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FORM 10-QSB
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For Quarter Ended December 31, 2005
 Commission File Number: 00-18235
 Eldorado Artesian Springs, Inc.
  Colorado
    
    84-0907853(State or other jurisdiction of incorporation)
    
    (IRS Employer Identification No.)
Or organization)1783 Dogwood Street Louisville, Colorado
    
    80027(Address of principal executive offices)
    
    (Zip Code)
  
  þ o
 
  o þ
  o þ




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ELDORADO ARTESIAN SPRINGS, INC.
 INDEX
 PagePart I  Financial InformationItem 1 - Financial StatementsBalance Sheets as of December 31, 2005 (Unaudited) and March 31, 2005
    
    
    3Unaudited Statements of Operations For the Three and Nine Months Ended
December 31, 2005 and December 31, 2004
    
    
    4Unaudited Statements of Cash Flows For the Nine Months Ended
December 31, 2005 and December 31, 2004
    
    
    5Notes to Unaudited Financial Statements
    
    
    6Item 2 - Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    9Item 3  Controls and Procedures
    
    
    16Part II  Other Information
    
    
    17Signatures and Exhibit Index
    
    
    18Certification Pursuant to Section 302 by the Chief Executive OfficerCertification Pursuant to Section 302 by the Chief Financial OfficerCertification Pursuant to Section 906 by the Chief Executive OfficerCertification Pursuant to Section 906 by the Chief Financial Officer
  2




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Balance Sheets
 December 31,
    
    
    March 31,2005
    
    
    2005(Unaudited)AssetsCurrent assetsCash
    
    $
    135,533
    
    
    $
    38,702Accounts receivableTrade, net of allowance of 80,000
    
    
    798,056
    
    
    
    755,837Other
    
    
    
    
    
    
    14,830Inventories
    
    
    304,884
    
    
    
    240,733Prepaid expenses and other
    
    
    63,584
    
    
    
    78,252Income tax receivable
    
    
    
    
    
    
    30,687Deferred tax asset
    
    
    29,064
    
    
    
    29,064Total current assets
    
    
    1,331,121
    
    
    
    1,188,105Non-current assetsProperty, plant and equipment  net
    
    
    4,234,837
    
    
    
    4,434,651Notes receivable  related party
    
    
    537,680
    
    
    
    508,356Water rights  net
    
    
    80,210
    
    
    
    83,576Deposits
    
    
    14,004
    
    
    
    16,089Other  net
    
    
    139,694
    
    
    
    154,100Total non-current assets
    
    
    5,006,425
    
    
    
    5,196,772Total
    
    $
    6,337,546
    
    
    $
    6,384,877Liabilities and Stockholders EquityCurrent liabilitiesLine of credit
    
    $
    306,150
    
    
    $
    300,000Accounts payable
    
    
    335,991
    
    
    
    245,756Accrued expenses
    
    
    237,172
    
    
    
    236,375Customer deposits
    
    
    104,556
    
    
    
    83,948Current portion of capital lease obligations
    
    
    
    
    
    
    31,635Current portion of long-term debt
    
    
    142,801
    
    
    
    141,249Total current liabilities
    
    
    1,126,670
    
    
    
    1,038,963Non-current liabilitiesLong-term debt, less current portion
    
    
    3,106,239
    
    
    
    3,212,466Deferred tax liability
    
    
    181,014
    
    
    
    189,569Deferred gain on the sale of real estate
    
    
    357,544
    
    
    
    357,544Total non-current liabilities
    
    
    3,644,797
    
    
    
    3,759,579Total liabilities
    
    
    4,771,467
    
    
    
    4,798,542Commitments and contingenciesStockholders equityPreferred stock, par value $.001 per share;
10,000,000 shares authorized; 0 issued and
outstanding
    
    
    
    
    
    
    Common stock, par value $.001 per share;
50,000,000 shares authorized; 2,995,495
issued and outstanding
    
    
    2,995
    
    
    
    2,995Additional paid-in capital
    
    
    1,416,107
    
    
    
    1,416,107Retained earnings
    
    
    146,977
    
    
    
    167,2331,566,079
    
    
    
    1,586,335Total
    
    $
    6,337,546
    
    
    $
    6,384,877
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Operations
 For the Three Months Ended
    
    
    For the Nine Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004RevenueWater and related
    
    $
    1,804,849
    
    
    $
    1,780,651
    
    
    $
    5,872,109
    
    
    $
    5,743,269Resort operations
    
    
    4,320
    
    
    
    3,000
    
    
    
    106,931
    
    
    
    71,663Net revenue
    
    
    1,809,169
    
    
    
    1,783,651
    
    
    
    5,979,040
    
    
    
    5,814,932Cost of goods sold
    
    
    331,444
    
    
    
    233,824
    
    
    
    1,168,992
    
    
    
    868,768Gross profit
    
    
    1,477,725
    
    
    
    1,549,827
    
    
    
    4,810,048
    
    
    
    4,946,164Operating expensesSalaries and related
    
    
    742,201
    
    
    
    729,216
    
    
    
    2,351,821
    
    
    
    2,337,229Administrative and
general
    
    
    398,105
    
    
    
    344,271
    
    
    
    1,168,453
    
    
    
    1,159,278Delivery
    
    
    208,353
    
    
    
    179,927
    
    
    
    614,210
    
    
    
    543,743Advertising and
promotions
    
    
    52,532
    
    
    
    120,415
    
    
    
    197,054
    
    
    
    560,214Depreciation and
amortization
    
    
    118,308
    
    
    
    128,818
    
    
    
    359,608
    
    
    
    400,0151,519,499
    
    
    
    1,502,647
    
    
    
    4,691,146
    
    
    
    5,000,479Operating (loss) income
    
    
    (41,774
    )
    
    
    47,180
    
    
    
    118,902
    
    
    
    (54,315
    )Other income (expense)Interest income
    
    
    9,956
    
    
    
    7,480
    
    
    
    29,324
    
    
    
    22,857Interest expense
    
    
    (61,168
    )
    
    
    (47,887
    )
    
    
    (180,482
    )
    
    
    (155,216
    )(51,212
    )
    
    
    (40,407
    )
    
    
    (151,158
    )
    
    
    (132,359
    )Net (loss) income
before provision for
income taxes
    
    
    (92,986
    )
    
    
    6,773
    
    
    
    (32,256
    )
    
    
    (186,674
    )Income tax benefit
(expense)
    
    
    33,000
    
    
    
    (2,000
    )
    
    
    12,000
    
    
    
    65,000Net (loss) income
    
    $
    (59,986
    )
    
    $
    4,773
    
    
    $
    (20,256
    )
    
    $
    (121,674
    )Basic (loss) earnings
per common share
    
    $
    (0.02
    )
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )Diluted (loss)
earnings per common
share
    
    $
    (0.02
    )
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )Weighted average
number of common
shares outstanding
    
    
    2,995,495
    
    
    
    2,995,495
    
    
    
    2,995,495
    
    
    
    2,995,495Weighted average
number of dilutive
shares outstanding
    
    
    2,995,495
    
    
    
    3,028,995
    
    
    
    2,995,495
    
    
    
    2,995,495
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Cash Flows
 Nine Months EndedDecember 31,2005
    
    
    2004Cash flows from operating activitiesNet income (loss)
    
    $
    (20,256
    )
    
    $
    (121,674
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activitiesDepreciation and amortization
    
    
    359,608
    
    
    
    400,015Income tax benefit (expense)
    
    
    (12,000
    )
    
    
    (65,000
    )Accrued interest on related party note receivable
    
    
    (29,324
    )
    
    
    (22,500
    )Revenue from vendor rebate
    
    
    
    
    
    
    (21,055
    )Changes in certain assets and liabilitiesAccounts receivable
    
    
    (27,389
    )
    
    
    (8,103
    )Inventories
    
    
    (64,151
    )
    
    
    (10,119
    )Prepaid expenses and other
    
    
    14,668
    
    
    
    (37,700
    )Deposits
    
    
    2,085
    
    
    
    15,459Accounts payable
    
    
    90,235
    
    
    
    23,439Accrued expenses
    
    
    797
    
    
    
    (96,563
    )Income taxes receivable
    
    
    34,132
    
    
    
    Customer deposits
    
    
    20,608
    
    
    
    5,767Net cash provided by (used in) operating activities
    
    
    369,013
    
    
    
    61,966Cash flows from investing activitiesPurchases of property and equipment
    
    
    (142,022
    )
    
    
    (98,024
    )Acquisition of a distributor company
    
    
    
    
    
    
    (18,846
    )Net cash flows (used in) provided by investing activities
    
    
    (142,022
    )
    
    
    (116,870
    )Cash flows from financing activitiesPayments on long-term obligations
    
    
    (136,310
    )
    
    
    (197,811
    )Proceeds on line of credit
    
    
    6,150
    
    
    
    200,000Net cash flows (used in) provided by financing activities
    
    
    (130,160
    )
    
    
    2,189Net increase (decrease) in cash
    
    
    96,831
    
    
    
    (52,715
    )Cash  beginning of period
    
    
    38,702
    
    
    
    153,639Cash  end of period
    
    $
    135,533
    
    
    $
    100,924
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Notes to Unaudited Financial Statements
 Note 1  Summary of Significant Accounting Policies
 Interim Unaudited Financial Statements
  Reclassifications
  Note 2  Stockholders Equity
 Stock Option Plan
  For the Nine Months EndedDecember 31,2005
    
    2004Net loss  as reported
    
    $
    (20,256
    )
    
    $
    (121,674
    )Net loss  pro forma
    
    $
    (145,483
    )
    
    $
    (166,354
    )Basic and diluted income (loss) per common share  as reported
    
    $
    (.01
    )
    
    $
    (.04
    )Basic and diluted loss per common share  pro forma
    
    $
    (.04
    )
    
    $
    (.06
    )
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For the Nine Months EndedDecember 31,2005
    
    2004Approximate risk free rate
    
    
    4.21
    %
    
    
    4.53
    %Average expected life
    
    
    10

    years
    
    
    10
    yearsDividend yield
    
    
    0
    %
    
    
    0
    %Volatility
    
    
    84.14
    %
    
    
    165.37
    %
  Note 3  Related Party Transactions
   Note 4  Contingencies
 Water Rights Contingency
  7




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Line of Credit
  Note 5  Commitments
    8




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Item 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
   Overview
      9




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Revenues
     10




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Cost of Goods Sold and Gross Profit
  Operating Expenses
  Salaries and Related Expenses
  General and Administrative Expenses
  11




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Advertising and Promotions
  Delivery Expenses
  Depreciation and Amortization
  Interest Expense
  Net Income and Net Loss
  12




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Liquidity and Capital Resources
        Fiscal Year End
    
    Long-Term Debt
    
    
    Capital Lease
    
    
    Operating Lease
    
    
    Total2006
    
    $
    142,801
    
    
    $
    
    
    
    $
    168,382
    
    
    $
    311,1832007
    
    
    154,202
    
    
    
    
    
    
    
    249,277
    
    
    
    403,4792008
    
    
    162,705
    
    
    
    
    
    
    
    181,208
    
    
    
    343,9132009
    
    
    171,685
    
    
    
    
    
    
    
    173,255
    
    
    
    344,9402010
    
    
    181,172
    
    
    
    
    
    
    
    59,573
    
    
    
    240,745Thereafter
    
    
    2,436,475
    
    
    
    
    
    
    
    7,834
    
    
    
    2,444,309Total
    
    $
    3,249,040
    
    
    $
    
    
    
    $
    839,529
    
    
    $
    4,088,569
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14




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Other Recent Accounting Developments
      15




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Item 3: CONTROLS AND PROCEDURES
   16




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PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 None.
 Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of the Security Holders
  Item 5. Other Information
  Item 6. Exhibits
  31.1
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 302 of The Sarbanes-Oxley Act of 2002 by Chief Executive Officer31.2
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 302 of The Sarbanes-Oxley Act of 2002 by Chief Financial Officer32.1
    
    
    Certification Of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350 by Chief Executive Officer32.2
    
    
    Certification Of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350 by Chief Financial Officer
 17




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SIGNATURES
  ELDORADO ARTESIAN SPRINGS, INC.Date: February 14, 2006
    By:
    /s/ Douglas LarsonDouglas Larson, PresidentDate: February 14, 2006
    By:

/s/ Cathleen ShoenfeldCathleen Shoenfeld, Chief Financial Officer 18




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ELDORADO ARTESIAN SPRINGS, INC.
 
 ExhibitNumber
    
    Description31.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 of The
Sarbanes-Oxley Act of 2002 by Chief Executive Officer31.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 of The
Sarbanes-Oxley Act of 2002 by Chief Financial Officer32.1
    
    Certification Of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350 by Chief Executive Officer32.2
    
    Certification Of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350 by Chief Financial Officer
 19