT></P> <P><FONT SIZE="-1"> the quarters ended June 30, 1999 and 1998 4</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Consolidated Statement of Income for</FONT></P> <P><FONT SIZE="-1"> the six months ended June 30, 1999 and 1998 5</FONT></P> <P><FONT SIZE="-1"> </FONT></P> <P><FONT SIZE="-1"> Consolidated Statement of Retained Earnings</FONT></P> <P><FONT SIZE="-1"> for the six months ended June 30, 1999 and 1998 5</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Consolidated Statement of Cash Flows for the </FONT></P> <P><FONT SIZE="-1"> six months ended June 30, 1999 and 1998 6</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Notes to the Consolidated Financial Statements 7-10</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Item 2 - Management's Discussion and Analysis of</STRONG></FONT></P> <P><FONT SIZE="-1"> <STRONG> Financial Condition</STRONG> <STRONG>and</STRONG> <STRONG>Results of Operations</STRONG> 10-13</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Item 3 - Quantitative and Qualitative Disclosures about</STRONG></FONT></P> <P><FONT SIZE="-1"> <STRONG>Market Risk</STRONG> 14</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> </FONT></P> <P><FONT SIZE="-1"><STRONG>Part II - Other Information:</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Item 1 - Legal Proceedings</STRONG> 14</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Item 2 - Changes in Securities</STRONG> 14</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Item 3 - Defaults Upon Senior Securities</STRONG> 14</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Item 4 - Submission of Matters to a Vote of</STRONG></FONT></P> <P><FONT SIZE="-1"> <STRONG>Security Holders</STRONG> 14</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Item 5 - Other Information</STRONG> 15</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Item 6 - Exhibits and Reports on Form 8-K</STRONG> 15-18</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>Signatures</STRONG> 19</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">Part I - Financial Information</FONT></P> <P><FONT SIZE="-1">Item I - Financial Statements</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>ARTESIAN RESOURCES CORPORATION</STRONG></FONT></P> <P><FONT SIZE="-1"> <STRONG><U>CONSOLIDATED BALANCE SHEET</U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></P> <P><FONT SIZE="-1"> (In thousands)</FONT></P> <P><FONT SIZE="-1"> Unaudited </FONT></P> <P><FONT SIZE="-1"> <U>June 30, 1999</U> <U>December 31, 1998</U> </FONT></P> <P><FONT SIZE="-1">ASSETS</FONT></P> <P><FONT SIZE="-1">Utility plant, at original cost </FONT></P> <P><FONT SIZE="-1"> less accumulated depreciation <U>$118,652</U> <U>$109,780</U></FONT></P> <P><FONT SIZE="-1">Current assets</FONT></P> <P><FONT SIZE="-1"> Cash and cash equivalents 77 114</FONT></P> <P><FONT SIZE="-1"> Accounts receivable, net 1,947 1,968</FONT></P> <P><FONT SIZE="-1"> Unbilled operating revenues 2,445 1,981</FONT></P> <P><FONT SIZE="-1"> Materials and supplies-at cost </FONT></P> <P><FONT SIZE="-1"> on FIFO basis 574 617</FONT></P> <P><FONT SIZE="-1"> Prepaid property taxes 2 552</FONT></P> <P><FONT SIZE="-1"> Prepaid expenses and other <U> 271</U> <U> 327</U></FONT></P> <P><FONT SIZE="-1"> <U> 5,316</U> <U> 5,559</U></FONT></P> <P><FONT SIZE="-1">Other assets</FONT></P> <P><FONT SIZE="-1"> Non-utility property (less accumulated </FONT></P> <P><FONT SIZE="-1"> depreciation 1999-$146;1998-$152) 276 280</FONT></P> <P><FONT SIZE="-1"> Other deferred assets <U> 1,057</U> <U> 1,071</U></FONT></P> <P><FONT SIZE="-1"> 1,333 1,351</FONT></P> <P><FONT SIZE="-1">Regulatory assets, net <U> 2,442</U> <U> 2,686</U></FONT></P> <P><FONT SIZE="-1"> $127,743 $119,376</FONT></P> <P><FONT SIZE="-1">LIABILITIES AND STOCKHOLDERS' EQUITY</FONT></P> <P><FONT SIZE="-1">Stockholders' equity</FONT></P> <P><FONT SIZE="-1"> Common stock $ 2,144 $ 1,806</FONT></P> <P><FONT SIZE="-1"> Additional paid-in capital 25,578 18,113</FONT></P> <P><FONT SIZE="-1"> Retained earnings 5,010 7,785</FONT></P> <P><FONT SIZE="-1"> Treasury Stock (153) (3)</FONT></P> <P><FONT SIZE="-1"> Additional paid-in capital from </FONT></P> <P><FONT SIZE="-1"> treasury stock (1,573) (40)</FONT></P> <P><FONT SIZE="-1"> Preferred stock <U> 272</U> <U> 272</U></FONT></P> <P><FONT SIZE="-1"> Total stockholders' equity <U> 31,278</U> <U> 27,933</U></FONT></P> <P><FONT SIZE="-1">Preferred stock-mandatorily redeemable, </FONT></P> <P><FONT SIZE="-1"> net of current portion 400 500</FONT></P> <P><FONT SIZE="-1">Long-term debt, net of current portion <U> 35,096</U> <U> 32,053</U></FONT></P> <P><FONT SIZE="-1"> <U> 66,774</U> <U> 60,486</U></FONT></P> <P><FONT SIZE="-1">Current liabilities</FONT></P> <P><FONT SIZE="-1"> Notes payable 5,985 7,704</FONT></P> <P><FONT SIZE="-1"> Current portion of long-term debt 1,148 43</FONT></P> <P><FONT SIZE="-1"> Current portion of mandatorily</FONT></P> <P><FONT SIZE="-1"> redeemable preferred stock 100 100 </FONT></P> <P><FONT SIZE="-1"> Accounts payable 4,218 3,148</FONT></P> <P><FONT SIZE="-1"> Overdraft payable 936 635</FONT></P> <P><FONT SIZE="-1"> State and federal taxes 159 ---</FONT></P> <P><FONT SIZE="-1"> Deferred income taxes 27 190</FONT></P> <P><FONT SIZE="-1"> Interest accrued 589 940</FONT></P> <P><FONT SIZE="-1"> Customer deposits 397 388</FONT></P> <P><FONT SIZE="-1"> Dividends payable 17 ---</FONT></P> <P><FONT SIZE="-1"> Other <U> 990</U> <U> 903</U></FONT></P> <P><FONT SIZE="-1"> <U> 14,566</U> <U> 14,051</U></FONT></P> <P><FONT SIZE="-1">Deferred credits and other liabilities</FONT></P> <P><FONT SIZE="-1"> Net advances for construction 18,356 18,337 </FONT></P> <P><FONT SIZE="-1"> Postretirement benefit obligation 1,585 1,627</FONT></P> <P><FONT SIZE="-1"> Deferred investment tax credits 980 994</FONT></P> <P><FONT SIZE="-1"> Deferred income taxes <U> 2,195</U> <U> 1,471</U></FONT></P> <P><FONT SIZE="-1"> <U> 23,116</U> <U> 22,429</U></FONT></P> <P><FONT SIZE="-1">Net contributions in aid of construction <U> 23,287</U> <U> 22,410</U></FONT></P> <P><FONT SIZE="-1"> $127,743 $119,376</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">See notes to the consolidated financial statements.</FONT></P> <P><FONT SIZE="-1"> <STRONG>ARTESIAN RESOURCES CORPORATION</STRONG></FONT></P> <P><FONT SIZE="-1"> <STRONG>CONSOLIDATED STATEMENT OF INCOME</STRONG></FONT></P> <P><FONT SIZE="-1"> Unaudited</FONT></P> <P><FONT SIZE="-1"> (In thousands, except share and per share amounts)</FONT></P> <P><FONT SIZE="-1"> For the Quarter</FONT></P> <P><FONT SIZE="-1"> Ended June 30, </FONT></P> <P><FONT SIZE="-1"> <U>1999</U> <U>1998</U></FONT></P> <P><FONT SIZE="-1">OPERATING REVENUES</FONT></P> <P><FONT SIZE="-1"> Water sales $ 6,688 $ 6,568</FONT></P> <P><FONT SIZE="-1"> Other utility operating revenue <U> 106</U> <U> 104</U></FONT></P> <P><FONT SIZE="-1"> <U> 6,794</U> <U> 6,672</U></FONT></P> <P><FONT SIZE="-1">OPERATING EXPENSES</FONT></P> <P><FONT SIZE="-1"> Utility operating expenses 3,908 3,402</FONT></P> <P><FONT SIZE="-1"> Non-utility operating expenses 13 ---</FONT></P> <P><FONT SIZE="-1"> Related party expenses 57 57</FONT></P> <P><FONT SIZE="-1"> Depreciation and amortization 632 472</FONT></P> <P><FONT SIZE="-1"> State and federal income taxes 450 675</FONT></P> <P><FONT SIZE="-1"> Property and other taxes <U> 404</U> <U> 370</U></FONT></P> <P><FONT SIZE="-1"> <U> 5,464</U> <U> 4,976</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">OPERATING INCOME 1,330 1,696</FONT></P> <P><FONT SIZE="-1">ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION 54 70</FONT></P> <P><FONT SIZE="-1">OTHER INCOME (EXPENSE), NET <U> 13</U> <U> 6</U></FONT></P> <P><FONT SIZE="-1">INCOME BEFORE INTEREST CHARGES <U> 1,397</U> <U> 1,772</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">INTEREST CHARGES <U> 721</U> <U> 759</U></FONT></P> <P><FONT SIZE="-1"> </FONT></P> <P><FONT SIZE="-1">NET INCOME $ 676 $ 1,013</FONT></P> <P><FONT SIZE="-1">DIVIDENDS ON PREFERRED STOCK <U> 17</U> <U> 19</U></FONT></P> <P><FONT SIZE="-1">NET INCOME APPLICABLE TO COMMON STOCK $ 659 $ 994</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">INCOME PER COMMON SHARE:</FONT></P> <P><FONT SIZE="-1"> Basic $ .32 $ .55</FONT></P> <P><FONT SIZE="-1"> Diluted $ .32 $ .55</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">CASH DIVIDEND PER COMMON SHARE $ .26 $ .23</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">AVERAGE COMMON SHARES OUTSTANDING</FONT></P> <P><FONT SIZE="-1"> Basic 2,040,160 1,793,737</FONT></P> <P><FONT SIZE="-1"> Diluted 2,074,320 1,810,283</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> </FONT></P> <P><FONT SIZE="-1"> </FONT></P> <P><FONT SIZE="-1"> </FONT></P> <P><FONT SIZE="-1"> </FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P ALIGN="CENTER"><FONT SIZE="-1"></FONT><FONT SIZE="-1"><STRONG>ARTESIAN RESOURCES CORPORATION</STRONG></FONT></P> <P><FONT SIZE="-1"><STRONG> CONSOLIDATED STATEMENT OF INCOME</STRONG></FONT></P> <P><FONT SIZE="-1"> Unaudited</FONT></P> <P><FONT SIZE="-1"> (In thousands, except share and per share amounts.)</FONT></P> <P><FONT SIZE="-1"> For the Six Months</FONT></P> <P><FONT SIZE="-1"> Ended June 30,</FONT></P> <P><FONT SIZE="-1"> 1999 1998</FONT></P> <P><FONT SIZE="-1">OPERATING REVENUES</FONT></P> <P><FONT SIZE="-1"> Water sales $ 12,544 $ 12,115</FONT></P> <P><FONT SIZE="-1"> Other utility operating revenue <U> 189</U> <U> 177</U></FONT></P> <P><FONT SIZE="-1"> <U> 12,733</U> <U> 12,292</U></FONT></P> <P><FONT SIZE="-1">OPERATING EXPENSES</FONT></P> <P><FONT SIZE="-1"> Utility operating expenses 7,452 6,773</FONT></P> <P><FONT SIZE="-1"> Related party expenses 113 114</FONT></P> <P><FONT SIZE="-1"> Depreciation and amortization 1,164 1,078</FONT></P> <P><FONT SIZE="-1"> State and federal income taxes 715 893</FONT></P> <P><FONT SIZE="-1"> Property and other taxes <U> 794</U> <U> 746</U></FONT></P> <P><FONT SIZE="-1"> <U> 10,238</U> <U> 9,604</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">OPERATING INCOME 2,495 2,688</FONT></P> <P><FONT SIZE="-1">ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION 79 118</FONT></P> <P><FONT SIZE="-1">OTHER INCOME (EXPENSE), NET <U> 26</U> <U> 24</U> </FONT></P> <P><FONT SIZE="-1">INCOME BEFORE INTEREST CHARGES <U> 2,600</U> <U> 2,830</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">INTEREST CHARGES <U> 1,529</U> <U> 1,490</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">NET INCOME 1,071 1,340</FONT></P> <P><FONT SIZE="-1">DIVIDENDS ON PREFERRED STOCK <U> 54</U> <U> 42</U></FONT></P> <P><FONT SIZE="-1">NET INCOME APPLICABLE TO COMMON STOCK $ 1,017 $ 1,298</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">INCOME PER COMMON SHARE:</FONT></P> <P><FONT SIZE="-1"> Basic $ 0.52 $ 0.72</FONT></P> <P><FONT SIZE="-1"> Diluted $ 0.51 $ 0.72</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">CASH DIVIDEND PER COMMON SHARE $ 0.52 $ 0.46</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">AVERAGE COMMON SHARES OUTSTANDING</FONT></P> <P><FONT SIZE="-1"> Basic 1,958,271 1,792,787</FONT></P> <P><FONT SIZE="-1"> Diluted 1,992,591 1,809,208</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">See notes to the consolidated financial statements.</FONT></P> <P><FONT SIZE="-1"> </FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>CONSOLIDATED STATEMENT OF RETAINED EARNINGS</STRONG></FONT></P> <P><FONT SIZE="-1"> Unaudited</FONT></P> <P><FONT SIZE="-1"> (In thousands) For the Six Months</FONT></P> <P><FONT SIZE="-1"> Ended June 30,</FONT></P> <P><FONT SIZE="-1"> 1999 1998</FONT></P> <P><FONT SIZE="-1">Balance, beginning of period $ 7,785 $ 6,887</FONT></P> <P><FONT SIZE="-1">Net income <U> 1,071</U> <U> 1,340</U></FONT></P> <P><FONT SIZE="-1"> 8,856 8,227</FONT></P> <P><FONT SIZE="-1">Dividends 1,080 886</FONT></P> <P><FONT SIZE="-1">Common stock reacquired <U> 2,766</U> <U> ---</U></FONT></P> <P><FONT SIZE="-1">Balance, end of period $ 5,010 $ 7,341</FONT></P> <P><FONT SIZE="-1">See notes to the consolidated financial statements.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>ARTESIAN RESOURCES CORPORATION</STRONG></FONT></P> <P><FONT SIZE="-1"><STRONG> CONSOLIDATED</STRONG> <STRONG>STATEMENT OF CASH FLOWS</STRONG></FONT></P> <P><FONT SIZE="-1"> Unaudited</FONT></P> <P><FONT SIZE="-1"> (In thousands)</FONT></P> <P><FONT SIZE="-1"> For the Six Months</FONT></P> <P><FONT SIZE="-1"> Ended June 30,</FONT></P> <P><FONT SIZE="-1"> <U>1999</U> <U>1998</U></FONT></P> <P><FONT SIZE="-1">CASH FLOWS FROM OPERATING ACTIVITIES</FONT></P> <P><FONT SIZE="-1">NET INCOME $ 1,071 $ 1,340</FONT></P> <P><FONT SIZE="-1">Adjustments to reconcile net income to net </FONT></P> <P><FONT SIZE="-1"> cash provided by operating activities:</FONT></P> <P><FONT SIZE="-1"> Depreciation and amortization 1,109 1,001</FONT></P> <P><FONT SIZE="-1"> Deferred income taxes, net 547 115</FONT></P> <P><FONT SIZE="-1"> Allowance for funds used during construction (79) (118)</FONT></P> <P><FONT SIZE="-1">Changes in Assets and Liabilities:</FONT></P> <P><FONT SIZE="-1"> Accounts receivable 21 185</FONT></P> <P><FONT SIZE="-1"> Unbilled operating revenue (464) (507) </FONT></P> <P><FONT SIZE="-1"> Materials and supplies 43 22</FONT></P> <P><FONT SIZE="-1"> Accrued state and federal income taxes 159 768</FONT></P> <P><FONT SIZE="-1"> Prepaid property taxes 550 507</FONT></P> <P><FONT SIZE="-1"> Prepaid expenses and other 56 (50)</FONT></P> <P><FONT SIZE="-1"> Other deferred assets 14 29</FONT></P> <P><FONT SIZE="-1"> Regulatory assets 244 (68) </FONT></P> <P><FONT SIZE="-1"> Postretirement benefit obligation (42) (28)</FONT></P> <P><FONT SIZE="-1"> Accounts payable 1,070 614</FONT></P> <P><FONT SIZE="-1"> Interest accrued (351) (270)</FONT></P> <P><FONT SIZE="-1"> Customer deposits and other, net <U> 96</U> <U> 419</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">NET CASH PROVIDED BY OPERATING ACTIVITIES <U> 4,044</U> <U> 3,959</U> </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">CASH FLOWS FROM INVESTING ACTIVITIES</FONT></P> <P><FONT SIZE="-1"> Capital expenditures (net of AFUDC) (10,167) (8,478) </FONT></P> <P><FONT SIZE="-1"> Proceeds from sale of assets <U> 6</U> <U> 13</U> </FONT></P> <P><FONT SIZE="-1">NET CASH USED IN INVESTING ACTIVITIES (<U>10,161</U>) <U> (8,465</U>)</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">CASH FLOW FROM FINANCING ACTIVITIES</FONT></P> <P><FONT SIZE="-1"> Net(repayments)borrowings under line of </FONT></P> <P><FONT SIZE="-1"> credit agreement (1,718) 4,905 </FONT></P> <P><FONT SIZE="-1"> Overdraft payable 301 345</FONT></P> <P><FONT SIZE="-1"> Net advances and contributions in aid</FONT></P> <P><FONT SIZE="-1"> of construction 1,160 50</FONT></P> <P><FONT SIZE="-1"> Proceeds from issuance of common stock 7,803 265</FONT></P> <P><FONT SIZE="-1"> Dividends (1,063) (866)</FONT></P> <P><FONT SIZE="-1"> Repayment of long-term debt (278) ---</FONT></P> <P><FONT SIZE="-1"> Principal payments under capital </FONT></P> <P><FONT SIZE="-1"> lease obligations (25) (21) </FONT></P> <P><FONT SIZE="-1"> Retirement of preferred stock <U> (100</U>) <U> (112</U>)</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">NET CASH PROVIDED BY FINANCING ACTIVITIES <U> 6,080</U> <U> 4,566</U> </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">NET (DECREASE)INCREASE IN CASH AND CASH </FONT></P> <P><FONT SIZE="-1"> EQUIVALENTS (37) 60 </FONT></P> <P><FONT SIZE="-1">CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD <U> 114</U> <U> 146</U></FONT></P> <P><FONT SIZE="-1">CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 77 $ 206</FONT></P> <P><FONT SIZE="-1">Supplemental Disclosures of Cash Flow Information:</FONT></P> <P><FONT SIZE="-1"> Interest paid $ 1,865 $ 1,204</FONT></P> <P><FONT SIZE="-1"> Income taxes paid $ 1 $ ---</FONT></P> <P><FONT SIZE="-1">See Notes to the Consolidated Financial Statements.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>NOTE 1 - GENERAL</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> The unaudited financial statements of Artesian Resources Corporation and</FONT></P> <P><FONT SIZE="-1">its wholly-owned subsidiaries (the Company or Artesian Resources),</FONT></P> <P><FONT SIZE="-1">including its principal operating company, Artesian Water Company, Inc.</FONT></P> <P><FONT SIZE="-1">(Artesian Water), presented herein have been prepared in accordance with the</FONT></P> <P><FONT SIZE="-1">instructions to Form 10-Q and do not include all of the information and note</FONT></P> <P><FONT SIZE="-1">disclosures required by generally accepted accounting principles. These </FONT></P> <P><FONT SIZE="-1">statements should be read in conjunction with the consolidated financial</FONT></P> <P><FONT SIZE="-1">statements and notes thereto for the year ended December 31, 1998 included in</FONT></P> <P><FONT SIZE="-1">the Company's Annual Report on Form 10-K. The accompanying consolidated</FONT></P> <P><FONT SIZE="-1">financial statements have not been examined by independent accountants in</FONT></P> <P><FONT SIZE="-1">accordance with generally accepted auditing standards, but in the opinion of</FONT></P> <P><FONT SIZE="-1">management such consolidated financial statements include all adjustments,</FONT></P> <P><FONT SIZE="-1">consisting only of normal recurring adjustments, necessary to fairly</FONT></P> <P><FONT SIZE="-1">summarize the Company's financial position and results of operations. The</FONT></P> <P><FONT SIZE="-1">results of operations for the quarter and six months ended June 30, 1999 may not be indicative of the results that may be expected for the year ending December 31, 1999.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>NOTE 2 - REGULATORY ASSETS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Certain expenses, which are recoverable through rates as permitted by the</FONT></P> <P><FONT SIZE="-1">State of Delaware Public Service Commission (PSC), are deferred and </FONT></P> <P><FONT SIZE="-1">amortized during future periods using various methods. Expenses related to</FONT></P> <P><FONT SIZE="-1">rate proceedings are amortized on a straight-line basis over a period of two</FONT></P> <P><FONT SIZE="-1">to five years. The post retirement benefit obligation, which is being</FONT></P> <P><FONT SIZE="-1">amortized over twenty years is adjusted for the difference between the net</FONT></P> <P><FONT SIZE="-1">periodic post retirement benefit costs and the cash payments. The deferred</FONT></P> <P><FONT SIZE="-1">income taxes will be amortized over future years as the tax effects of</FONT></P> <P><FONT SIZE="-1">temporary differences previously flowed through to the customer reverse.</FONT></P> <P><FONT SIZE="-1">Regulatory assets, net of amortization, comprise:</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <U>June 30, 1999</U> <U>December 31,1998</U></FONT></P> <P><FONT SIZE="-1"> (in thousands) </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">Postretirement benefit obligation $1,585 $1,627</FONT></P> <P><FONT SIZE="-1">Deferred income taxes recoverable</FONT></P> <P><FONT SIZE="-1"> in future rates 687 695</FONT></P> <P><FONT SIZE="-1">Expense of rate proceedings <U> 170</U> <U> 364</U></FONT></P> <P><FONT SIZE="-1"> $2,442 $2,686</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>NOTE 3 - DEBT</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> On April 29, 1999, Artesian entered into an agreement with Helena C. Taylor and Ellis D. Taylor (the "Taylors") for the purpose of repurchasing 126,353 shares of Class B Common Stock and 24,165 shares of Class A Non-Voting Common Stock ("the Stock") owned by the Taylors. On May 4, 1999, Artesian executed a promissory note (the "Note") in the principal amount of $4,450,000 representing the purchase price of the stock. The Note is payable quarterly, on a calendar basis, over a four year period and in sixteen equal principal installments of $278,125 commencing on June 30, 1999. The outstanding balance on the Note bears interest in an amount computed based on the quarterly dividend the Taylors would have received on the Stock transferred to Artesian but not yet paid for by Artesian. In addition, the principal installment is adjusted on a quarterly basis to reflect increases in the book value per common share of the Company as reported in its most recent quarterly financial statement distributed to stockholders prior to the quarterly payment. At June 30, 1999, Artesian had $4,171,900 outstanding under this promissory note.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>NOTE 4 - NON-UTILITY OPERATING EXPENSES</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> On December 19, 1996, Artesian Wastewater Management, Inc. (Artesian</FONT></P> <P><FONT SIZE="-1">Wastewater) was created as an additional non-regulated subsidiary of Artesian</FONT></P> <P><FONT SIZE="-1">Resources. Artesian Wastewater plans to provide wastewater treatment services</FONT></P> <P><FONT SIZE="-1">in Delaware. On March 12, 1997, Artesian Wastewater became a one-third owner</FONT></P> <P><FONT SIZE="-1">in AquaStructure Delaware, L.L.C.,which intends to develop and market various</FONT></P> <P><FONT SIZE="-1">proposals to provide wastewater treatment services. Artesian Wastewater began operating a small wastewater treatment spray irrigation facility owned by a municipality in Southern New Castle County Delaware. Artesian Wastewater is paid a lump sum fee to maintain operations at the facility.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>NOTE 5 - RELATED PARTY TRANSACTIONS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> The office building and shop complex utilized by Artesian Water are</FONT></P> <P><FONT SIZE="-1">leased at an annual rental of $180,000 from a partnership, White Clay Realty,</FONT></P> <P><FONT SIZE="-1">in which certain of Artesian Resources' officers and directors are partners.</FONT></P> <P><FONT SIZE="-1">The lease expires in December, 2002, with provisions for renewals for two</FONT></P> <P><FONT SIZE="-1">five-year periods thereafter. Management believes that the payments made to</FONT></P> <P><FONT SIZE="-1">White Clay Realty for the lease of its office building and shop complex are</FONT></P> <P><FONT SIZE="-1">comparable to what Artesian Water would have to pay to unaffiliated parties</FONT></P> <P><FONT SIZE="-1">for similar facilities.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Artesian Water leases certain parcels of land for water production wells</FONT></P> <P><FONT SIZE="-1">from Glendale Enterprises Limited, a company wholly-owned by Ellis D. Taylor,</FONT></P> <P><FONT SIZE="-1">Chairman Emeritus of Artesian Resources, at an annual rental of $45,000.</FONT></P> <P><FONT SIZE="-1">Renewal of the Lease is automatic from year to year unless 60 days written</FONT></P> <P><FONT SIZE="-1">notice is given by either party before the end of the year's lease. The</FONT></P> <P><FONT SIZE="-1">annual rental is adjusted each year by the consumer price index as of June 30</FONT></P> <P><FONT SIZE="-1">of the preceding year. Artesian Water has the right to terminate this lease</FONT></P> <P><FONT SIZE="-1">by giving 60 days' written notice should the water supply be exhausted or</FONT></P> <P><FONT SIZE="-1">other conditions beyond the control of Artesian Water materially and adversely</FONT></P> <P><FONT SIZE="-1">affect its interest in the lease.<STRONG><EM> </EM></STRONG></FONT><FONT SIZE="-1"></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> On April 29, 1999, Artesian entered into an agreement with Helena C. Taylor and Ellis D. Taylor (the "Taylors") for the purpose of repurchasing 126,353 shares of Class B Common Stock and 24,165 shares of Class A Non-Voting Common Stock ("the Stock") owned by the Taylors. On May 4, 1999, Artesian executed a promissory note (the "Note") in the principal amount of $4,450,000 representing the purchase price of the stock. The Note is payable quarterly, on a calendar basis, over a four year period and in sixteen equal principal installments of $278,125 commencing on June 30, 1999. The outstanding balance on the Note bears interest in an amount computed based on the quarterly dividend the Taylors would have received on the Stock transferred to Artesian but not yet paid for by Artesian. In addition, the principal installment is adjusted on a quarterly basis to reflect increases in the book value per common share of the Company as reported in its most recent quarterly financial statement distributed to stockholders prior to the quarterly payment. At June 30, 1999, Artesian had $4,171,900 outstanding under this promissory note.</FONT><FONT FACE="Times New Roman"></FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"></FONT><FONT SIZE="-1"> Expenses associated with related party transactions are as follows:</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> For the Quarter Ended For the Six Months</FONT></P> <P><FONT SIZE="-1"> June 30, Ended June 30,</FONT></P> <P><FONT SIZE="-1"> <U>1999</U> <U>1998 1999 1998</U></FONT></P> <P><FONT SIZE="-1"> (in thousands) (in thousands)</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> White Clay Realty $ 46 $ 46 $ 91 $ 92</FONT></P> <P><FONT SIZE="-1"> Glendale Enterprises <U> 11</U> <U> 11</U> <U> 22</U> <U> 22</U></FONT></P> <P><FONT SIZE="-1"> $ 57 $ 57 $113 $114</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>NOTE 6 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Basic net income per share is based on the weighted average number of</FONT></P> <P><FONT SIZE="-1">common shares outstanding. Diluted net income per share is based on the</FONT></P> <P><FONT SIZE="-1">weighted average number of common shares outstanding and potentially dilutive</FONT></P> <P><FONT SIZE="-1">effect of employee stock options. The following table summarizes the shares</FONT></P> <P><FONT SIZE="-1">used in computing basic and diluted net income per share:</FONT></P> <P><FONT SIZE="-1"> For the Quarter For the Six Months </FONT></P> <P><FONT SIZE="-1"> Ended June 30, Ended June 30,</FONT></P> <P><FONT SIZE="-1"> <U>1999</U> <U>1998</U> <U>1999</U> <U>1998</U></FONT></P> <P><FONT SIZE="-1"> (in thousands)</FONT></P> <P><FONT SIZE="-1">Average common shares outstanding during</FONT></P> <P><FONT SIZE="-1"> the period for Basic computation 2,040 1,793 1,958 1,793 Dilutive effect of employee stock options <U> 34</U> <U> 17</U> <U> 35</U> <U> 16</U></FONT></P> <P><FONT SIZE="-1">Average common shares outstanding during</FONT></P> <P><FONT SIZE="-1"> the period for Diluted computation 2,074 1,810 1,993 1,809 </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Equity per common share was $15.57 and $15.06 at June 30, 1999 and 1998, respectively. These amounts were computed by dividing common stockholders' equity, excluding preferred stock, by the number of shares of common stock outstanding on June 30, 1999 and 1998, respectively. </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG>NOTE 7 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> In March 1998, the American Institute of Certified Public Accountants</FONT></P> <P><FONT SIZE="-1">issued Statement of Position 98-1, "Accounting for the Costs of</FONT></P> <P><FONT SIZE="-1">Computer Software Developed or Obtained for Internal Use." This statement is</FONT></P> <P><FONT SIZE="-1">effective for financial statements for fiscal years beginning after</FONT></P> <P><FONT SIZE="-1">December 15, 1998. Earlier application is encouraged in fiscal years for</FONT></P> <P><FONT SIZE="-1">which annual financial statements have not been issued. We implemented this</FONT></P> <P><FONT SIZE="-1">statement in the first quarter of 1998 and it did not have a material impact</FONT></P> <P><FONT SIZE="-1">on our financial condition or results of operations.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> In June 1998, FASB issued Statement of Financial Accounting Standards</FONT></P> <P><FONT SIZE="-1">No. 133, "Accounting for Derivative Instruments and Hedging Activities," which</FONT></P> <P><FONT SIZE="-1">established accounting and reporting standards for derivative instruments</FONT></P> <P><FONT SIZE="-1">and hedging activities. In June 1999, FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," moving the effective date for this standard from fiscal years beginning after June 15, 1999 to fiscal years beginning after June 15, 2000. We plan to adopt this statement effective January 1, 2000. Our adoption of this statement will not have a material impact on our financial condition or results of operations.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities". This statement is effective for financial statements for fiscal years beginning after December 15, 1998. Earlier application is encouraged in fiscal years for which annual financial statement have not been issued. We implemented this statement in the first quarter of 1999 and it did not have a material impact on our financial condition or results of operations.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>NOTE 8 - RATE PROCEEDINGS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> On April 30, 1999, Artesian Water filed a petition with the Delaware</FONT></P> <P><FONT SIZE="-1">Public Service Commission to implement new rates to meet a requested increase</FONT></P> <P><FONT SIZE="-1">in revenue of approximately 10.35%, or $2.7 million on an annualized basis.</FONT></P> <P><FONT SIZE="-1">Artesian Water is permitted to collect a temporary increase not in excess of</FONT></P> <P><FONT SIZE="-1">$2.5 million on an annualized basis, under bond, until the level of permanent</FONT></P> <P><FONT SIZE="-1">rates are decided by the Delaware Public Service Commission. The temporary</FONT></P> <P><FONT SIZE="-1">rates became effective on July 1, 1999.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>ITEM 2</STRONG></FONT></P> <P><FONT SIZE="-1"><STRONG>ARTESIAN RESOURCES CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF</STRONG></FONT></P> <P><FONT SIZE="-1"><STRONG>FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30,</STRONG></FONT></P> <P><FONT SIZE="-1"><STRONG>1999</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>RESULTS OF OPERATIONS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><U>Overview</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Artesian Water, our principal subsidiary, is the oldest and largest</FONT></P> <P><FONT SIZE="-1">regulated public water utility in the State of Delaware and has been</FONT></P> <P><FONT SIZE="-1">providing water within the state since 1905. We distribute and sell water</FONT></P> <P><FONT SIZE="-1">to residential, commercial, industrial, governmental, municipal and utility</FONT></P> <P><FONT SIZE="-1">customers throughout Delaware. As of June 30, 1999, we had approximately</FONT></P> <P><FONT SIZE="-1">62,000 metered customers and served a population of approximately 200,000,</FONT></P> <P><FONT SIZE="-1">representing approximately 27% of Delaware's total population. We believe</FONT></P> <P><FONT SIZE="-1">that we have a reputation for providing water and service of superior quality</FONT></P> <P><FONT SIZE="-1">to our customers.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> The Delaware Public Service Commission regulates Artesian Water's rates</FONT></P> <P><FONT SIZE="-1">charged for water service, the sale and issuance of securities, mergers and</FONT></P> <P><FONT SIZE="-1">other matters. We periodically seek rate increases to cover the cost of</FONT></P> <P><FONT SIZE="-1">increased operating expenses, increased financing expenses due to additional</FONT></P> <P><FONT SIZE="-1">investments in utility plant and other costs of doing business. Increases</FONT></P> <P><FONT SIZE="-1">in customers served by Artesian Water also contribute to increases in our</FONT></P> <P><FONT SIZE="-1">operating revenues, although such increases have been offset slightly by</FONT></P> <P><FONT SIZE="-1">reductions in customers' individual usage. We continue our efforts to contain</FONT></P> <P><FONT SIZE="-1">expenses and improve efficiencies which contribute to increases in our</FONT></P> <P><FONT SIZE="-1">operating income. Our business is also subject to seasonal fluctuations and</FONT></P> <P><FONT SIZE="-1">the effects of weather.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><U>Operating Revenues</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> We realized 98.5% of our total revenue in the six months of 1999 from the sale of water. Water sales revenue increased $120,000, or 1.8%, for the quarter ended June 30, 1999 compared to the second quarter of 1998. For the six months ended June 30, 1999, water sales revenue increased $429,000, or 3.5%, as compared to the same period in 1998. The increase was primarily due to a 3.1% growth in the number of customers served. </FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><U></U></FONT><FONT SIZE="-1"><U>Operating Expenses</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Operating and maintenance expenses increased $519,000 and $678,000 for the quarter and six months ended June 30, 1999, compared to the same periods in 1998, primarily due to increased payroll and related expenses. In addition, the Company recorded a $165,000 write-off related to the unamortized portion of rate case expenses from PSC Docket No. 97-66 and 97-340. The write-off resulted from the implementation of temporary rates and the amortization of costs associated with the rate increase request filed on April 30, 1999. The ratio of operating and maintenance expense to total revenue was 59.4% for the six months ended June 30, 1999 as compared to 56.0% for the same period in 1998. Payroll and related expenses increased $397,000, or 12.9%, and $262,000 or 17.7%, respectively, for the six months and quarter ended June 30, 1999 primarily due to the addition of new employees and increases in annual merit and incentive compensation and an approximately 20% increase in medical insurance premiums effective beginning the third quarter of 1998. </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Depreciation and amortization expense increased $160,000 and $86,000, or 34% and 8%, respectively, in the quarter and first six months of 1999 due to capital additions. Income tax expense decreased $178,000, or 19.9% and $225,000, or 33.3%, respectively, for the six months and quarter ended June 30, 1999. Our total effective income tax rate for the six months ended June 30, 1999 and 1998 was 40.0%.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><U>Interest Charges</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Interest charges increased $39,000, or 2.6% for the six months ended June 30, 1999 as compared with the same period in 1998 due to higher average borrowings on the lines of credit incurred to finance investment in utility plant. Average borrowings for the first six months of 1999 and 1998 were $7.0 million and $3.6 million, respectively. Interest charges decreased $38,000 or 5.0% for the second quarter due to repayments on the lines of credit.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><U>Net Income</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> For the quarter ended June 30, 1999, Artesian Resources recorded net income of $676,000 which represents a $337,000, or a 33.3%, decrease as compared to earnings of $1,013,000 for the quarter ended June 30, 1998. Net income for the six months ended June 30, 1999 was $1,071,000, a decrease of $269,000 or 20.1%, compared to earnings of $1,340,000 for the same period in 1998. </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG>LIQUIDITY AND CAPITAL RESOURCES</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Our primary sources of liquidity for the first six months of 1999 were $4.0 million provided by cash flow from operating activities and the $7.5 million issuance of 325,000 shares of Class A Non-Voting Common Stock on April 13, 1999. Cash flow from operating activities was primarily provided by our utility operations, and is impacted by operating and maintenance expenses, the timeliness and adequacy of rate increases and weather conditions.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> We rely on our sources of liquidity for investments in our utility plant</FONT></P> <P><FONT SIZE="-1">and systems and to meet our various payment obligations. We currently</FONT></P> <P><FONT SIZE="-1">estimate that our aggregate investments in our utility plant and systems for</FONT></P> <P><FONT SIZE="-1">the remainder of 1999 will be approximately $7.7 million. These investments</FONT></P> <P><FONT SIZE="-1">will be financed by our operations and short-term borrowings under our</FONT></P> <P><FONT SIZE="-1">revolving credit agreements. Our total obligations related to dividend and</FONT></P> <P><FONT SIZE="-1">sinking fund payments on preferred stock, interest payments on indebtedness,</FONT></P> <P><FONT SIZE="-1">rental payments and water service interconnection agreements for the remainder</FONT></P> <P><FONT SIZE="-1">of 1999 are anticipated to be approximately $2.8 million and will be financed</FONT></P> <P><FONT SIZE="-1">with cashflow from our operating activities.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> On May 4, 1999, we purchased from Ellis and Helena Taylor 24,165 shares</FONT></P> <P><FONT SIZE="-1">of Class A Non-Voting Common Stock for $604,125 and 126,353 shares of Class B</FONT></P> <P><FONT SIZE="-1">Common Stock for $3,845,875, payable in equal quarterly installments over a four year period and bearing interest at a rate equal to the amount that the sellers would have received in dividends on the shares as to which the principal amount has not yet been paid. On a quarterly basis, the consideration paid is subject to certain upward adjustments based upon</FONT></P> <P><FONT SIZE="-1">increases in our book value per common share. We anticipate that this</FONT></P> <P><FONT SIZE="-1">obligation will be financed by our cashflow from operations and external</FONT></P> <P><FONT SIZE="-1">sources including our short-term lines of credit.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Developer advances and contributions in aid of construction are used for</FONT></P> <P><FONT SIZE="-1">the installation of mains and hydrants in new developments. An additional $1.4</FONT></P> <P><FONT SIZE="-1">million of capital expenditures will be financed by developers during the</FONT></P> <P><FONT SIZE="-1">remainder of 1999.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> At June 30, 1999, we had a working capital deficit of $9.3 million</FONT></P> <P><FONT SIZE="-1">mainly due to borrowings on our lines of credit incurred to finance investment</FONT></P> <P><FONT SIZE="-1">in utility plant and the $1,112,500 currently payable portion of the note to Ellis and Helena Taylor.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> At June 30, 1999, Artesian Water had lines of credit with three</FONT></P> <P><FONT SIZE="-1">separate financial institutions totaling $35.0 million to meet its temporary</FONT></P> <P><FONT SIZE="-1">cash requirements. These revolving credit facilities are unsecured. As of</FONT></P> <P><FONT SIZE="-1">June 30, 1999, we had $29.0 million of available funds under these lines.</FONT></P> <P><FONT SIZE="-1">The interest rate for borrowings under each of these lines is the London</FONT></P> <P><FONT SIZE="-1">Interbank Offering Rate plus 1.0% or the bank's federal funds rate plus 1.0%,</FONT></P> <P><FONT SIZE="-1">at our discretion. All the facilities are reviewed annually by each bank</FONT></P> <P><FONT SIZE="-1">for renewal.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> On April 13, 1999, Artesian Resources issued 325,000 shares of Class A</FONT></P> <P><FONT SIZE="-1">Non-Voting Common Stock at $25.00 per share in an underwritten public</FONT></P> <P><FONT SIZE="-1">offering, and the net proceeds of approximately $7.5 million were used to reduce Artesian Water's borrowing on the lines of credit incurred to finance investment in utility plant. </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> In March 1998, the American Institute of Certified Public Accountants</FONT></P> <P><FONT SIZE="-1">issued Statement of Position 98-1, "Accounting for the Costs of</FONT></P> <P><FONT SIZE="-1">Computer Software Developed or Obtained for Internal Use." This statement is</FONT></P> <P><FONT SIZE="-1">effective for financial statements for fiscal years beginning after</FONT></P> <P><FONT SIZE="-1">December 15, 1998. Earlier application is encouraged in fiscal years for</FONT></P> <P><FONT SIZE="-1">which annual financial statements have not been issued. We implemented this</FONT></P> <P><FONT SIZE="-1">statement in the first quarter of 1998 and it did not have a material impact</FONT></P> <P><FONT SIZE="-1">on our financial condition or results of operations.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> In June 1998, FASB issued Statement of Financial Accounting Standards</FONT></P> <P><FONT SIZE="-1">No. 133, "Accounting for Derivative Instruments and Hedging Activities," which</FONT></P> <P><FONT SIZE="-1">established accounting and reporting standards for derivative instruments</FONT></P> <P><FONT SIZE="-1">and hedging activities. In June 1999, FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," moving the effective date for this standard from fiscal years beginning after June 15, 1999 to fiscal years beginning after June 15, 2000. We plan to adopt this statement effective January 1, 2000. Our adoption of this statement will not have a material impact on our financial condition or results of operations.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities". This statement is effective for financial statements for fiscal years beginning after December 15, 1998. Earlier application is encouraged in fiscal years for which annual financial statement have not been issued. We implemented this statement in the first quarter of 1999 and it did not have a material impact on our financial condition or results of operations.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>YEAR 2000 COMPLIANCE</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Our management has completed an assessment of all our information and</FONT></P> <P><FONT SIZE="-1">non-information technology systems and implemented a company-wide program</FONT></P> <P><FONT SIZE="-1">which continues to test and correct all of our critical systems to ensure</FONT></P> <P><FONT SIZE="-1">Year 2000 compliance. We have dedicated the financial, technical and</FONT></P> <P><FONT SIZE="-1">management resources required to achieve Year 2000 compliance. We identified</FONT></P> <P><FONT SIZE="-1">the critical systems for our operations and are compliant as of June 30,</FONT></P> <P><FONT SIZE="-1">1999. Additionally, in 1998, we adopted management practices which require</FONT></P> <P><FONT SIZE="-1">that any new systems or system upgrades be Year 2000 compliant prior to their</FONT></P> <P><FONT SIZE="-1">purchase and implementation.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> In 1998, we undertook a comprehensive program to assess providers of</FONT></P> <P><FONT SIZE="-1">critical services for the purpose of identifying and minimizing exposure to</FONT></P> <P><FONT SIZE="-1">Year 2000 risks that are not under our direct control. Contingency plans have been developed which include, but are not limited to, the installation of back-up generators in case of power loss; increasing inventory levels in late 1999 for crucial materials and supplies, including gasoline, diesel fuel and water treatment chemicals; and identifying alternate providers in case our primary providers cannot meet delivery requirements.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> We are completing our Year 2000 compliance program in the normal course</FONT></P> <P><FONT SIZE="-1">of business and do not anticipate a material impact on our business, results</FONT></P> <P><FONT SIZE="-1">of operations, liquidity or capital resources. As a result of our corporate</FONT></P> <P><FONT SIZE="-1">automation plan developed in 1994, we capitalized $395,000 during the year</FONT></P> <P><FONT SIZE="-1">ended December 31, 1998 on new computer software and hardware, some of</FONT></P> <P><FONT SIZE="-1">which replaced software and hardware which was not Year 2000 compliant.</FONT></P> <P><FONT SIZE="-1">No capital expenditures for computer software and hardware were made during</FONT></P> <P><FONT SIZE="-1">the first six months of 1999, and we do not anticipate any significant capital</FONT></P> <P><FONT SIZE="-1">expenditures for the remainder of 1999 for the purpose of achieving Year 2000</FONT></P> <P><FONT SIZE="-1">compliance.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>RECENT EVENTS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> On August 5, 1999, the Governor of Delaware declared a drought emergency for northern New Castle County and implemented mandatory restrictions on water use. Our regulated water utility provides service to the majority of its customers in the area where the drought emergency was declared. Our water demand and total pumpage has decreased since the drought emergency was declared. We cannot determine what impact the reduction in consumption may have on our financial position or earnings for 1999 or how long the drought emergency will be in effect.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> </FONT></P> <P><FONT SIZE="-1"><STRONG>CAUTIONARY STATEMENT</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Statements in this Quarterly Report on Form 10-Q which express our</FONT></P> <P><FONT SIZE="-1">"belief", "anticipation" or "expectation", as well as other statements which</FONT></P> <P><FONT SIZE="-1">are not historical fact, are forward-looking statements within the meaning of</FONT></P> <P><FONT SIZE="-1">the Private Securities Litigation Reform Act of 1995 and involve risks and</FONT></P> <P><FONT SIZE="-1">uncertainties that could cause actual results to differ materially from</FONT></P> <P><FONT SIZE="-1">those projected. Certain factors, such as competitive market pressures,</FONT></P> <P><FONT SIZE="-1">material changes in demand from larger customers, changes in weather,</FONT></P> <P><FONT SIZE="-1">availability of labor, failure of critical suppliers to meet Year 2000</FONT></P> <P><FONT SIZE="-1">compliance, changes in government policies and changes in economic conditions,</FONT></P> <P><FONT SIZE="-1">could cause results to differ materially from those in the forward-looking</FONT></P> <P><FONT SIZE="-1">statements.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG>ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> None</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>PART II - OTHER INFORMATION</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>ITEM 1 - LEGAL PROCEEDINGS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> On April 30, 1999, Artesian Water filed a petition with the PSC to</FONT></P> <P><FONT SIZE="-1">implement new rates to meet an increased revenue requirement of approximately</FONT></P> <P><FONT SIZE="-1">10.35%, or $2.7 million on an annualized basis. Artesian Water is permitted to</FONT></P> <P><FONT SIZE="-1">collect a temporary increase not in excess of $2.5 million on an annualized</FONT></P> <P><FONT SIZE="-1">basis, under bond, until permanent rates are approved by the PSC. Such</FONT></P> <P><FONT SIZE="-1">temporary rates will become effective July 1, 1999. </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> There are no other material legal proceedings pending at this date.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG>ITEM 2 - CHANGES IN SECURITIES</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Not applicable. </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>ITEM 3 - DEFAULTS UPON SENIOR SECURITIES</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Not applicable.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <UL> <LI><FONT SIZE="-1"> The annual meeting of Class B Common Shareholders was held on April 28, 1999.</FONT></LI> <BR WP="BR1"><BR WP="BR2"></UL> <UL> <LI><FONT SIZE="-1"> With 473,851 votes in favor, 794 votes withheld, the Class B Common Shareholders elected Dian C. Taylor to serve a three year term on Artesian Resources' Board of Directors (the "Board") until her successor shall have been elected and qualified or until her earlier resignation or removal. She was last re-elected at the 1996 Annual Meeting of Shareholders. Ms. Taylor also serves as President and Chief Executive Officer of Artesian Resources Corporation and its subsidiaries and has served on the Executive and Budget Committees of the Board.</FONT></LI> <BR WP="BR1"><BR WP="BR2"></UL> <P><FONT SIZE="-1"> With 473,836 votes in favor, 779 votes withheld, the Class B Common Shareholders also elected John R. Eisenbrey, Jr. to serve a three year term on Artesian Resources' Board of Directors (the "Board") until his successor shall have been elected and qualified or until his earlier resignation or removal. He was last re-elected at the 1996 Annual Meeting of Shareholders. Mr. Eisenbrey has served as a member on the Personnel, Compensation and Benefits; and Incentive Stock Option Plan Committees of the Board.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Following the re-election of Ms. Taylor and Mr. Eisenbrey, the members of the Board and their respective terms are as follows:</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Dian C. Taylor term expires at the 2002 annual meeting</FONT></P> <P><FONT SIZE="-1"> John R. Eisenbrey, Jr. term expires at the 2002 annual meeting</FONT></P> <P><FONT SIZE="-1"> William H. Taylor, II term expires at the 2001 annual meeting</FONT></P> <P><FONT SIZE="-1"> William C. Wyer term expires at the 2001 annual meeting</FONT></P> <P><FONT SIZE="-1"> Kenneth R. Biederman term expires at the 2000 annual meeting</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>ITEM 5 - OTHER INFORMATION</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Not applicable.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><STRONG>ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> No reports on Form 8-K were filed for the quarter ended March 31, 1999.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>INDEX TO EXHIBITS</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"><U>Exhibit Number</U> <U>Description</U></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> 3 Articles of Incorporation and By-Law</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (3.1) Restated Certificate of Incorporation of the Company effective</FONT></P> <P><FONT SIZE="-1"> May 26, 1995 incorporated by reference to the exhibit filed</FONT></P> <P><FONT SIZE="-1"> with Artesian Resources Corporation Form 10-Q for the quarter</FONT></P> <P><FONT SIZE="-1"> ended June 30, 1995.</FONT></P> <P><FONT SIZE="-1"> </FONT></P> <P><FONT SIZE="-1"> (3.2) Restated Certificate of Incorporation of the Company effective</FONT></P> <P><FONT SIZE="-1"> April 26, 1994 including Certificate of Correction incorporated</FONT></P> <P><FONT SIZE="-1"> by reference to the exhibit filed with the Artesian Resources</FONT></P> <P><FONT SIZE="-1"> Corporation Form 10-Q for the quarter ended March 31, 1994.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (3.3) By-Laws of the Company effective April 27, 1993 incorporated by</FONT></P> <P><FONT SIZE="-1"> reference to the exhibit filed with the Artesian Resources</FONT></P> <P><FONT SIZE="-1"> Corporation Form 8-K filed April 27, 1993.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">4 Instruments Defining the Rights of Security Holders, Including Indentures</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (4.1) Thirteenth and Fourteenth Indentures dated as of June 17, 1997</FONT></P> <P><FONT SIZE="-1"> between Artesian Water Company, Inc., subsidiary of Artesian</FONT></P> <P><FONT SIZE="-1"> Resources Corporation, and Wilmington Trust Company, as Trustee.</FONT></P> <P><FONT SIZE="-1"> Incorporated by reference to the exhibits filed with Artesian</FONT></P> <P><FONT SIZE="-1"> Resources Corporation Form 10-Q for the quarter ended June 30,</FONT></P> <P><FONT SIZE="-1"> 1997.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (4.2) Twelfth Supplemental Indenture dated as of December 5, 1995</FONT></P> <P><FONT SIZE="-1"> between Artesian Water Company, Inc. subsidiary of Artesian</FONT></P> <P><FONT SIZE="-1"> Resources Corporation, and Wilmington Trust Company, as Trustee.</FONT></P> <P><FONT SIZE="-1"> Incorporated by reference to the exhibit filed with the Artesian</FONT></P> <P><FONT SIZE="-1"> Resources Corporation Annual Report on Form 10-K for the year</FONT></P> <P><FONT SIZE="-1"> ended December 31, 1995.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (4.3) Eleventh Supplemental Indenture dated as of February 16, 1993</FONT></P> <P><FONT SIZE="-1"> between Artesian Water Company, Inc., subsidiary of Artesian</FONT></P> <P><FONT SIZE="-1"> Resources Corporation, and Principal Mutual Life Insurance</FONT></P> <P><FONT SIZE="-1"> Company. Incorporated by reference to the exhibit filed with</FONT></P> <P><FONT SIZE="-1"> Artesian Resources Corporation Annual Report on Form 10-K for</FONT></P> <P><FONT SIZE="-1"> the year ended December 31, 1992.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (4.4) Tenth Supplemental Indenture dated as of April 1, 1989 between</FONT></P> <P><FONT SIZE="-1"> Artesian Water Company, Inc., subsidiary of Artesian Resources</FONT></P> <P><FONT SIZE="-1"> Corporation, and Wilmington Trust Company, as Trustee.</FONT></P> <P><FONT SIZE="-1"> Incorporated by reference to the exhibit filed with Artesian</FONT></P> <P><FONT SIZE="-1"> Resources Corporation Registration Statement on Form 10 filed</FONT></P> <P><FONT SIZE="-1"> April 30, 1990 and as amended by Form 8 filed on June 19, 1990.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (4.5) Other Supplemental Indentures with amounts authorized less than</FONT></P> <P><FONT SIZE="-1"> ten percent of the total assets of the Company and its</FONT></P> <P><FONT SIZE="-1"> subsidiaries on a consolidated basis will be furnished upon</FONT></P> <P><FONT SIZE="-1"> request. Incorporated by reference to the exhibit filed with</FONT></P> <P><FONT SIZE="-1"> Artesian Resources Corporation Registration Statement on Form</FONT></P> <P><FONT SIZE="-1"> 10 filed April 30, 1990 and as amended by Form 8 filed on</FONT></P> <P><FONT SIZE="-1"> June 19, 1990. </FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">10 Material Contracts</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (10.1) Amended and Restated Artesian Resources Corporation 1992</FONT></P> <P><FONT SIZE="-1"> Non-Qualified Stock Option Plan, as amended, filed herewith.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (10.2) Lease dated as of March 1, 1972 between White Clay Realty</FONT></P> <P><FONT SIZE="-1"> Company and Artesian Water Company, Inc. incorporated by</FONT></P> <P><FONT SIZE="-1"> reference to the exhibit filed with Artesian Resources</FONT></P> <P><FONT SIZE="-1"> Corporation Registration Statement on Form 10 filed April 30,</FONT></P> <P><FONT SIZE="-1"> 1990 and as amended by Form 8 filed on June 19, 1990.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (10.3) Artesian Resources Corporation Cash and Stock Bonus</FONT></P> <P><FONT SIZE="-1"> Compensation Plan for Officers incorporated by reference to the</FONT></P> <P><FONT SIZE="-1"> exhibit filed with the Artesian Resources Corporation Form</FONT></P> <P><FONT SIZE="-1"> 10-K for the year ended December 31, 1993.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (10.4) Artesian Resources Corporation Incentive Stock Option Plan</FONT></P> <P><FONT SIZE="-1"> incorporated by reference to the exhibit filed with the</FONT></P> <P><FONT SIZE="-1"> Artesian Resources Corporation Annual Report on Form 10-K for</FONT></P> <P><FONT SIZE="-1"> the year ended December 31, 1995.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> (10.5) Share Repurchase Agreement dated April 28, 1999 and related</FONT></P> <P><FONT SIZE="-1"> Promissary Note dated May 4, 1999.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P ALIGN="CENTER"><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG>SIGNATURES</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> Pursuant to the requirements of the Securities Exchange Act of 1934, the</FONT></P> <P><FONT SIZE="-1">registrant has duly caused this report to be signed on its behalf by the </FONT></P> <P><FONT SIZE="-1">undersigned thereunto duly authorized.</FONT></P> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1"> <STRONG>ARTESIAN RESOURCES CORPORATION</STRONG></FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">08/09/99 <U>/s/ Dian C. Taylor</U></FONT></P> <P><FONT SIZE="-1"> Dian C. Taylor</FONT></P> <P><FONT SIZE="-1"> President, CEO, and Chair of the Board</FONT></P> <P><FONT SIZE="-1"> Artesian Resources Corporation and Subsidiaries</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <P><FONT SIZE="-1">08/09/99 <U>/s/ David B. Spacht</U></FONT></P> <P><FONT SIZE="-1"> David B. Spacht</FONT></P> <P><FONT SIZE="-1"> Vice President, Chief Financial Officer, and</FONT></P> <P><FONT SIZE="-1"> Treasurer</FONT></P> <P><FONT SIZE="-1"> Artesian Resources Corporation and Subsidiaries</FONT></P> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> <BR WP="BR1"><BR WP="BR2"> </BODY> </HTML>