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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 September 30, 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 September 30, 2008 (Unaudited) and March 31, 2008
    
    
    2Unaudited Statements of Operations for the Three and Six Months Ended
September 30, 2008 and September 30, 2007
    
    
    3Unaudited Statement of Changes in Stockholders Equity for the Six Months Ended
September 30, 2008
    
    
    4Unaudited Statements of Cash Flows for the Six Months Ended
September 30, 2008 and September 30, 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
    
    
    19Item 6  Exhibits
    
    
    19Signatures
    
    
    20Exhibit Index
    
    
    21Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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ITEM 1. FINANCIAL STATEMENTS
 ELDORADO ARTESIAN SPRINGS, INC.
 
 Balance Sheets
 September 30,
    
    
    March 31,2008
    
    
    2008(Unaudited)AssetsCurrent assetsCash
    
    $
    241,949
    
    
    $
    389,440Accounts receivableTrade, net of allowance of $80,000
    
    
    1,202,837
    
    
    
    893,660Inventories
    
    
    507,910
    
    
    
    437,171Prepaid expenses and other
    
    
    49,102
    
    
    
    107,144Deferred tax asset
    
    
    29,648
    
    
    
    29,648Total current assets
    
    
    2,031,446
    
    
    
    1,857,063Non-current assetsProperty, plant and equipment  net
    
    
    4,437,420
    
    
    
    4,177,350Notes receivable  related party
    
    
    330,208
    
    
    
    318,138Water rights
    
    
    432,871
    
    
    
    432,871Deposits
    
    
    140,447
    
    
    
    135,785Long-term deferred tax asset  net
    
    
    163,646
    
    
    
    35,944Other  net
    
    
    63,361
    
    
    
    72,878Total non-current assets
    
    
    5,567,953
    
    
    
    5,172,966Total
    
    $
    7,599,399
    
    
    $
    7,030,029Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    791,358
    
    
    $
    417,929Accrued expenses
    
    
    235,943
    
    
    
    318,352Customer deposits
    
    
    87,310
    
    
    
    80,530Line of credit
    
    
    215,000
    
    
    
    Current portion of capital lease obligations
    
    
    79,228
    
    
    
    Current portion of long-term debt
    
    
    82,938
    
    
    
    56,748Total current liabilities
    
    
    1,491,777
    
    
    
    873,559Non-current liabilitiesCapital lease obligations, less current portion
    
    
    228,441
    
    
    
    Long-term debt, less current portion
    
    
    4,347,675
    
    
    
    4,403,789Deferred gain on the sale of real estate
    
    
    178,822
    
    
    
    178,822Total non-current liabilities
    
    
    4,754,938
    
    
    
    4,582,611Total liabilities
    
    
    6,246,715
    
    
    
    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
    
    
    1,652,786
    
    
    
    1,634,159Accumulated deficit
    
    
    (306,801
    )
    
    
    (66,726
    )1,352,684
    
    
    
    1,573,859Total
    
    $
    7,599,399
    
    
    $
    7,030,029
   2




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Operations
 For the Three Months Ended
    
    
    For the Six Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenueWater and related
    
    $
    2,734,821
    
    
    $
    2,311,041
    
    
    $
    4,909,871
    
    
    $
    4,429,864Resort operations
    
    
    83,552
    
    
    
    92,395
    
    
    
    125,840
    
    
    
    138,598Net revenue
    
    
    2,818,373
    
    
    
    2,403,436
    
    
    
    5,035,711
    
    
    
    4,568,462Cost of goods sold
    
    
    817,616
    
    
    
    585,836
    
    
    
    1,339,312
    
    
    
    1,032,083Gross profit
    
    
    2,000,757
    
    
    
    1,817,600
    
    
    
    3,696,399
    
    
    
    3,536,379Operating expensesSalaries and related
    
    
    1,034,506
    
    
    
    946,127
    
    
    
    2,005,828
    
    
    
    1,845,908Administrative and general
    
    
    470,193
    
    
    
    466,802
    
    
    
    976,589
    
    
    
    896,743Delivery
    
    
    262,771
    
    
    
    213,765
    
    
    
    501,336
    
    
    
    413,736Advertising and promotions
    
    
    84,906
    
    
    
    90,838
    
    
    
    181,524
    
    
    
    160,927Depreciation and amortization
    
    
    122,353
    
    
    
    107,665
    
    
    
    238,921
    
    
    
    211,9861,974,729
    
    
    
    1,825,197
    
    
    
    3,904,198
    
    
    
    3,529,300Operating income (loss)
    
    
    26,028
    
    
    
    (7,597
    )
    
    
    (207,799
    )
    
    
    7,079Other income (expense)Interest income
    
    
    15,166
    
    
    
    15,519
    
    
    
    21,909
    
    
    
    30,746Interest expense
    
    
    (92,429
    )
    
    
    (87,944
    )
    
    
    (181,885
    )
    
    
    (172,863
    )(77,263
    )
    
    
    (72,425
    )
    
    
    (159,976
    )
    
    
    (142,117
    )Net loss before provision
for income taxes
    
    
    (51,235
    )
    
    
    (80,022
    )
    
    
    (367,775
    )
    
    
    (135,038
    )Income tax benefit
    
    
    17,700
    
    
    
    19,000
    
    
    
    127,700
    
    
    
    25,000Net loss
    
    $
    (33,535
    )
    
    $
    (61,022
    )
    
    $
    (240,075
    )
    
    $
    (110,038
    )Basic loss per common share
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    (0.02
    )Diluted loss per common share
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    (0.02
    )Weighted average number of
common shares outstanding 
basic and dilutive
    
    
    6,696,914
    
    
    
    6,109,207
    
    
    
    6,638,468
    
    
    
    6,070,936
   3




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statement of Changes in Stockholders Equity
 For the Six Months Ended September 30, 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
    
    
    
    
    
    
    
    
    
    
    16,275
    
    
    
    
    
    
    
    16,275Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (240,075
    )
    
    
    (240,075
    )Balance  September 30, 2008
    
    
    6,699,481
    
    
    $
    6,699
    
    
    $
    1,652,786
    
    
    $
    (306,801
    )
    
    $
    1,352,684
   4




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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Cash Flows
 Six Months EndedSeptember 30,2008
    
    
    2007Cash flows from operating activitiesNet loss
    
    $
    (240,075
    )
    
    $
    (110,038
    )Adjustments to reconcile net loss to net cash (used in) provided
by operating activitiesDepreciation and amortization
    
    
    238,921
    
    
    
    211,986Deferred income tax benefit
    
    
    (127,700
    )
    
    
    (25,000
    )Stock based compensation
    
    
    16,275
    
    
    
    64,811Accrued interest on related party note receivable
    
    
    (12,070
    )
    
    
    (22,486
    )Income tax payable
    
    
    
    
    
    
    (99,750
    )Changes in certain assets and liabilitiesAccounts receivable
    
    
    (309,177
    )
    
    
    (128,681
    )Inventories
    
    
    (70,739
    )
    
    
    (83,579
    )Prepaid expenses and other
    
    
    67,557
    
    
    
    (13,959
    )Deposits
    
    
    (4,662
    )
    
    
    (35,396
    )Accounts payable
    
    
    373,429
    
    
    
    274,864Accrued expenses
    
    
    (82,409
    )
    
    
    (49,152
    )Customer deposits
    
    
    6,780
    
    
    
    19,224Net cash (used in) provided by operating activities
    
    
    (143,870
    )
    
    
    2,844Cash flows from investing activitiesPurchase of water rights
    
    
    
    
    
    
    (87,500
    )Purchases of property and equipment
    
    
    (147,114
    )
    
    
    (167,251
    )Net cash flows used in investing activities
    
    
    (147,114
    )
    
    
    (254,751
    )Cash flows from financing activitiesPayments on long-term obligations
    
    
    (74,132
    )
    
    
    (34,778
    )Proceeds on line of credit
    
    
    215,000
    
    
    
    Proceeds from exercise of stock options
    
    
    2,625
    
    
    
    7,250Net cash flows provided by (used in) financing activities
    
    
    143,493
    
    
    
    (27,528
    )Net decrease increase in cash
    
    
    (147,491
    )
    
    
    (279,435
    )Cash  beginning of period
    
    
    389,440
    
    
    
    607,759Cash  end of period
    
    $
    241,949
    
    
    $
    328,324
       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
  Note 2  Stockholders Equity
 Stock Option Expenses
 share-based
 Valuation and Expense Information under SFAS 123(R)
   6




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Six Months EndedSeptember 30, 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
 option-pricing
 Six Months EndedSeptember 30, 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
 Organic Vitamin Charged Spring Water
  10




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Organic Vitamin Charged Spring Water
 Three and Six Months Ended September 30, 2008 Compared to Three and Six Months Ended September 30,
2007
 Revenues
    Organic Vitamin Charged Spring Water Organic Vitamin Charged Spring Water Organic Vitamin Charged Spring Water
  11




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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
      14




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Liquidity and Capital Resources
          15




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Contractual Obligations and Commitments
  Fiscal Year End
    
    Long-Term Debt
    
    
    Operating Lease
    
    
    Total2009
    
    $
    162,166
    
    
    $
    386,836
    
    
    $
    549,0022010
    
    
    172,888
    
    
    
    338,969
    
    
    
    511,8572011
    
    
    181,594
    
    
    
    195,038
    
    
    
    376,6322012
    
    
    1,468,901
    
    
    
    83,771
    
    
    
    1,552,6722013
    
    
    2,752,733
    
    
    
    78,363
    
    
    
    2,831,096Total
    
    $
    4,738,282
    
    
    $
    1,082,977
    
    
    $
    5,821,259
  
 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
   Nominee
    
    Shares Voted For
    
    
    Shares WithheldDouglas A. Larson
    
    
    5,891,257
    
    
    
    98,612Kevin M. Sipple
    
    
    5,891,257
    
    
    
    98,612Jeremy S. Martin
    
    
    5,891,257
    
    
    
    98,612George J. Schmitt
    
    
    5,891,257
    
    
    
    98,612J. Ross Colbert
    
    
    5,891,257
    
    
    
    98,612
  Proposal
    
    Shares Voted For
    
    
    Shares Voted Against
    
    
    Shares AbstainedEhrhardt Keefe
Steiner & Hottman,
PC
    
    
    5,895,318
    
    
    
    94,315
    
    
    
    236
  Proposal
    
    Shares Voted For
    
    
    Shares Voted Against
    
    
    Shares Abstained2008 Incentive
Stock Plan
    
    
    5,139,926
    
    
    
    135,496
    
    
    
    2,336
  18




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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.
  19




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SIGNATURES
  ELDORADO ARTESIAN SPRINGS, INC.Date: November 14, 2008
    By:
    /s/ Douglas A. LarsonDouglas A. LarsonPresident
(Principal Executive Officer)Date: November 14, 2008
    By:
    /s/ Cathleen ShoenfeldCathleen ShoenfeldChief Financial Officer
(Principal Financial Officer)  20




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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.
  21