PREVIEW

Our profitability is primarily attributable to the sale of water.  Gross water
sales comprised 85.7% of total operating revenues for the year ended December
31, 2021.  Our profitability is also attributed to the various contract
operations, water, sewer and internal SLP Plans 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 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.

Covid-19 pandemic

As of December 31, 2021, 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.

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 December 31, 2021, the number of metered water customers in
Delaware increased approximately 1.5% compared to December 31, 2020.  The number
of metered water customers in Maryland increased approximately 2.2% compared to
December 31, 2020.  The number of metered water customers in Pennsylvania
remained consistent compared to December 31, 2020.  For the year ended December
31, 2021, approximately 8.3 billion gallons of water were distributed in our
Delaware systems and approximately 134.7 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 increased approximately 14.8% compared  to December 31,
2020.  In January 2022, Artesian Wastewater completed its agreement to acquire
Tidewater Environmental Services, Inc, or TESI, which more than doubled our
current number of wastewater customers served in Sussex County, Delaware.  The
acquisition agreement with TESI is discussed further in the "Strategic Direction
and Recent Developments" section below.

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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 December 30, 2021, the eligible customers enrolled in the WSLP Plan, the
SSLP Plan and the ISLP Plan increased 4.9%, 2.1% and 28.6%, respectively,
compared to December 31, 2020.  The non-utility customers enrolled in one of our
three protections plans increased 3.7%.

Strategic direction and recent developments

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.
Some recent acquisitions are noted below.

On August 3, 2020, Artesian Water completed the purchase of substantially all of
the water system operating assets from the City of Delaware City, a Delaware
municipality, or Delaware City, including the right to provide water service to
Delaware City's existing customers.  The total purchase price was $2.1 million.
Artesian Water had previously acquired the water assets of an area annexed by
Delaware City, known as Fort DuPont, which was earmarked for growth and
expansion of Delaware City.

On April 2, 2020, Artesian Water completed its purchase of substantially all of
the operating assets of the water system of the Town of Frankford, a Delaware
municipality, or Frankford, including the right to provide water service to
Frankford's existing customers, or the Frankford Water System.  Pursuant to the
terms of the agreement, Frankford transferred to Artesian Water all of
Frankford's right, title and interest in and to all of the plant and equipment,
associated real property, contracts, easements and permits possessed by
Frankford at closing related to the Frankford Water System.  The total purchase
price was $3.6 million. The Delaware Drinking Water State Revolving Fund issued
a $1.5 million appropriation in July 2021 to partially offset the purchase
price.

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 pending due diligence and approval by the Delaware Public
Service Commission related to the transfer of exclusive franchise territory.

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.

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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 will be 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.

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 intercompany 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies and estimates are those we believe are most
important to portraying the financial condition and results of operations and
also require significant estimates, assumptions or other judgments by
management.  The following provides an overview of the accounting policies that
are particularly important to the results of operations and financial condition
of the Company. Changes in the estimates, assumptions or other judgments
included within these accounting policies could result in a significant change
to the financial statements in any quarterly or annual period.  We consider the
following policies to be the most critical in understanding the judgment that is
involved in preparing our Consolidated Financial Statements.  Senior management
has discussed the selection and development of our critical accounting policies
and estimates with the Audit Committee of the Board of Directors.

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.  Cost includes direct labor, materials, AFUDC (see description in Note
1-Utility Plant) and indirect charges for items such as transportation,
supervision, pension, medical, and other fringe benefits related to employees
engaged in construction activities.  When depreciable units of utility plant are
retired, the historical costs of plant retired is charged to accumulated
depreciation.  Any cost associated with retirement, less any salvage value or
proceeds received, is charged to the regulated retirement liability.
Maintenance, repairs, and replacement of minor items of utility plant are
charged to expense as incurred.

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We record water service revenue, including amounts billed to customers, on a
cycle basis and unbilled amounts based upon estimated usage from the date of the
last meter reading to the end of the accounting period.  As actual usage amounts
are received, 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, using 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, we
believe the overall total estimate of consumption and revenue for the fiscal
period will not differ materially from actual billed consumption.

We record accounts receivable at the invoiced amounts.  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, the Company
experienced longer receivable cycles throughout 2020, and into 2021, related to
temporary executive orders issued by state governmental agencies requiring
utility companies to prohibit late fees and service disconnections for
non-payment, resulting in an adjustment to increase the reserve for bad debt.
Account balances are written off against the allowance when it is probable the
receivable will not be recovered.

The Financial Accounting Standards Board, or FASB, Accounting Standards
Codification, or ASC, Topic 980 stipulates generally accepted accounting
principles for companies whose rates are established or subject to approvals by
a third-party regulatory agency.  Our regulated utilities record deferred
regulatory assets under FASB ASC Topic 980, which are costs that may be
recovered over various lengths of time as prescribed by the DEPSC, MDPSC and
PAPUC.  As the utility incurs certain costs, such as expenses related to rate
case applications, a deferred regulatory asset is created.  Adjustments to these
deferred regulatory assets are made when the DEPSC, MDPSC or PAPUC determines
whether the expense is recoverable in rates, the length of time over which an
expense is recoverable, or, because of changes in circumstances, whether a
remaining balance of deferred expense is recoverable in rates charged to
customers.  In addition, our regulated utilities record deferred and/or
amortized regulatory liabilities under FASB ASC Topic 980, as determined by the
DEPSC, the MDPSC, and the 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.
Adjustments to reflect changes in recoverability of certain deferred regulatory
assets or certain deferred regulatory liabilities may have a significant effect
on our financial results.

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.

Our long-lived assets consist primarily of utility plant in service and
regulatory assets.  We review for impairment of our long-lived assets, including
utility plant in service, in accordance with the requirements of FASB ASC Topic
360.  We review regulatory assets for the continued application of FASB ASC
Topic 980.  Our review determines whether there have been changes in
circumstances or events that have occurred that require adjustments to the
carrying value of these assets.  Adjustments to the carrying value of these
assets would be made in instances where changes in circumstances or events
indicate the carrying value of the asset may not be recoverable in rates charged
to customers.  The Company believes there are no impairments in the carrying
amounts of its long-lived assets or regulatory assets at December 31, 2021.

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Results of Operations

2021 Compared to 2020

Operating Revenues

Revenues totaled $90.9 million for the year ended December 31, 2021, $2.7 millioni.e. 3.1%, more than the turnover for the year ended December 31, 2020.

Water sales revenue increased $1.3 million, or 1.8%, for the year ended December
31, 2021 from the corresponding period in 2020, primarily due to an increase in
fixed fee revenue related to customer growth and an increase in non-residential
consumption revenue.  We realized 85.7% and 86.8% of our total operating revenue
for the years ended December 31, 2021 and December 31, 2020, respectively, from
the sale of water.

Other utility operating revenue, predominately consisting of wastewater
revenues, increased approximately $0.7 million, or 10.3%, for the year ended
December 31, 2021 compared to the year ended December 31, 2020.  This increase
is mainly due to an increase in wastewater revenue related to residential
customer growth and housing development growth, mostly offset by a decrease in
industrial wastewater service revenue resulting from adjustments related to the
amounts recorded for the minimum required volume of wastewater under contract,
pursuant to a settlement agreement.  In addition, service and finance charges
increased, related to executive orders that were issued by state governmental
agencies in 2020 requiring utility companies to prohibit late fees and service
disconnections for non-payment that since have been lifted.

Non-utility operating revenue increased approximately $0.7 million, or 13.7%,
for the year ended December 31, 2021 compared to the same period in 2020.  The
increase is primarily due to an increase in contract service revenue related to
a contract for the design and construction of wastewater infrastructure for a
third party and an increase in Service Line Protection Plan revenue.

Percentage of operating revenue

                                      2021        2020        2019
Water Sales
Residential                           53.0 %      53.8 %      52.8 %
Commercial                            19.4        19.5        21.0
Industrial                             0.1         0.1         0.1
Government and Other                  13.2        13.4        14.1

Other utility operating revenue 7.9 7.4 5.9 Non-utility operating revenue 6.4 5.8 6.1 Total

                                100.0 %     100.0 %     100.0 %



Residential

Residential water service revenues in 2021 amounted to $48.2 million, an
increase of $0.8 million, or 1.7%, above the $47.4 million recorded in 2020,
primarily due to an increase in fixed fee revenue related to customer growth and
an increase in overall water consumption.  The volume of water sold to
residential customers increased to 4,230 million gallons in 2021 compared to
4,209 million gallons in 2020, a 0.5% increase.  The number of residential
customers served increased by approximately 1,400, or 1.6%, in 2021.

Commercial

Water service revenues from commercial customers in 2021 increased by 2.6%, to
$17.6 million in 2021 from $17.2 million in 2020, primarily due to an increase
in overall water consumption.  The volume of water sold to commercial customers
increased to 2,237 million gallons in 2021 compared to 2,180 million gallons
sold in 2020, an increase of 2.6%.

Industrial

Revenue from water supply to industrial customers fell to $49,000 in 2021 from $71,000 in 2020. The volume of water sold to industrial customers increased from 9.2 million gallons in 2020 to 5.3 million gallons in 2021.

Government and others

Government and other water service revenues in 2021 increased by 1.0%, to $12.0
million in 2021 from $11.8 million in 2020, primarily due to an increase in
overall water consumption.  The volume of water sold to government and other
customers increased to 1,155 million gallons in 2021 compared to 1,050 million
gallons in 2020, an increase of 10.0%.

Other utility operating revenue

Other utility operating revenue, derived from regulated wastewater services,
contract operations, antenna leases on water tanks, finance/service charges,
wastewater customer service revenues and industrial wastewater service revenues,
increased 10.3%, from $6.5 million in 2020 to $7.2 million in 2021.  This
increase is primarily due to an increase in wastewater revenue related to
residential customer growth and housing development growth, mostly offset by a
decrease in industrial wastewater service revenue.  In addition, service and
finance charges increased, related to executive orders that were issued by state
governmental agencies in 2020 requiring utility companies to prohibit late fees
and service disconnections for non-payment that since have been lifted.

Non-Utility Operating Revenues

Non-utility operating revenue, derived from non-regulated water and wastewater
operations, increased by 13.7%, to $5.8 million in 2021 from $5.1 million in
2020. The increase is primarily due to an increase in contract service revenue
related to a contract for the design and construction of wastewater
infrastructure for a third party and an increase in Service Line Protection Plan
revenue.

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Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $1.9
million, or 4.0%, for the year ended December 31, 2021 compared to the year
ended December 31, 2020.  The components of the change in operating expenses
primarily include an increase in utility operating expenses of $1.1 million, an
increase in non-utility operating expenses of $0.7 million and an increase in
property and other taxes of $0.2 million.

Utility operating expenses increased $1.1 millionor 2.7%, for the year ended
December 31, 2021 compared to the year ended December 31, 2020. The net increase is mainly related to the following items.

Repair and maintenance costs have increased $1.0 millionrelated to an increase in

maintenance costs primarily associated with water and wastewater treatment

installations and equipment, an increase in the replacement of water treatment filters, a

increased paint costs for contracted tanks and increased fuel costs.

Increase in salary costs and benefits $0.4 millionmainly related to

an increase in total compensation.

Water treatment costs have increased $0.1 millionmainly due to an increase

chemicals and related equipment in 2021 in water and wastewater

operations.

Administrative costs have decreased $0.5 millionmainly due to a decrease in bad

provision for debt related to non-payment of water customer balances

resulting from the COVID-19 pandemic, which was partially offset by increases

training and overall employee costs, legal fees associated with

transition from the 401(k) retirement plan to a new registrar, and a

settlement agreement regarding the payment of royalties by an industrial wastewater treatment plant

 customer.



Non-utility operating expenses increased 20.3%, primarily due to an increase in
costs associated with the wastewater infrastructure design and construction
contract, an increase in plumbing services related to Service Line Protection
Plan repairs, and an increase in payroll and employee benefit costs.

Property and other taxes increased $0.2 million, or 3.4%, 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.

Percentage of operating and maintenance expenses

                                     2021        2020        2019
Payroll and Associated Expenses      49.9 %      51.0 %      50.1 %
Administrative                       12.3        14.1        13.6
Purchased Water                       9.5         9.9         9.9
Repair and Maintenance               10.2         8.3         9.3
Purchased Power                       5.4         5.5         5.5
Water Treatment                       4.0         3.7         3.8
Non-utility Operating                 8.7         7.5         7.8

Total                               100.0 %     100.0 %     100.0 %

The ratio of operating expenses, excluding depreciation and income taxes, to total sales was 56.1% for the year ended December 31, 2021compared to 55.6% for the year ended December 31, 2020.

Depreciation and amortization expense increased $0.7 million, or 6.7%, primarily
due to continued investment in utility plant providing supply, treatment,
storage and distribution of water to customers and service to our wastewater
customers.

Other Income, Net

Other income, net remained consistent.  Miscellaneous income increased $0.3
million related to an increase in the annual patronage refund from CoBank, ACB.
The primary refund calculation for both 2021 and 2020 was based on 0.8% of the
average loan balance outstanding.  In addition, a special patronage distribution
based on 0.2% and 0.1% of the average loan balance outstanding was refunded in
March 2021 and March 2020, respectively.  Allowance for funds used during
construction, or AFUDC, decreased $0.3 million as a result of lower long-term
construction activity subject to AFUDC for the twelve months ended December 31,
2021 compared to the same period in 2020.

Interest charges

Long-term debt interest decreased $0.1 million, primarily related to amortizing
debt.  Short-term debt interest increased $0.1 million, primarily related to
higher short-term borrowing levels throughout 2021.

Net revenue

Our net earnings applicable to common shares remained constant. Operating revenue increased $2.7 millionwhile operating costs have increased $2.7 million.

Part I, item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 Annual Report on Form 10-K includes a comparative analysis of the fiscal years ended December 31, 2020 and 2019 and is incorporated herein by reference.

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Cash and capital resources

Overview

The Company's primary sources of liquidity for the year ended December 31, 2021
were $31.9 million of cash provided by operating activities, $15.8 million in
net contributions and advances from developers, $4.1 million from the issuance
of long-term debt and $1.4 million in net proceeds from the issuance of common
stock.  These funds were used to invest $41.5 million in capital expenditures
and to pay dividends of approximately $9.8 million.

We depend on the availability of capital for expansion, construction and
maintenance. We rely on our sources of liquidity for investments in our utility
plant and to meet our various payment obligations. We expect that our net
investments in utility plant in 2022 will be approximately $50.4 million. Our
total obligations related to interest and principal payments on indebtedness,
rental payments, elevated storage tank agreements and water service
interconnection agreements for 2022 are anticipated to be approximately $10.4
million.

Operating Activities

Our primary source of liquidity for the year ended December 31, 2021 was $31.9
million provided by cash flow from operating activities.  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 Activities

The primary focus of our investment in 2021 was to continue to provide high
quality reliable service to our growing service territory. Capital expenditures
during 2021 were $40.8 million compared to $40.0 million invested during the
same period in 2020.  During 2021, we invested approximately $18.4 million for
our rehabilitation program for transmission and distribution facilities by
replacing aging or deteriorating mains and for installing new mains.  We
invested $8.5 million to enhance or improve existing treatment facilities and
replace aging wells and pumping equipment to better serve our customers.  We
invested $1.7 million for equipment purchases, computer hardware and software
upgrades and transportation equipment.  Developers financed $6.4 million for the
installation of water mains and hydrants in 2021 compared to $4.1 million in
2020.  We invested $1.2 million to upgrade and automate our meter reading
equipment.  We invested approximately $2.5 million in mandatory utility plant
expenditures due to governmental highway projects, which required the relocation
of water service mains in addition to facility improvements and upgrades.  We
invested $2.1 million in wastewater projects in Delaware.

The following chart summarizes our investment in plant and systems over the past
three fiscal years

In thousands                                              2021         2020         2019

Source of supply, treatment and pumping               $  9,681     $ 14,999     $ 13,000
Transmission and distribution                           20,951       15,993       13,789
General plant and equipment                              1,739        3,089        3,180
Developer financed utility plant                         6,866        4,132 

4,573

Wastewater facilities                                    2,133        2,586 

7,021

Allowance for Funds Used During Construction, AFUDC       (556 )       (781 )       (886 )
Total                                                 $ 40,814     $ 40,018     $ 40,677


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Of the $67.2 million gross investment expected in 2022, approximately $15.1
million will be invested in upgraded and improved booster stations, a new
elevated storage tank, new water treatment facilities, water treatment facility
upgrades, equipment and wells throughout Delaware, Maryland, and Pennsylvania to
identify, develop, treat, and protect sources of water supply to assure
uninterrupted service to our customers.  Approximately $12.5 million will be
invested in renewals associated with the rehabilitation of aging
infrastructure.  Approximately $12.3 million will be for extending transmission
and distribution facilities to address service needs in growth areas of our
service territory.  Approximately $8.7 million will be invested in the
construction of force mains used for the transmission of wastewater to plants.
Approximately $8.0 million will be invested into the ongoing construction of a
regional wastewater treatment plant along with improvements to existing
wastewater treatment plants and wastewater pumping stations.  Approximately $4.9
million will be invested in the relocations of facilities as a result of
government mandates.  Approximately $4.8 million will be invested in general
plant, which includes transportation and equipment upgrades, new corporate
automation, and building renovations.  Additionally, we will refund $0.9 million
to customers, real estate developers and builders related to previous advances
for construction they provided to Artesian for distribution facilities on their
properties.

Our projected capital expenditures and other investments are subject to periodic
review, and revision to reflect changes in economic conditions and other
factors.  The Company's investment for 2022 is expected to be offset by
developer contributions of $10.8 million and grant funds from the State of
Delaware of $6.0 million, for a net investment of $50.4 million in 2022. The
Company believes the net investment in utility plant will continue to be
recovered through rates charged to customers.

Fundraising activities

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.  We expect to fund our activities for the
next twelve months using our projected cash generated from operations, bank
credit lines, a $30 million first mortgage bond, state revolving fund loans,
government grants, and other capital market financing as needed to provide
sufficient working capital to maintain normal operations, to meet our financing
requirements and to expand through strategic acquisitions.  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.

Material Cash Requirements

Lines of credit and long-term debt

At December 31, 2021, 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 December 31, 2021, there was $31.3 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 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 December 31, 2021, 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 December 31, 2021, 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 patronage refunds earned by Artesian Water
for 2021 and 2020 were $1.4 million and $1.0 million respectively.  The term of
this line of credit expires on July 30, 2022. Artesian Water expects to renew
this line of credit.

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

Material Cash Requirements                              Payments Due by Period
                                    Less than           1-3           4-5       After 5
In thousands                           1 Year         Years         Years         Years         Total
First mortgage bonds (principal
and interest)                     $     6,623     $  13,169     $  13,056     $ 188,219     $ 221,067
State revolving fund loans
(principal and interest)                  820         1,535         1,122         4,336         7,813
Lines of credit                        26,703           ---           ---           ---        26,703
Promissory note (principal and
interest)                                 961         1,921         1,923        11,576        16,381
Operating leases                           29            48            49         1,335         1,461
Operating agreements                       63            77            81           825         1,046
Unconditional purchase
obligations                             1,518         1,489         1,403           ---         4,410
Tank painting contractual
obligation                                392           588           ---           ---           980
Total contractual cash
obligations                       $    37,109     $  18,827     $  17,634     $ 206,291     $ 279,861


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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 December
31, 2021, we were in compliance with these covenants.

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 February 7, 2022, Artesian Water entered into an interest rate lock
agreement, or the Agreement, with CoBank.  The Company is seeking to finance a
$30 million principal amount First Mortgage Bond, or the Bond.  The Agreement
allows for a maturity period of 25 years and a fixed interest rate of 4.43% per
annum, or the Fixed Rate, for the Bond.  The Agreement is effective through May
7, 2022, or the Settlement Date.  Pursuant to the Agreement, the Bond is not
subject to redemption based on mortgage style amortization.  Interest on the
outstanding principal balance will be payable quarterly on the 30th day of
January, April, July and October each year.  The proceeds from the sale of the
Bond shall be used to pay down outstanding lines of credit of Artesian Water,
with any additional proceeds used to fund future capital investments in Artesian
Water.  Closing on the debt financing is subject to approval by the DEPSC.  Also
pursuant to the Agreement, the Company agrees to pay to CoBank, on demand, a
broken funding charge if the Company does not, for any reason whatsoever, borrow
the entire $30 million principal amount on or before the Settlement Date.  The
broken funding charge shall be in an amount equal to the present value of the
sum of all losses and expenses incurred by CoBank in retiring, liquidating, or
reallocating any debt, obligation, or cost incurred or allocated by CoBank to
fund or hedge the Fixed Rate.

On July 15, 2021, Artesian Water entered into a Financing Agreement, or the
Financing Agreement, with the Delaware Drinking Water State Revolving Fund,
acting by and through the Delaware Department of Health & Social Services,
Division of Public Health, a public agency of the state of Delaware, or the
Department.  Under the Financing Agreement, the Department agreed to advance to
Artesian Water up to approximately $2.5 million, or the Loan, to finance all or
a portion of the cost to acquire the Town of Frankford water system and to
replace water transmission mains and renew services and hydrants in the Town of
Frankford, collectively, the Project.  In accordance with the Financing
Agreement, Artesian Water will from time to time request funds under the Loan as
it incurs costs in connection with the Project.  Artesian Water requested an
initial draw of approximately $1.5 million for the acquisition of the Town of
Frankford water system.  Upon receipt of the initial draw, an amount equal to
approximately $1.5 million was forgiven by the Department and is no longer
considered outstanding or unpaid principal under the Financing Agreement.  The
Company shall pay to the Department, on the principal amount drawn down and
outstanding from the date drawn, interest at a rate of 1.0% per annum and an
administrative fee at the rate of 1.0% per annum.

On April 28, 2020, Artesian Water entered into three financing agreements, or
the Financing Agreements, with the Delaware Drinking Water State Revolving Fund,
acting by and through the Delaware Department of Health & Social Services,
Division of Public Health, a public agency of the state of Delaware, or the
Department.  Under the Financing Agreements, the Department agreed to advance to
Artesian Water up to approximately $1.7 million, $1.0 million and $1.3 million,
collectively, the Loans, to finance all or a portion of the costs to replace
specific water transmission mains in service areas located in New Castle County,
Delaware, collectively, the Projects.  The Company shall pay to the Department,
on the principal amount drawn down and outstanding from the date drawn, interest
at a rate of 0.6% per annum and an administrative fee at the rate of 0.6% per
annum.  As of December 31, 2021, the full amount that will be borrowed under the
Loans is approximately $2.6 million.

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.

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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.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 18 to our Consolidated Financial Statements for a full description of the impact of recent accounting pronouncements.

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