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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 December 31, 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
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ELDORADO ARTESIAN SPRINGS, INC.
 INDEX
 PagePart I  Financial InformationItem 1  Financial StatementsBalance Sheets as of December 31, 2006 (Unaudited) and March 31, 2006
    
    
    3Unaudited Statements of Operations For the Three and Nine Months Ended
December 31, 2006 and December 31, 2005
    
    
    4Unaudited Statement of Changes in Stockholders Equity For the Nine Months Ended
December 31, 2006
    
    
    5Unaudited Statements of Cash Flows For the Nine Months Ended
December 31, 2006 and December 31, 2005
    
    
    6Notes to Unaudited Financial Statements
    
    
    7Item 2  Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    12Item 3  Controls and Procedures
    
    
    18Part II  Other Information
    
    
    19Signatures and Exhibit Index
    
    
    20Certification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Balance Sheets
 December 31,
    
    
    March 31,2006
    
    
    2006(Unaudited)AssetsCurrent assetsCash
    
    $
    39,493
    
    
    $
    86,558Accounts receivableTrade, net of allowance of 80,000
    
    
    804,717
    
    
    
    829,880Inventories
    
    
    297,026
    
    
    
    296,777Prepaid expenses and other
    
    
    97,515
    
    
    
    65,923Deferred tax asset
    
    
    29,064
    
    
    
    29,064Total current assets
    
    
    1,267,815
    
    
    
    1,308,202Non-current assetsProperty, plant and equipment  net
    
    
    4,305,507
    
    
    
    4,160,850Notes receivable  related party
    
    
    579,418
    
    
    
    547,822Water rights  net
    
    
    75,722
    
    
    
    79,088Deposits
    
    
    104,729
    
    
    
    14,004Other  net
    
    
    126,007
    
    
    
    139,834Total non-current assets
    
    
    5,191,383
    
    
    
    4,941,598Total
    
    $
    6,459,198
    
    
    $
    6,249,800Liabilities and Stockholders EquityCurrent liabilitiesLine of credit
    
    $
    356,150
    
    
    $
    306,150Accounts payable
    
    
    354,730
    
    
    
    288,490Accrued expenses
    
    
    247,681
    
    
    
    232,316Customer deposits
    
    
    112,653
    
    
    
    94,304Income taxes payable
    
    
    28,627
    
    
    
    31,035Current portion of long-term debt
    
    
    98,482
    
    
    
    136,855Total current liabilities
    
    
    1,198,323
    
    
    
    1,089,150Non-current liabilitiesLong-term debt, less current portion
    
    
    3,017,744
    
    
    
    3,077,982Deferred tax liability
    
    
    160,149
    
    
    
    149,024Deferred gain on the sale of real estate
    
    
    357,544
    
    
    
    357,544Total non-current liabilities
    
    
    3,535,437
    
    
    
    3,584,550Total liabilities
    
    
    4,733,760
    
    
    
    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
    
    
    235,450
    
    
    
    156,9981,725,438
    
    
    
    1,576,100Total
    
    $
    6,459,198
    
    
    $
    6,249,800
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Operations
 For the Three Months Ended
    
    
    For the Nine Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005RevenueWater and related
    
    $
    1,864,559
    
    
    $
    1,804,849
    
    
    $
    6,156,111
    
    
    $
    5,872,109Resort operations
    
    
    5,293
    
    
    
    4,320
    
    
    
    126,605
    
    
    
    106,931Net revenue
    
    
    1,869,852
    
    
    
    1,809,169
    
    
    
    6,282,716
    
    
    
    5,979,040Cost of goods sold
    
    
    394,371
    
    
    
    331,444
    
    
    
    1,360,811
    
    
    
    1,168,992Gross profit
    
    
    1,475,481
    
    
    
    1,477,725
    
    
    
    4,921,905
    
    
    
    4,810,048Operating expensesSalaries and related
    
    
    769,156
    
    
    
    742,201
    
    
    
    2,382,253
    
    
    
    2,351,821Administrative and
general
    
    
    348,793
    
    
    
    398,105
    
    
    
    1,162,876
    
    
    
    1,168,453Delivery
    
    
    196,461
    
    
    
    208,353
    
    
    
    617,599
    
    
    
    614,210Advertising and
promotions
    
    
    32,109
    
    
    
    52,532
    
    
    
    172,469
    
    
    
    197,054Depreciation and
amortization
    
    
    111,387
    
    
    
    118,308
    
    
    
    342,851
    
    
    
    359,6081,457,906
    
    
    
    1,519,499
    
    
    
    4,678,048
    
    
    
    4,691,146Operating income (loss)
    
    
    17,575
    
    
    
    (41,774
    )
    
    
    243,857
    
    
    
    118,902Other income (expense)Other income
    
    
    
    
    
    
    
    
    
    
    92,300
    
    
    
    Interest income
    
    
    10,728
    
    
    
    9,956
    
    
    
    31,594
    
    
    
    29,324Interest expense
    
    
    (77,694
    )
    
    
    (61,168
    )
    
    
    (219,299
    )
    
    
    (180,482
    )(66,966
    )
    
    
    (51,212
    )
    
    
    (95,405
    )
    
    
    (151,158
    )Net (loss) income
before provision for
income taxes
    
    
    (49,391
    )
    
    
    (92,986
    )
    
    
    148,452
    
    
    
    (32,256
    )Income tax benefit
(expense)
    
    
    17,000
    
    
    
    33,000
    
    
    
    (70,000
    )
    
    
    12,000Net (loss) income
    
    $
    (32,391
    )
    
    $
    (59,986
    )
    
    $
    78,452
    
    
    $
    (20,256
    )Basic (loss) earnings
per common share
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    0.03
    
    
    $
    (0.01
    )Diluted (loss)
earnings per common
share
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    0.02
    
    
    $
    (0.01
    )Weighted average
number of common
shares outstanding
    
    
    3,004,495
    
    
    
    2,995,495
    
    
    
    3,002,328
    
    
    
    2,995,495Weighted average
number of dilutive
shares outstanding
    
    
    3,209,908
    
    
    
    2,995,495
    
    
    
    3,247,947
    
    
    
    2,995,495
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statement of Changes in Stockholders Equity
 For the Nine Months Ended December 31, 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78,452
    
    
    $
    78,452Balance  December 31, 2006
    
    
    3,004,495
    
    
    $
    3,004
    
    
    $
    1,486,984
    
    
    $
    235,450
    
    
    $
    1,725,438
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ELDORADO ARTESIAN SPRINGS, INC.
 
 Unaudited Statements of Cash Flows
 Nine Months EndedDecember 31,2006
    
    
    2005Cash flows from operating activitiesNet income (loss)
    
    $
    78,452
    
    
    $
    (20,256
    )Adjustments to reconcile net income (loss) to net
cash provided by operating activitiesDepreciation and amortization
    
    
    342,851
    
    
    
    359,608Deferred income tax
    
    
    11,125
    
    
    
    (12,000
    )Stock based compensation
    
    
    50,149
    
    
    
    Accrued interest on related party note receivable
    
    
    (31,596
    )
    
    
    (29,324
    )Changes in certain assets and liabilitiesAccounts receivable
    
    
    25,163
    
    
    
    (27,389
    )Inventories
    
    
    (249
    )
    
    
    (64,151
    )Prepaid expenses and other
    
    
    (31,592
    )
    
    
    14,668Deposits
    
    
    (90,725
    )
    
    
    2,085Accounts payable
    
    
    66,240
    
    
    
    90,235Accrued expenses
    
    
    15,365
    
    
    
    797Income taxes (payable) receivable
    
    
    (2,408
    )
    
    
    34,132Customer deposits
    
    
    18,349
    
    
    
    20,608Net cash provided by operating activities
    
    
    451,124
    
    
    
    369,013Cash flows from investing activitiesPurchases of property and equipment
    
    
    (470,315
    )
    
    
    (142,022
    )Net cash flows used in investing activities
    
    
    (470,315
    )
    
    
    (142,022
    )Cash flows from financing activitiesProceeds from exercise of stock options
    
    
    20,737
    
    
    
    Payments on long-term obligations
    
    
    (98,611
    )
    
    
    (136,310
    )Proceeds on line of credit
    
    
    50,000
    
    
    
    6,150Net cash flows used in financing activities
    
    
    (27,874
    )
    
    
    (130,160
    )Net (decrease) increase in cash
    
    
    (47,065
    )
    
    
    96,831Cash  beginning of period
    
    
    86,558
    
    
    
    38,702Cash  end of period
    
    $
    39,493
    
    
    $
    135,533
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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 Expenses
    7




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Valuation and Expense Information under SFAS 123(R)
   Nine Months Ended December 31, 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
   8




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Note 4  Contingencies
 Water Rights Contingency
     9




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Line of Credit
  Note 5  Commitments
    Note 6  Recently Issued Accounting Pronouncements
    10




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11




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Item 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
   Overview
     12




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Revenues
       13




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Cost of Goods Sold and Gross Profit
  Operating Expenses
  Salaries and Related Expenses
  General and Administrative Expenses
  Advertising and Promotions
  14




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Delivery Expenses
  Depreciation and Amortization
  Other Income and Interest Expense
   Income Taxes
  15




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Net Income and Net Loss
  Liquidity and Capital Resources
        Fiscal Year End
    
    Long-Term Debt
    
    
    Operating Lease
    
    
    Total2007
    
    $
    98,482
    
    
    $
    330,849
    
    
    $
    429,3312008
    
    
    145,419
    
    
    
    261,264
    
    
    
    406,6832009
    
    
    154,872
    
    
    
    253,132
    
    
    
    408,0042010
    
    
    164,964
    
    
    
    136,575
    
    
    
    301,5392011
    
    
    175,744
    
    
    
    95,481
    
    
    
    271,225Thereafter
    
    
    2,376,745
    
    
    
    34,259
    
    
    
    2,411,004Total
    
    $
    3,116,226
    
    
    $
    1,111,560
    
    
    $
    4,227,786
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Other Recent Accounting Developments
      17




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Item 3: CONTROLS AND PROCEDURES
   18




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PART II  OTHER INFORMATION
  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: February 14, 2007
    By:
    /s/ Douglas LarsonDouglas Larson, PresidentDate: February 14, 2007
    By:
    /s/ Cathleen ShoenfeldCathleen Shoenfeld, Chief Financial Officer 20




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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