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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended December 31, 2008
 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
    
    84-0907853(State or Other Jurisdiction of
    
    (IRS EmployerIncorporation or Organization)
    
    Identification No.)1783 Dogwood StreetLouisville, Colorado
    
    80027(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants Telephone Number, Including Area Code: (303) 499-1316
 þ 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, 2008 (Unaudited) and March 31, 2008
    
    
    2Unaudited Statements of Operations for the Three and Nine Months Ended
December 31, 2008 and December 31, 2007
    
    
    3Unaudited Statement of Changes in Stockholders Equity for the Nine Months Ended
December 31, 2008
    
    
    4Unaudited Statements of Cash Flows for the Nine Months Ended
December 31, 2008 and December 31, 2007
    
    
    5Notes to Unaudited Financial Statements
    
    
    6Item 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
    
    
    18Item 1A  Risk Factors
    
    
    18Item 2  Unregistered Sales of Equity Securities and Use and Proceeds
    
    
    18Item 3  Defaults Upon Senior Securities
    
    
    18Item 4  Submission of Matters to a Vote of Security Holders
    
    
    18Item 5  Other Information
    
    
    18Item 6  Exhibits
    
    
    18Signatures
    
    
    19Exhibit Index
    
    
    20Exhibit 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 31,2008
    
    
    2008(Unaudited)AssetsCurrent assetsCash
    
    $
    254,778
    
    
    $
    389,440Accounts receivableTrade, net of allowance of $80,000
    
    
    906,051
    
    
    
    893,660Other
    
    
    143,725
    
    
    
    Inventories
    
    
    446,568
    
    
    
    437,171Prepaid expenses and other
    
    
    100,637
    
    
    
    107,144Deferred tax asset
    
    
    29,648
    
    
    
    29,648Total current assets
    
    
    1,881,407
    
    
    
    1,857,063Non-current assetsProperty, plant and equipment  net
    
    
    4,389,095
    
    
    
    4,177,350Notes receivable  related party
    
    
    336,439
    
    
    
    318,138Water rights
    
    
    432,871
    
    
    
    432,871Deposits
    
    
    140,447
    
    
    
    135,785Long-term deferred tax asset  net
    
    
    67,470
    
    
    
    35,944Other  net
    
    
    55,835
    
    
    
    72,878Total non-current assets
    
    
    5,422,157
    
    
    
    5,172,966Total assets
    
    $
    7,303,564
    
    
    $
    7,030,029Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    466,155
    
    
    $
    417,929Accrued expenses
    
    
    319,677
    
    
    
    318,352Customer deposits
    
    
    64,386
    
    
    
    80,530Line of credit
    
    
    215,000
    
    
    
    Current portion of capital lease obligations
    
    
    57,308
    
    
    
    Current portion of long-term debt
    
    
    82,938
    
    
    
    56,748Total current liabilities
    
    
    1,205,464
    
    
    
    873,559Non-current liabilitiesCapital lease obligations, less current portion
    
    
    222,179
    
    
    
    Long-term debt, less current portion
    
    
    4,331,030
    
    
    
    4,403,789Deferred gain on the sale of real estate
    
    
    178,822
    
    
    
    178,822Total non-current liabilities
    
    
    4,732,031
    
    
    
    4,582,611Total liabilities
    
    
    5,937,495
    
    
    
    5,456,170Commitments 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; 6,699,481 (2008)
and 6,426,464 (2007) issued and outstanding
    
    
    6,699
    
    
    
    6,426Additional paid-in capital
    
    
    1,662,422
    
    
    
    1,634,159Accumulated deficit
    
    
    (303,052
    )
    
    
    (66,726
    )Total stockholders equity
    
    
    1,366,069
    
    
    
    1,573,859Total liabilities and stockholders equity
    
    $
    7,303,564
    
    
    $
    7,030,029
   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 31,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenueWater and related
    
    $
    2,104,352
    
    
    $
    1,894,455
    
    
    $
    7,014,223
    
    
    $
    6,324,319Resort operations
    
    
    8,184
    
    
    
    5,310
    
    
    
    134,024
    
    
    
    143,908Net revenue
    
    
    2,112,536
    
    
    
    1,899,765
    
    
    
    7,148,247
    
    
    
    6,468,227Cost of goods sold
    
    
    579,669
    
    
    
    375,975
    
    
    
    1,918,981
    
    
    
    1,408,058Gross profit
    
    
    1,532,867
    
    
    
    1,523,790
    
    
    
    5,229,266
    
    
    
    5,060,169Operating expensesSalaries and related
    
    
    891,151
    
    
    
    873,405
    
    
    
    2,896,979
    
    
    
    2,719,313Administrative and general
    
    
    463,100
    
    
    
    440,956
    
    
    
    1,439,689
    
    
    
    1,337,699Delivery
    
    
    221,400
    
    
    
    220,851
    
    
    
    722,736
    
    
    
    634,587Advertising and promotions
    
    
    82,668
    
    
    
    54,738
    
    
    
    264,192
    
    
    
    215,665Depreciation and amortization
    
    
    125,331
    
    
    
    93,250
    
    
    
    364,252
    
    
    
    305,2361,783,650
    
    
    
    1,683,200
    
    
    
    5,687,848
    
    
    
    5,212,500Operating income (loss)
    
    
    (250,783
    )
    
    
    (159,410
    )
    
    
    (458,582
    )
    
    
    (152,331
    )Other income (expense)Gain on the sale of property
    
    
    
    
    
    
    178,772
    
    
    
    
    
    
    
    178,772Other income
    
    
    350,000
    
    
    
    
    
    
    
    350,000
    
    
    
    Interest income
    
    
    6,327
    
    
    
    14,784
    
    
    
    28,236
    
    
    
    45,530Interest expense
    
    
    (92,095
    )
    
    
    (85,183
    )
    
    
    (273,980
    )
    
    
    (258,046
    )264,232
    
    
    
    108,373
    
    
    
    104,256
    
    
    
    (33,744
    )Net income (loss) before
provision for income taxes
    
    
    13,449
    
    
    
    (51,037
    )
    
    
    (354,326
    )
    
    
    (186,075
    )Income tax (expense) benefit
    
    
    (9,700
    )
    
    
    15,611
    
    
    
    118,000
    
    
    
    40,611Net income (loss)
    
    $
    3,749
    
    
    $
    (35,426
    )
    
    $
    (236,326
    )
    
    $
    (145,464
    )Basic loss per common share
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    (0.02
    )Diluted loss per common share
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    (0.02
    )Weighted average number of
common shares outstanding -
basic
    
    
    6,699,481
    
    
    
    6,290,412
    
    
    
    6,659,032
    
    
    
    6,144,635Weighted average number of
common shares outstanding
- dilutive
    
    
    6,906,348
    
    
    
    6,290,412
    
    
    
    6,659,032
    
    
    
    6,144,635
   3




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statement of Changes in Stockholders Equity
For the Nine Months Ended December 31, 2008
 Additional
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    EquityBalance  March 31, 2008
    
    
    6,426,464
    
    
    $
    6,426
    
    
    $
    1,634,159
    
    
    $
    (66,726
    )
    
    $
    1,573,859Net issuance of shares due
to the exercise of options
    
    
    270,017
    
    
    
    270
    
    
    
    (270
    )
    
    
    
    
    
    
    Stock options exercised
    
    
    3,000
    
    
    
    3
    
    
    
    2,622
    
    
    
    
    
    
    
    2,625Stock options issued to
employees
    
    
    
    
    
    
    
    
    
    
    25,911
    
    
    
    
    
    
    
    25,911Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (236,326
    )
    
    
    (236,326
    )Balance  December 31, 2008
    
    
    6,699,481
    
    
    $
    6,699
    
    
    $
    1,662,422
    
    
    $
    (303,052
    )
    
    $
    1,366,069
   4




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Cash Flows
 Nine Months EndedDecember 31,2008
    
    
    2007Cash flows from operating activitiesNet loss
    
    $
    (236,326
    )
    
    $
    (145,464
    )Adjustments to reconcile net loss to net cash (used in)
provided by operating activitiesDepreciation and amortization
    
    
    364,252
    
    
    
    305,236Deferred income tax benefit
    
    
    (31,525
    )
    
    
    (40,611
    )Stock based compensation
    
    
    25,911
    
    
    
    69,704Accrued interest on related party note receivable
    
    
    (18,301
    )
    
    
    (32,109
    )Change in deferred gain on the sale of real estate
    
    
    
    
    
    
    (178,772
    )Changes in certain assets and liabilitiesAccounts receivable
    
    
    (156,116
    )
    
    
    (12,703
    )Inventories
    
    
    (9,397
    )
    
    
    (109,756
    )Prepaid expenses and other
    
    
    23,550
    
    
    
    (20,336
    )Deposits
    
    
    (4,662
    )
    
    
    5,000Accounts payable
    
    
    48,226
    
    
    
    105,149Accrued expenses
    
    
    1,325
    
    
    
    43,148Customer deposits
    
    
    (16,144
    )
    
    
    27,062Income tax payable
    
    
    
    
    
    
    (99,750
    )Net cash used in operating activities
    
    
    (9,207
    )
    
    
    (84,202
    )Cash flows from investing activitiesPurchase of water rights
    
    
    
    
    
    
    (237,500
    )Payments received on related party note receivable
    
    
    
    
    
    
    310,311Purchases of property and equipment
    
    
    (224,121
    )
    
    
    (282,892
    )Net cash flows used in investing activities
    
    
    (224,121
    )
    
    
    (210,081
    )Cash flows from financing activitiesPayments on long-term obligations
    
    
    (118,959
    )
    
    
    (3,957,380
    )Proceeds from refinance of long-term obligations
    
    
    
    
    
    
    4,406,393Proceeds on line of credit
    
    
    215,000
    
    
    
    Proceeds from exercise of stock options
    
    
    2,625
    
    
    
    76,000Net cash flows provided by financing activities
    
    
    98,666
    
    
    
    525,013Net (decrease) increase in cash
    
    
    (134,662
    )
    
    
    230,730Cash  beginning of period
    
    
    389,440
    
    
    
    607,759Cash  end of period
    
    $
    254,778
    
    
    $
    838,489
       5




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Notes to Unaudited Financial Statements
 Note 1  Summary of Significant Accounting Policies
 Interim Unaudited Financial Statements
 10-Q 10-KSB.
 Revenue Recognition
  Note 2  Stockholders Equity
 Stock Option Expenses
 share-based share-based
 Valuation and Expense Information under SFAS 123(R)
   6




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Nine Months EndedDecember 31, 2008Risk 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
  Nine Months EndedDecember 31, 2008Risk 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
   7




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Note 3  Related Party Transactions
   Note 4  Contingencies
 Water Rights Contingency
    8




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Note 5  Commitments
 Line of Credit
  Note Payable
    9




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




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Organic Vitamin Charged Spring Water
   Organic Vitamin Charged Spring Water
 Three and Nine Months Ended December 31, 2008 Compared to Three and Nine Months Ended December 31,
2007
 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
    Gross Profit/Cost of Goods Sold
   12




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Operating Expenses
  Organic Vitamin Charged Spring Water
   Organic Vitamin Charged Spring
Water
  13




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Interest, Taxes, Other Income and Other Expenses
 Organic Vitamin Charged Spring Water
     Liquidity and Capital Resources
 Organic
Vitamin Charged Spring Water
  14




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15




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Contractual Obligations and Commitments
  Fiscal Year End
    
    Long-Term Debt
    
    
    Operating Lease
    
    
    Total2009
    
    $
    140,246
    
    
    $
    386,836
    
    
    $
    527,0822010
    
    
    178,070
    
    
    
    338,969
    
    
    
    517,0392011
    
    
    187,108
    
    
    
    195,038
    
    
    
    382,1462012
    
    
    1,470,816
    
    
    
    83,771
    
    
    
    1,554,5872013
    
    
    2,717,215
    
    
    
    78,363
    
    
    
    2,795,578Total
    
    $
    4,693,455
    
    
    $
    1,082,977
    
    
    $
    5,776,432
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4(T). CONTROLS AND PROCEDURES
 Conclusion Regarding The Effectiveness Of Disclosure Controls And Procedures
    16




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Remediation Of Material Weaknesses in Internal Control Over Financial Reporting
  Changes In Internal Control Over Financial Reporting
   17




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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.
  18




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SIGNATURES
  ELDORADO ARTESIAN SPRINGS, INC.Date: February 17, 2009
    By:
    /s/ Douglas A. LarsonDouglas A. LarsonPresident
(Principal Executive Officer)Date: February 17, 2009
    By:
    /s/ Cathleen ShoenfeldCathleen ShoenfeldChief Financial Officer
(Principal Financial Officer)  19




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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.
  20