##### Table of Contents



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 June 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 
Incorporation or Organization)
    
    (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
  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




---



##### 



ELDORADO ARTESIAN SPRINGS, INC.
FORM 10-Q
 INDEX
 PagePart I  Financial InformationItem 1  Financial StatementsBalance Sheets as of June 30, 2008 (Unaudited) and March 31, 2008
    
    
    2Unaudited Statements of Operations for the Three Months Ended
June 30, 2008 and June 30, 2007
    
    
    3Unaudited Statement of Changes in Stockholders Equity for the Three Months Ended
June 30, 2008
    
    
    4Unaudited Statements of Cash Flows for the Three Months Ended
June 30, 2008 and June 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
    
    
    15Item 4(T)  Controls and Procedures
    
    
    15Part 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




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ELDORADO ARTESIAN SPRINGS, INC.
 
 Balance Sheets
 June 30,
    
    
    March 31,2008
    
    
    2008(Unaudited)AssetsCurrent assetsCash
    
    $
    215,232
    
    
    $
    389,440Accounts receivableTrade, net of allowance of $80,000
    
    
    1,006,454
    
    
    
    893,660Inventories
    
    
    441,989
    
    
    
    437,171Prepaid expenses and other
    
    
    81,555
    
    
    
    107,144Deferred tax asset
    
    
    29,648
    
    
    
    29,648Total current assets
    
    
    1,774,878
    
    
    
    1,857,063Non-current assetsProperty, plant and equipment  net
    
    
    4,287,879
    
    
    
    4,177,350Notes receivable  related party
    
    
    324,093
    
    
    
    318,138Water rights  net
    
    
    432,871
    
    
    
    432,871Deposits
    
    
    149,148
    
    
    
    135,785Long-term deferred tax asset  net
    
    
    145,944
    
    
    
    35,944Other  net
    
    
    68,120
    
    
    
    72,878Total non-current assets
    
    
    5,408,055
    
    
    
    5,172,966Total
    
    $
    7,182,933
    
    
    $
    7,030,029Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    556,927
    
    
    $
    417,929Accrued expenses
    
    
    254,629
    
    
    
    318,352Customer deposits
    
    
    83,517
    
    
    
    80,530Line of credit
    
    
    140,000
    
    
    
    Current portion of capital lease obligations
    
    
    41,881
    
    
    
    Current portion of long-term debt
    
    
    52,835
    
    
    
    56,748Total current liabilities
    
    
    1,129,789
    
    
    
    873,559Non-current liabilitiesCapital lease obligations, less current portion
    
    
    106,900
    
    
    
    Long-term debt, less current portion
    
    
    4,393,539
    
    
    
    4,403,789Deferred gain on the sale of real estate
    
    
    178,822
    
    
    
    178,822Total non-current liabilities
    
    
    4,679,261
    
    
    
    4,582,611Total liabilities
    
    
    5,809,050
    
    
    
    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; 6,696,481 (2008)
and 6,426,464 (2007) issued and outstanding
    
    
    6,696
    
    
    
    6,426Additional paid-in capital
    
    
    1,640,453
    
    
    
    1,634,159Accumulated deficit
    
    
    (273,266
    )
    
    
    (66,726
    )1,373,883
    
    
    
    1,573,859Total
    
    $
    7,182,933
    
    
    $
    7,030,029
   2




---



##### Table of Contents



ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Operations
 For the Three Months EndedJune 30,2008
    
    
    2007RevenueWater and related
    
    $
    2,175,050
    
    
    $
    2,118,823Resort operations
    
    
    42,288
    
    
    
    46,203Net revenue
    
    
    2,217,338
    
    
    
    2,165,026Cost of goods sold
    
    
    521,696
    
    
    
    446,247Gross profit
    
    
    1,695,642
    
    
    
    1,718,779Operating expensesSalaries and related
    
    
    971,322
    
    
    
    899,781Administrative and general
    
    
    506,396
    
    
    
    429,941Delivery
    
    
    238,565
    
    
    
    199,971Advertising and promotions
    
    
    96,618
    
    
    
    70,089Depreciation and amortization
    
    
    116,568
    
    
    
    104,3211,929,469
    
    
    
    1,704,103Operating (loss) income
    
    
    (233,827
    )
    
    
    14,676Other income (expense)Interest income
    
    
    6,743
    
    
    
    15,227Interest expense
    
    
    (89,456
    )
    
    
    (84,919
    )Total other expense
    
    
    (82,713
    )
    
    
    (69,692
    )Net loss before provision for income taxes
    
    
    (316,540
    )
    
    
    (55,016
    )Income tax benefit
    
    
    110,000
    
    
    
    6,000Net loss
    
    $
    (206,540
    )
    
    $
    (49,016
    )Basic loss per common share
    
    $
    (0.03
    )
    
    $
    (0.01
    )Diluted loss per common share
    
    $
    (0.03
    )
    
    $
    (0.01
    )Weighted average number of common shares outstanding
    
    
    6,579,365
    
    
    
    6,032,670Weighted average number of dilutive shares outstanding
    
    
    6,579,365
    
    
    
    6,032,670
   3




---



##### Table of Contents



ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statement of Changes in Stockholders Equity
For the Three Months Ended June 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 issued
    
    
    
    
    
    
    
    
    
    
    6,564
    
    
    
    
    
    
    
    6,564Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (206,540
    )
    
    
    (206,540
    )Balance  June 30, 2008
    
    
    6,696,481
    
    
    $
    6,696
    
    
    $
    1,640,453
    
    
    $
    (273,266
    )
    
    $
    1,373,883
   4




---



##### Table of Contents



ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Cash Flows
 Three Months EndedJune 30,2008
    
    
    2007Cash flows from operating activitiesNet (loss) income
    
    $
    (206,540
    )
    
    $
    (49,016
    )Adjustments to reconcile net (loss) income to net cash provided
by operating activitiesDepreciation and amortization
    
    
    116,568
    
    
    
    104,321Deferred income tax (benefit) expense
    
    
    (110,000
    )
    
    
    (6,000
    )Stock based compensation
    
    
    6,564
    
    
    
    59,918Accrued interest on related party note receivable
    
    
    (5,955
    )
    
    
    (11,138
    )Income tax payable
    
    
    
    
    
    
    (99,750
    )Changes in certain assets and liabilitiesAccounts receivable
    
    
    (112,794
    )
    
    
    (100,259
    )Inventories
    
    
    (4,818
    )
    
    
    (39,754
    )Prepaid expenses and other
    
    
    30,347
    
    
    
    (169
    )Deposits
    
    
    (13,363
    )
    
    
    5,000Accounts payable
    
    
    138,998
    
    
    
    160,095Accrued expenses
    
    
    (63,723
    )
    
    
    (10,522
    )Customer deposits
    
    
    2,987
    
    
    
    10,874Net cash (used in) provided by operating activities
    
    
    (221,729
    )
    
    
    23,600Cash flows from investing activitiesPurchase of water rights
    
    
    
    
    
    
    (87,500
    )Purchases of property and equipment
    
    
    (75,316
    )
    
    
    (52,141
    )Net cash flows used in investing activities
    
    
    (75,316
    )
    
    
    (139,641
    )Cash flows from financing activitiesPayments on long-term obligations
    
    
    (17,163
    )
    
    
    (18,737
    )Proceeds on line of credit
    
    
    140,000
    
    
    
    Proceeds from exercise of stock options
    
    
    
    
    
    
    1,750Net cash flows provided by (used in) financing activities
    
    
    122,837
    
    
    
    (16,987
    )Net (decrease) increase in cash
    
    
    (174,208
    )
    
    
    (133,028
    )Cash  beginning of period
    
    
    389,440
    
    
    
    607,759Cash  end of period
    
    $
    215,232
    
    
    $
    474,731
       5




---



##### Table of Contents



ELDORADO ARTESIAN SPRINGS, INC.
 
 Notes to Unaudited Financial Statements
 Note 1  Summary of Significant Accounting Policies
 Interim Unaudited Financial Statements
 Form 10-Q Form 10-KSB.
 Note 2  Stockholders Equity
 Stock Dividend
  Stock Option Expenses
   6




---



##### Table of Contents



Valuation and Expense Information under SFAS 123(R)
   Three Months EndedJune 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
  Three Months EndedJune 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




---



##### Table of Contents



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




---



##### Table of Contents



Note 5  Commitments
 Line of Credit
  Note Payable
  Organic
Vitamin Charged Spring Water
  9




---



##### Table of Contents



Note 6  Subsequent Events
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
   Overview
 Organic Vitamin Charged Spring Water
  10




---



##### Table of Contents



Results of Operations
   Organic Vitamin Charged
Spring Water
  Organic Vitamin Charged Spring Water
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
 Revenues
    11




---



##### Table of Contents



Gross Profit/Cost of Goods Sold
   12




---



##### Table of Contents



Operating Expenses
      Interest, Taxes, Other Income and Other Expenses
   13




---



##### Table of Contents



Liquidity and Capital Resources
         14




---



##### Table of Contents



Contractual Obligations and Commitments
  Fiscal Year End
    
    Long-Term Debt
    
    
    Operating Lease
    
    
    Total2009
    
    $
    94,716
    
    
    $
    386,836
    
    
    $
    481,5522010
    
    
    112,794
    
    
    
    338,969
    
    
    
    451,7632011
    
    
    117,420
    
    
    
    195,038
    
    
    
    312,4582012
    
    
    1,452,643
    
    
    
    83,771
    
    
    
    1,536,4142013
    
    
    2,817,583
    
    
    
    78,363
    
    
    
    2,895,945Total
    
    $
    4,595,155
    
    
    $
    1,082,977
    
    
    $
    5,678,132
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4(T). CONTROLS AND PROCEDURES
 Conclusion Regarding The Effectiveness Of Disclosure Controls And Procedures
   15




---



##### Table of Contents



Remediation Of Material Weaknesses in Internal Control Over Financial Reporting
  Changes In Internal Control Over Financial Reporting
   16




---



##### Table of Contents



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.
    
    Description10.1
    
    
    First Amendment to Water Lease Agreement (incorporated by
reference to Exhibit 10.24 to Eldorados Form 8-K filed with
the Securities and Exchange Commission on August 1, 2008).10.2
    
    
    2008 Incentive Stock Plan (incorporated by reference to Annex
A to Eldorados Definitive Proxy Statement on Schedule 14A for
the Annual Meeting of Shareholders held on August 26, 2008).31.1
    
    
    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




---



##### Table of Contents



SIGNATURES
  ELDORADO ARTESIAN SPRINGS, INC.Date: August 12, 2008
    By:
    /s/   Douglas A. LarsonDouglas A. LarsonPresident
(Principal Executive Officer)Date: August 12, 2008
    By:
    /s/   Cathleen ShoenfeldCathleen ShoenfeldChief Financial Officer
(Principal Financial Officer)  18




---



##### Table of Contents



ELDORADO ARTESIAN SPRINGS, INC.
 
 Exhibit No.
    
    Description10.1
    
    
    First Amendment to Water Lease Agreement (incorporated by
reference to Exhibit 10.24 to Eldorados Form 8-K filed with
the Securities and Exchange Commission on August 1, 2008).10.2
    
    
    2008 Incentive Stock Plan (incorporated by reference to Annex
A to Eldorados Definitive Proxy Statement on Schedule 14A for
the Annual Meeting of Shareholders held on August 26, 2008).31.1
    
    
    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