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UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from  to
 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)
 (Issuers telephone number, including area 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 June 30, 2006 (Unaudited) and March 31, 2006
    
    
    2Unaudited Statements of Operations For the Three Months Ended June 30, 2006 and June 30, 2005
    
    
    3Unaudited
Statement of Changes in Stockholders Equity for June 30, 2006 and the Year Ended March 31, 2006
    
    
    4Unaudited Statements of Cash Flows For the Three Months Ended June 30, 2006 and June 30, 2005
    
    
    5Notes to Unaudited Financial Statements
    
    
    6Item 2 - Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3  Controls and Procedures
    
    
    14Part II  Other Information
    
    
    14Signatures and Exhibit Index
    
    
    16-17Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Balance Sheets
 June 30,
    
    
    March 31,2006
    
    
    2006(Unaudited)AssetsCurrent assetsCash
    
    $
    261,900
    
    
    $
    86,558Accounts receivableTrade, net of allowance of $80,000
    
    
    929,913
    
    
    
    829,880Inventories
    
    
    223,371
    
    
    
    296,777Prepaid expenses and other
    
    
    56,706
    
    
    
    65,923Deferred tax asset
    
    
    29,064
    
    
    
    29,064Total current assets
    
    
    1,500,954
    
    
    
    1,308,202Non-current assetsProperty, plant and equipment  net
    
    
    4,111,896
    
    
    
    4,160,850Notes receivable  related party
    
    
    558,160
    
    
    
    547,822Water rights  net
    
    
    77,966
    
    
    
    79,088Deposits
    
    
    14,004
    
    
    
    14,004Other  net
    
    
    135,305
    
    
    
    139,834Total non-current assets
    
    
    4,897,331
    
    
    
    4,941,598Total
    
    $
    6,398,285
    
    
    $
    6,249,800Liabilities and Stockholders EquityCurrent liabilitiesLine of credit
    
    $
    306,150
    
    
    $
    306,150Accounts payable
    
    
    396,576
    
    
    
    288,490Accrued expenses
    
    
    210,569
    
    
    
    232,316Customer deposits
    
    
    94,409
    
    
    
    94,304Income taxes payable
    
    
    
    
    
    
    31,035Current portion of long-term debt
    
    
    132,031
    
    
    
    136,855Total current liabilities
    
    
    1,139,735
    
    
    
    1,089,150Non-current liabilitiesLong-term debt, less current portion
    
    
    3,048,775
    
    
    
    3,077,982Deferred tax liability
    
    
    186,024
    
    
    
    149,024Deferred gain on the sale of real estate
    
    
    357,544
    
    
    
    357,544Total non-current liabilities
    
    
    3,592,343
    
    
    
    3,584,550Total liabilities
    
    
    4,732,078
    
    
    
    4,673,700Commitments 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; 3,004,495
(2007) and 2,995,495 (2006) issued and
outstanding
    
    
    3,004
    
    
    
    2,995Additional paid-in capital
    
    
    1,486,984
    
    
    
    1,416,107Retained earnings
    
    
    176,219
    
    
    
    156,9981,666,207
    
    
    
    1,576,100Total
    
    $
    6,398,285
    
    
    $
    6,249,800
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Operations
 For the Three Months EndedJune 30,2006
    
    
    2005RevenueWater and related
    
    $
    2,164,914
    
    
    $
    1,966,014Resort operations
    
    
    47,962
    
    
    
    26,175Net revenue
    
    
    2,212,876
    
    
    
    1,992,189Cost of goods sold
    
    
    492,812
    
    
    
    401,165Gross profit
    
    
    1,720,064
    
    
    
    1,591,024Operating expensesSalaries and related (includes $50,149 for
stock based compensation for
2006)
    
    
    801,618
    
    
    
    775,579Administrative and general
    
    
    423,765
    
    
    
    370,631Delivery
    
    
    201,608
    
    
    
    180,626Advertising and promotions
    
    
    66,729
    
    
    
    76,381Depreciation and amortization
    
    
    112,160
    
    
    
    122,6071,605,880
    
    
    
    1,525,824Operating income
    
    
    114,184
    
    
    
    65,200Other income (expense)Interest income
    
    
    10,336
    
    
    
    9,594Interest expense
    
    
    (68,299
    )
    
    
    (57,672
    )(57,963
    )
    
    
    (48,078
    )Net income before provision for income taxes
    
    
    56,221
    
    
    
    17,122Income tax expense
    
    
    (37,000
    )
    
    
    (6,000
    )Net income
    
    $
    19,221
    
    
    $
    11,122Basic earnings per common share
    
    $
    0.01
    
    
    $
    0.00Diluted earnings per common share
    
    $
    0.01
    
    
    $
    0.00Weighted average number of common shares
outstanding
    
    
    2,995,495
    
    
    
    2,995,495Weighted average number of common shares
outstanding (diluted)
    
    
    3,028,790
    
    
    
    3,062,995
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statement of Changes in Stockholders Equity
For the Three Months Ended June 30, 2006
 Additional
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    EquityBalance  March 31, 2006
    
    
    2,995,495
    
    
    $
    2,995
    
    
    $
    1,416,107
    
    
    $
    156,998
    
    
    $
    1,576,100Stock options exercised
    
    
    9,000
    
    
    
    9
    
    
    
    20,728
    
    
    
    
    
    
    $
    20,737Stock options issued to employees
    
    
    
    
    
    
    
    
    
    
    50,149
    
    
    
    
    
    
    $
    50,149Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,221
    
    
    $
    19,221Balance  June 30, 2006
    
    
    3,004,495
    
    
    $
    3,004
    
    
    $
    1,486,984
    
    
    $
    176,219
    
    
    $
    1,666,207
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##### Table of Contents



ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Cash Flows
 Three Months EndedJune 30,2006
    
    
    2005Cash flows from operating activitiesNet income
    
    $
    19,221
    
    
    $
    11,122Adjustments to reconcile net income to net cash
provided by operating activitiesDepreciation and amortization
    
    
    112,160
    
    
    
    122,607Deferred income tax expense
    
    
    37,000
    
    
    
    6,000Stock based compensation
    
    
    50,149
    
    
    
    Accrued interest on related party note receivable
    
    
    (10,338
    )
    
    
    (9,594
    )Changes in certain assets and liabilitiesAccounts receivable
    
    
    (100,033
    )
    
    
    (39,304
    )Inventories
    
    
    73,406
    
    
    
    29,183Prepaid expenses and other
    
    
    9,217
    
    
    
    (17,082
    )Accounts payable
    
    
    108,086
    
    
    
    137,914Accrued expenses
    
    
    (21,747
    )
    
    
    (44,208
    )Income tax payable
    
    
    (31,035
    )
    
    
    Customer deposits
    
    
    105
    
    
    
    11,821Net cash provided by operating activities
    
    
    246,191
    
    
    
    208,459Cash flows from investing activitiesPurchases of property and equipment
    
    
    (57,555
    )
    
    
    (35,373
    )Net cash flows used in investing activities
    
    
    (57,555
    )
    
    
    (35,373
    )Cash flows from financing activitiesPayments on long-term obligations
    
    
    (34,031
    )
    
    
    (50,150
    )Proceeds on line of credit
    
    
    
    
    
    
    6,150Proceeds from exercise of stock options
    
    
    20,737
    
    
    
    Net cash flows used in financing activities
    
    
    (13,294
    )
    
    
    (44,000
    )Net increase in cash
    
    
    175,342
    
    
    
    129,086Cash  beginning of period
    
    
    86,558
    
    
    
    38,702Cash  end of period
    
    $
    261,900
    
    
    $
    167,788
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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
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Valuation and Expense Information under SFAS 123(R)
   Three Months Ended June30, 2006Risk Free Interest Rate
    
    
    5.15
    %Expected life (years)
    
    
    10Expected dividend yield
    
    
    0
    %Annualized volatility
    
    
    88.85
    %Forfeiture rate
    
    
    23
    %Estimated fair value of options granted
    
    $2.89 per share
 Note 3  Related Party Transactions
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Note 4  Contingencies
 Water Rights Contingency
    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
  Advertising and Promotions
  Delivery Expenses
  11




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Depreciation and Amortization
  Interest Expense
  Income Taxes
  Net Income and Net Loss
  Liquidity and Capital Resources
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Fiscal Year End
    
    Long-Term Debt
    
    
    Operating Lease
    
    
    Total2007
    
    $
    132,031
    
    
    $
    384,739
    
    
    $
    516,7702008
    
    
    145,419
    
    
    
    261,264
    
    
    
    406,6832009
    
    
    154,872
    
    
    
    253,132
    
    
    
    408,0042010
    
    
    164,964
    
    
    
    136,575
    
    
    
    301,5392011
    
    
    175,744
    
    
    
    95,481
    
    
    
    271,225Thereafter
    
    
    2,407,776
    
    
    
    34,259
    
    
    
    2,442,035Total
    
    $
    3,180,806
    
    
    $
    1,165,450
    
    
    $
    4,346,256
  Other Recent Accounting Developments
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Item 3: CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
  14




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Item 6. Exhibits
  3
    
    Articles of Incorporation and Bylaws. Incorporated by reference to Exhibit
No. 3 to the Registration Statement (No. 33-6738-D).3.1
    
    Amended Articles of Incorporation. Incorporated by reference to Exhibit 3.1
filed with the Companys Form 10-KSB for the fiscal year ended March 31, 1998.31.1
    
    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
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SIGNATURES
  ELDORADO ARTESIAN SPRINGS, INC.Date: August 14, 2006
    By:
    /s/ Douglas LarsonDouglas Larson, PresidentDate: August 14, 2006
    By:
    /s/ Cathleen ShoenfeldCathleen Shoenfeld, Chief Financial Officer 16




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ELDORADO ARTESIAN SPRINGS, INC.
 
 ExhibitNumber
    
    Description3
    
    Articles of Incorporation and Bylaws. Incorporated by reference to Exhibit No. 3 to the
Registration Statement (No. 33-6738-D).3.1
    
    Amended Articles of Incorporation. Incorporated by reference to Exhibit 3.1 filed with the
Companys Form 10-KSB for the fiscal year ended March 31, 1998.31.1
    
    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