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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark
one)
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended December 31, 2009
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-18235
 
 ELDORADO ARTESIAN SPRINGS, INC.
  
 Colorado
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    84-0907853
(IRS Employer
Identification No.)1783 Dogwood Street 
Louisville, Colorado
(Address of Principal Executive Offices)
    
    80027
(Zip Code)
 Registrants Telephone Number, Including Area Code: (303) 499-1316
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller
reporting company)
 o þ




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##### 



ELDORADO ARTESIAN SPRINGS, INC.
FORM 10-Q
 INDEX
 PagePart I  Financial InformationItem 1  Financial StatementsBalance Sheets as of December 31, 2009 (Unaudited) and March 31, 2009
    
    
    2Unaudited Statements of Operations for the Three and Nine Months Ended
December 31, 2009 and December 31, 2008
    
    
    3Unaudited Statements of Cash Flows for the Nine Months Ended
December 31, 2009 and December 31, 2008
    
    
    4Notes to Unaudited Financial Statements
    
    
    5Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4(T)  Controls and Procedures
    
    
    16Part II  Other InformationItem 1  Legal Proceedings
    
    
    17Item 1A  Risk Factors
    
    
    17Item 2  Unregistered Sales of Equity Securities and Use and Proceeds
    
    
    17Item 3  Defaults Upon Senior Securities
    
    
    17Item 4   Submission of Matters to a Vote of Security Holders
    
    
    17Item 5  Other Information
    
    
    17Item 6  Exhibits
    
    
    17Signatures
    
    
    18Exhibit Index
    
    
    19Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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ITEM 1.
    
    FINANCIAL STATEMENTS
 ELDORADO ARTESIAN SPRINGS, INC.
 
 Balance Sheets
 December 31,
    
    
    March 31,2009
    
    
    2009(Unaudited)AssetsCurrent assetsCash
    
    $
    89,863
    
    
    $
    347,148Accounts receivable  trade, net of $80,000 allowance
    
    
    830,391
    
    
    
    967,508Inventories
    
    
    391,932
    
    
    
    393,320Prepaid expenses and other
    
    
    163,189
    
    
    
    105,456Deferred tax asset
    
    
    29,648
    
    
    
    29,648Income tax receivable
    
    
    
    
    
    
    66,405Total current assets
    
    
    1,505,023
    
    
    
    1,909,485Non-current assetsProperty, plant and equipment  net
    
    
    4,242,310
    
    
    
    4,433,393Notes receivable  related party
    
    
    362,557
    
    
    
    342,787Investments
    
    
    361,196
    
    
    
    361,196Water rights
    
    
    71,675
    
    
    
    71,675Deposits
    
    
    118,020
    
    
    
    112,820Deferred tax asset  long term
    
    
    147,466
    
    
    
    28,066Other  net
    
    
    36,802
    
    
    
    78,538Total non-current assets
    
    
    5,340,026
    
    
    
    5,428,475Total assets
    
    $
    6,845,049
    
    
    $
    7,337,960Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    571,613
    
    
    $
    420,849Accrued expenses
    
    
    207,796
    
    
    
    283,540Customer deposits
    
    
    65,707
    
    
    
    66,477Current portion of capital lease obligations
    
    
    119,656
    
    
    
    118,334Current portion of long-term debt
    
    
    150,414
    
    
    
    363,086Total current liabilities
    
    
    1,115,186
    
    
    
    1,252,286Non-current liabilitiesCapital lease obligations, less current portion
    
    
    49,062
    
    
    
    135,118Long-term debt, less current portion
    
    
    4,277,458
    
    
    
    4,332,360Deferred gain on the sale of real estate
    
    
    178,822
    
    
    
    178,822Total non-current liabilities
    
    
    4,505,342
    
    
    
    4,646,300Total liabilities
    
    
    5,620,528
    
    
    
    5,898,586Commitments 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; 6,536,091 (December and March
2009) issued and outstanding
    
    
    6,536
    
    
    
    6,536Additional paid-in capital
    
    
    1,760,558
    
    
    
    1,736,438Accumulated deficit
    
    
    (542,573
    )
    
    
    (303,600
    )Total stockholders equity
    
    
    1,224,521
    
    
    
    1,439,374Total liabilities and stockholders equity
    
    $
    6,845,049
    
    
    $
    7,337,960
   2




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Operations
 For the Three Months Ended
    
    
    For the Nine Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenueWater and related
    
    $
    1,917,200
    
    
    $
    2,104,352
    
    
    $
    6,434,674
    
    
    $
    7,014,223Resort operations
    
    
    
    
    
    
    8,184
    
    
    
    95,852
    
    
    
    134,024Net revenue
    
    
    1,917,200
    
    
    
    2,112,536
    
    
    
    6,530,526
    
    
    
    7,148,247Cost of goods sold
    
    
    435,420
    
    
    
    579,669
    
    
    
    1,631,432
    
    
    
    1,918,981Gross profit
    
    
    1,481,780
    
    
    
    1,532,867
    
    
    
    4,899,094
    
    
    
    5,229,266Operating expensesSalaries and related
    
    
    739,517
    
    
    
    891,151
    
    
    
    2,520,625
    
    
    
    2,896,979Administrative and general
    
    
    371,732
    
    
    
    463,100
    
    
    
    1,254,729
    
    
    
    1,439,689Delivery
    
    
    186,855
    
    
    
    221,400
    
    
    
    571,159
    
    
    
    722,736Advertising and promotions
    
    
    62,602
    
    
    
    82,668
    
    
    
    278,804
    
    
    
    264,192Depreciation and
amortization
    
    
    123,886
    
    
    
    125,331
    
    
    
    375,904
    
    
    
    364,2521,484,592
    
    
    
    1,783,650
    
    
    
    5,001,221
    
    
    
    5,687,848Operating loss
    
    
    (2,812
    )
    
    
    (250,783
    )
    
    
    (102,127
    )
    
    
    (458,582
    )Other income (expense)Other income
    
    
    
    
    
    
    350,000
    
    
    
    
    
    
    
    350,000Interest income
    
    
    6,727
    
    
    
    6,327
    
    
    
    19,905
    
    
    
    28,236Interest expense
    
    
    (88,254
    )
    
    
    (92,095
    )
    
    
    (276,151
    )
    
    
    (273,980
    )(81,527
    )
    
    
    264,232
    
    
    
    (256,246
    )
    
    
    104,256Net (loss) income before
provision for income taxes
    
    
    (84,339
    )
    
    
    13,449
    
    
    
    (358,373
    )
    
    
    (354,326
    )Income tax benefit (expense)
    
    
    25,900
    
    
    
    (9,700
    )
    
    
    119,400
    
    
    
    118,000Net (loss) income
    
    $
    (58,439
    )
    
    $
    3,749
    
    
    $
    (238,973
    )
    
    $
    (236,326
    )Basic loss per common share
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    (0.04
    )
    
    $
    (0.04
    )Dilutive loss per common
share
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    (0.04
    )
    
    $
    (0.04
    )Weighted average number of
common shares outstanding 
basic
    
    
    6,536,091
    
    
    
    6,699,481
    
    
    
    6,536,091
    
    
    
    6,659,032Weighted average number of
common shares outstanding
 dilutive
    
    
    6,536,091
    
    
    
    6,906,348
    
    
    
    6,536,091
    
    
    
    6,659,032
   3




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Cash Flows
 Nine Months EndedDecember 31,2009
    
    
    2008Cash flows from operating activitiesNet loss
    
    $
    (238,973
    )
    
    $
    (236,326
    )Adjustments to reconcile net loss to net cash (used in)
provided by operating activitiesDepreciation and amortization
    
    
    375,904
    
    
    
    364,252Deferred income tax benefit
    
    
    (119,400
    )
    
    
    (31,525
    )Stock based compensation
    
    
    24,120
    
    
    
    25,911Accrued interest on related party note receivable
    
    
    (19,770
    )
    
    
    (18,301
    )Changes in certain assets and liabilitiesAccounts receivable
    
    
    137,117
    
    
    
    (156,116
    )Inventories
    
    
    1,388
    
    
    
    (9,397
    )Prepaid expenses and other
    
    
    (30,272
    )
    
    
    23,550Deposits
    
    
    (5,200
    )
    
    
    (4,662
    )Accounts payable
    
    
    150,764
    
    
    
    48,226Accrued expenses
    
    
    (75,744
    )
    
    
    1,325Customer deposits
    
    
    (770
    )
    
    
    (16,144
    )Income tax receivable
    
    
    66,405
    
    
    
    Net cash provided by (used in) operating activities
    
    
    265,569
    
    
    
    (9,207
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (170,546
    )
    
    
    (224,121
    )Net cash flows used in investing activities
    
    
    (170,546
    )
    
    
    (224,121
    )Cash flows from financing activitiesPayments on long-term obligations
    
    
    (352,308
    )
    
    
    (118,959
    )Proceeds on line of credit
    
    
    
    
    
    
    215,000Proceeds from exercise of stock options
    
    
    
    
    
    
    2,625Net cash flows (used in) provided by financing activities
    
    
    (352,308
    )
    
    
    98,666Net decrease in cash
    
    
    (257,285
    )
    
    
    (134,662
    )Cash  beginning of period
    
    
    347,148
    
    
    
    389,440Cash  end of period
    
    $
    89,863
    
    
    $
    254,778
       4




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Notes to Unaudited Financial Statements
 Note 1  Summary of Significant Accounting Policies
 Interim Unaudited Financial Statements
  Investments
  Revenue Recognition
  Note 2  Stockholders Equity
 Stock Option Expenses
   5




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Valuation and Expense Information under SFAS 123(R)
   Risk Free Interest Rate
    
    4.65%Expected life (years)
    
    5Expected dividend yield
    
    0%Annualized volatility
    
    88.5%Estimated fair value of options granted
    
    $1.01 per share
  Risk Free Interest Rate
    
    3.75%Expected life (years)
    
    7.5Expected dividend yield
    
    0%Annualized volatility
    
    118.27%Estimated fair value of options granted
    
    $1.26 per share
 Warrants
   6




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Note 3  Related Party Transactions
   Note 4  Contingencies
 Water Rights Contingency
    7




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Note 5  Commitments
 Line of Credit
     8




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Notes Payable
     Renewable Energy Service Agreement
  Note 6  Subsequent Events
   9




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
   Overview
   Results of Operations
    10




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Organic Vitamin Charged Spring Water
 Organic Vitamin Charged Spring Water
 Three and Nine Months Ended December 31, 2009 Compared to Three and Nine Months Ended December 31,
2008
 Revenues
     11




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Organic Vitamin Charged Spring Water Organic Vitamin Charged Spring Water Organic Vitamin Charged Spring Water
 Organic Vitamin Charged Spring Water Organic Vitamin Charged Spring Water
       12




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Gross Profit/Cost of Goods Sold
  Operating Expenses
      13




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Interest, Taxes, Other Income and Other Expenses
     Liquidity and Capital Resources
   14




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15




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ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4(T).
    
    CONTROLS AND PROCEDURES
 Conclusion Regarding The Effectiveness Of Disclosure Controls And Procedures
   Remediation Of Material Weaknesses in Internal Control Over Financial Reporting
  Changes In Internal Control Over Financial Reporting
   16




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PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE AND PROCEEDS
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5.
    
    OTHER INFORMATION
  
 ITEM 6.
    
    EXHIBITS
 Exhibit No.
    
    Description31.1
    
    
    Certification of Principal Executive Officer Pursuant to Rule
13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Principal Financial Officer Pursuant to Rule
13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Principal Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Principal Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
  17




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SIGNATURES
  ELDORADO ARTESIAN SPRINGS, INC.Date: February 16, 2010
    By:
    /s/ Douglas A. LarsonDouglas A. LarsonPresident
(Principal Executive Officer)Date: February 16, 2010
    By:
    /s/ Cathleen ShoenfeldCathleen ShoenfeldChief Financial Officer
(Principal Financial Officer)  18




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ELDORADO ARTESIAN SPRINGS, INC.
 
 
  Exhibit No.
    
    Description31.1
    
    
    Certification of Principal Executive Officer Pursuant to Rule
13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Principal Financial Officer Pursuant to Rule
13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Principal Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Principal Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
  19