FORM 10-Q

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

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act.

As of June 30, 2003, 3,292,293 shares of Class A Non-Voting Common Stock and 587,680 shares of Class B Common Stock were outstanding.

PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS

Artesian Resources Corporation ("Artesian Resources") is a non-operating holding company, whose income is derived from the earnings of our four wholly owned subsidiary companies and our one-third interest in AquaStructure, a Limited Liability Corporation whose primary activity is marketing wastewater services. Artesian Water Company, Inc. ("Artesian Water"), our principal subsidiary, is the oldest and largest public water utility in the State of Delaware and has been providing water service within the state since 1905. We distribute and sell water to residential, commercial, industrial, governmental, municipal and utility customers throughout Delaware. In addition, we provide services to other water utilities, including operations and billing functions, and have contract operation agreements with thirteen private and municipal water providers.

At June 30, 2003, the Company had three stock-based compensation plans. The Company applies APB Opinion No. 25 and related interpretations in accounting for compensation expense under its plans. Accordingly, the aggregate compensation cost that has been charged against income for the three plans was $18,900 and $19,200 for the three months ended June 30, 2003 and 2002, respectively and $18,700 and $21,600 for the six months ended June 30, 2003 and 2002, respectively. Had compensation cost for the Company's three plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method required by Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation," the Company's net income and net income per common share would have been reduced to the pro-forma amounts indicated below:

Certain expenses are recoverable through rates, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the Delaware Public Service Commission ("Delaware PSC"). Expenses related to rate proceedings are amortized on a straight-line basis over a period of two years. The postretirement benefit obligation, which is being amortized over 20 years, is adjusted for the difference between the net periodic postretirement benefit costs and the cash payments. The deferred income taxes will be amortized over future years as the tax effects of temporary differences previously flowed through to the customers reverse. Regulatory assets at June 30, net of amortization, comprise:

The office building and shop complex utilized by Artesian Water are leased at an average annual rental of $173,000 from the former partners of White Clay Realty who now own the property jointly as tenants in common. Certain of Artesian Resources' officers and directors (Dian C. Taylor and John R. Eisenbrey, Jr.) are a tenant in common or the beneficiary of a tenant in common. The current rental of $173,000 is below market rates. In December of 2002, Artesian Water filed a condemnation action in the Delaware Superior Court, seeking to acquire title to the office and shop complex currently leased by Artesian Water, known as 664 Churchmans Road, Newark, Delaware (the "Property"). Artesian Water filed this action under its statutory power of eminent domain against the owner of the Property, White Clay Realty, a Delaware Limited Partnership, and each of the limited partners. The Superior Court ruled that since White Clay Realty has no general partner, the partnership is dissolved and all of the former partners own the Property jointly as tenants in common. A special committee of the Board of Directors of Artesian Resources, composed entirely of outside directors who have no ownership interest in the Property, made the determination to purchase the Property through the condemnation procedures. Under this procedure, if the acquisition of the Property is approved by the court, the fair market value of the Property will be determined by a panel of commissioners after an evidentiary hearing. Artesian Water's independent appraiser has valued the Property to be worth $3,800,000. In December 2002, Artesian Water issued a payment to the Prothonotary for the State of Delaware for $3,800,000. As the court has delayed payment until the matter is decided, the amount was refunded to Artesian in June 2003. Until a final determination of the condemnation, the parties have agreed that Artesian Water may continue to occupy the Property under the terms of the lease with a quarterly rental payment of $43,361. Pursuant to a deadline set by the Superior Court, the owners of the Property have submitted an independent appraisal that values the Property to be worth $4,800,000. If the parties are unable to agree on a purchase price, the condemnation case will proceed in the Superior Court.

Expenses associated with related party transactions are as follows:

Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding and the potentially dilutive effect of employee stock options. The following table summarizes the shares used in computing basic and diluted net income per share:

Equity per common share was $13.37 and $12.99 at June 30, 2003 and 2002, 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, 2003 and 2002, respectively.

In April 2003, the FASB issued Statement No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies financial accounting and reporting related to derivatives and hedging activities under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement is effective for contracts entered into or modified, and hedging relationships designated, after June 30, 2003. This statement has no applicability to Artesian Water Company, Inc.

In May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The statement is effective for financial instruments entered into or modified after May 31, 2003 and effective for other instruments beginning at the first interim period beginning after June 15, 2003. Our adoption of this statement will not have a material impact on our financial condition or results of operation.

On April 2, 2002, Artesian Water filed a petition with the Delaware PSC seeking to raise rates for water service by 23.12% or $7.5 million. The Delaware PSC, on April 16, 2002, suspended the implementation of the proposed new rates pending further investigation and public evidentiary hearings. Pending these hearings and a final ruling by the Delaware PSC, Artesian Water, as is permitted by law, placed 7.71% of the proposed rates into effect under bond beginning June 1, 2002. Beginning December 3, 2002, Artesian Water placed an additional 3.69% of the proposed rates into effect. On April 15, 2003, the Delaware PSC issued PSC Order No. 6147 approving an increase in Artesian Water's revenue requirement of 9.68% effective May 1, 2003. These rates represent an increase in water consumption charges, customer charges, and fire hydrant ready-to-serve charges necessary to generate an increase in annual operating revenues of approximately $3.3 million. Since temporary rates were in excess of the final rate increase, in June 2003 we refunded approximately $201,000 plus interest to our customers. Since the Company had reserved revenue related to the second temporary increase of approximately $234,000, $33,000 was recorded to revenue.

Delaware statute permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a Distribution System Improvement Charge (DSIC). This charge is available to water utilities to be implemented between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC process significantly reduces expenses when compared to those typically associated with general rate increase requests. We requested on May 30, 2003 and subsequently implemented a 0.39% overall surcharge for bills rendered subsequent to July 1, 2003. Through this charge, we expect to generate approximately $75,000 in revenues during 2003.

On April 30, 2003, the Company's Board of Directors approved a three for two stock split in the form of a stock dividend. The Company's Board of Directors also declared a cash dividend of $0.1983 (post-split basis) per share, the payment of which was based on the number of shares outstanding on May 12, 2003, prior to the May 30, 2003 effective date of the stock split. All share and per share information have been restated to retroactively show the effect of the stock split.

Our profitability is primarily attributable to the sale of water by Artesian Water, the amount of which is dependent on seasonal fluctuations in weather, particularly during the summer months when water demand may vary with rainfall and temperature.

While customer growth in our utility subsidiary will continue to be a major focus in 2003, we are aggressively seeking opportunities that produce revenue streams that are not as directly affected by weather. These opportunities include our wastewater management subsidiary's operation of a new spray irrigation wastewater treatment facility with a capacity of 2.5 million-gallons-per-day for the town of Middletown, Delaware, which began operations in the third quarter of 2002. In addition, we will continue to focus attention on expanding our contract operations opportunities with municipalities and private water providers in Delaware and surrounding areas.

Ensuring our customers have a dependable supply of safe, high-quality water has been, and will continue to be, a high priority. We expect to make investments in 2003 that will increase our sources of water and enhance our ability to deliver supply from our Aquifer Storage and Recovery Program. We are the first and only water utility in Delaware to utilize this technology that capitalizes on Delaware's unique geology to provide storage capacity for water to be used during periods of peak water demand.

Regulatory Matters and Inflation

As of June 30, 2003, we had approximately 69,000 metered customers and serviced a population of approximately 228,000, representing approximately 28% of Delaware's total population. The Delaware PSC regulates Artesian Water's rates charged for water service, the sale and issuance of our securities and other matters. We periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business. In Delaware, utilities are permitted to place rates into effect on a temporary basis pending completion of a rate increase proceeding. If such rates are found to be in excess of rates the PSC finds to be appropriate, the utility must refund the portion found in excess to customers with interest. Increases in the number of customers served by Artesian Water also contribute to increases in our operating revenues.

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 costs, compared to investments made 20 to 40 years ago, which must be recovered, from future cash flows.

Delaware statute permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a Distribution System Improvement Charge (DSIC). This charge is available to water utilities to be implemented between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC process significantly reduces expenses when compared to those typically associated with general rate increase requests. We requested on May 30, 2003 and subsequently implemented a 0.39% overall surcharge for bills rendered subsequent to July 1, 2003. Through this charge, we expect to generate approximately $75,000 in revenues during 2003.

Revenues totaled $9.5 million and $18.0 million for the quarter and six months ended June 30, 2003, 9.4% and 9.8% above revenues for the quarter and six months ended June 30, 2002. Water sales revenues increased 7.7% for the quarter and 8.3% for the six months ended June 30, 2003 over the corresponding periods in 2002 due to customer growth and rate increases approved by the Delaware PSC. The remaining increase in operating revenues is primarily due to additional revenues generated by wastewater services. We realized 96.2% and 96.4% of our total revenue for the quarter and six months ended June 30, 2003 from the sale of water.

In addition, Artesian Wastewater Management, our non-regulated subsidiary, provides wastewater management and operations service for two wastewater treatment plants in Delaware. These services provide us with another source of revenue and are outside of the regulatory environment. Non-utility Operating Revenue from wastewater services increased $93,000 and $180,000 for the quarter and six months ended June 30, 2003, over the same period last year. This increase reflects the start of operation services for the second plant during the summer of 2002.

Operating expenses, excluding depreciation and taxes, decreased $68,000, or 1.4%, to $4.7 million for the quarter ended June 30, 2003, and increased $160,000 for the six months ended June 30, 2003 compared to the same period a year ago. The decrease in operating expenses resulted primarily from a decrease during the quarter ended June 30, 2003 in consulting and temporary services of $78,000 and a decrease in rate case expenses of $56,000 due to the write-off of 2000 rate case expense upon the implementation of temporary rates related to the 2002 rate case in June 2002. Those decreases were partially offset by an increase in labor and benefits. The increase in operating expenses for the six months ended June 30, 2003 resulted primarily from an increase in payroll and related expense of $318,000, or 6.8%, principally due to increases in annual merit compensation, additional positions and an increase in employee benefit expense. The ratio of operating expense, excluding depreciation and taxes, to total revenue was 53.6% for the six months ended June 30, 2003, compared to 57.9% for the six months ended June 30, 2002. Purchased water expense will increase in the second half of the year as we fulfill our minimum take obligations.

Depreciation and amortization expense increased $81,000 and $116,000, or 10.0% and 7.2% over the quarter and six months ended June 30, 2002 due to increases in our utility plant in service. Income tax expense increased $181,000 and $308,000 due to increased profitability for the quarter and six months ended June 30, 2003 over the quarter and six months ended June 30, 2002.

Interest charges increased $116,000 and $155,000, or 10.4% and 7.0%, over the quarter and six months ended June 30, 2002, primarily due to an increase in interest related to the $25 million Series P First Mortgage Bond issued on January 31, 2003. This bond issuance replaced the Series L 8.03% $10 million bond and paid down our line of credit.

For the quarter and six months ended June 30, 2003, our net income applicable to common stock increased $319,000 and $491,000 compared to the same periods in 2002. The increase in net income was primarily due to rate increases authorized in 2002, continued customer growth and control of expenses.

Our primary sources of liquidity for the six months ended June 30, 2003 were $9.6 million primarily from cash flow from operating activities. Cash flow from operating activities was primarily provided by our utility operations, and was impacted by the timeliness and adequacy of rate increases. It included the refund of $3.8 million by the Prothonotary for the State of Delaware until a final determination of the condemnation action for ownership of our office and shop complex is obtained.

A significant part of our ability to maintain and meet our financial objectives is to assure 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. On April 2, 2002, Artesian Water filed a petition with the Delaware PSC seeking to raise rates for water service and on April 15, 2003, the Delaware PSC issued PSC Order No. 6147 approving an increase in Artesian Water's revenue requirement of 9.68% effective May 1, 2003. These rates represent an increase in water consumption charges, customer charges, and fire hydrant ready-to-serve charges necessary to generate an increase in annual operating revenues of approximately $3.3 million.

At June 30, 2003, Artesian Water had lines of credit with three separate financial institutions totaling $35.0 million to meet its temporary cash requirements. These revolving credit facilities are unsecured. As of June 30, 2003, we had $31.1 million of available funds under these lines. The interest rate for borrowings under each of these lines is the London Interbank Offering Rate plus 1.0% or, at our discretion, the bank's federal funds rate plus 1.0%. At June 30, 2003 our rate on these lines was 2.30%. All the facilities are reviewed annually by each bank for renewal. Our cash from operations and lines of credit are sufficient to meet our financial obligations for the next twelve months.

On February 21, 2003, Artesian Resources redeemed all 10,868 shares of our 7% Prior Preferred Stock. We incurred $54,000 in redemption premium costs associated with this buy-back.

CAUTIONARY STATEMENT

Statements in this Quarterly Report on Form 10-Q which express our "belief," "anticipation" or "expectation," as well as other statements which are not historical fact including statements regarding our customer growth, contract operations opportunities, investment plans in 2003, revenues from DSIC and a dependable supply of safe, high-quality water the initiation of temporary rates, our investment plans in 2002 and whether we will conduct a debt offeringare forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from those projected. Certain factors, such as competitive market pressures, material changes in demand from larger customers, changes in weather, changes in government policies, changes in economic conditions, and other matters could cause results to differ materially from those in the forward-looking statements. The CompanyThe Company does not undertake to update any of the forwarding looking statements included in the Quarterly Report on Form 10-Q.

On April 2, 2002, Artesian Water filed a petition with the Delaware PSC seeking to raise rates for water service by 23.12% or $7.5 million. The Delaware PSC, on April 16, 2002, suspended the implementation of the proposed new rates pending further investigation and public evidentiary hearings. Pending these hearings and a final ruling by the Delaware PSC, Artesian Water, as is permitted by law, placed 7.71% of the proposed rates into effect under bond beginning June 1, 2002. Beginning December 3, 2002, Artesian Water placed an additional 3.69% of the proposed rates into effect. On April 15, 2003, the Delaware PSC issued PSC Order No. 6147 approving an increase in Artesian Water's revenue requirement of 9.68% effective May 1, 2003. These rates represent an increase in water consumption charges, customer charges, and fire hydrant ready-to-serve charges necessary to generate an increase in annual operating revenues of approximately $3.3 million. Since temporary rates were in excess of the final rate increase, in June 2003 we refunded approximately $201,000 plus interest to our customers. Since the Company had reserved revenue related to the second temporary increase of approximately $234,000, $33,000 was recorded to revenue.

The office building and shop complex utilized by Artesian Water are leased at an average annual rental of $173,000 from the former partners of White Clay Realty who now own the property jointly as tenants in common. Certain of Artesian Resources' officers and directors (Dian C. Taylor and John R. Eisenbrey, Jr.) are a tenant in common or the beneficiary of a tenant in common. The current rental of $173,000 is below market rates. In December of 2002, Artesian Water filed a condemnation action in the Delaware Superior Court, seeking to acquire title to the office and shop complex currently leased by Artesian Water, known as 664 Churchmans Road, Newark, Delaware (the "Property"). Artesian Water filed this action under its statutory power of eminent domain against the owner of the Property, White Clay Realty, a Delaware Limited Partnership, and each of the limited partners. The Superior Court has ruled that since White Clay Realty has no general partner, the partnership is dissolved and all of the former partners own the Property jointly as tenants in common. A special committee of the Board of Directors of Artesian Resources, composed entirely of outside directors who have no ownership interest in the Property, made the determination to purchase the Property through the condemnation procedures. Under this procedure, if the acquisition of the Property is approved by the court, the fair market value of the Property will be determined by a panel of commissioners after an evidentiary hearing. Artesian Water's independent appraiser has valued the Property to be worth $3,800,000. In December 2002, Artesian Water issued a payment to the Prothonotary for the State of Delaware for $3,800,000. As the court has delayed payment until the matter is decided, the amount was refunded to Artesian in June 2003. Until a final determination of the condemnation, the parties have agreed that Artesian Water may continue to occupy the Property under the terms of the lease with a quarterly rental payment of $43,361. Pursuant to a deadline set by the Superior Court, the owners of the Property have submitted an independent appraisal that values the Property to be worth $4,800,000. If the parties are unable to agree on a purchase price, the condemnation case will proceed in the Superior Court.

There are no other material legal proceedings pending at this date.

Not applicable.

Not applicable.

Directors are elected by a plurality of the votes cast; therefore, votes cast in the election could not be recorded against or as an abstention, nor could broker-non votes be recorded.

Not applicable.

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

Exhibit 99.1

Exhibit 99.2

Exhibit 99.3

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Artesian Resources Corporation and will be retained by Artesian Resources Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 99.4

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Artesian Resources Corporation and will be retained by Artesian Resources Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 10.4