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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 September 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)
 
   þ o
  o þ
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ELDORADO ARTESIAN SPRINGS, INC.
 INDEX
  
 PagePart I  Financial InformationItem 1  Financial StatementsBalance Sheets as of September 30, 2006 (Unaudited) and March 31, 2006
    
    
    2Unaudited Statements of Operations For the Three and Six Months Ended
September 30, 2006 and September 30, 2005
    
    
    3Unaudited Statement of Changes in Stockholders Equity for September 30, 2006
    
    
    4Unaudited Statements of Cash Flows For the Six Months Ended
September 30, 2006 and September 30, 2005
    
    
    5Notes to Unaudited Financial Statements
    
    
    6Item 2  Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11Item 3  Controls and Procedures
    
    
    17Part II  Other Information
    
    
    18Signatures and Exhibit Index
    
    
    19Certification 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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##### Table of Contents



ELDORADO ARTESIAN SPRINGS, INC.
 Balance Sheets
 September 30,
    
    
    March 31,2006
    
    
    2006(Unaudited)AssetsCurrent assetsCash
    
    $
    210,125
    
    
    $
    86,558Accounts receivableTrade, net of allowance of $80,000
    
    
    873,632
    
    
    
    829,880Inventories
    
    
    297,864
    
    
    
    296,777Prepaid expenses and other
    
    
    98,770
    
    
    
    65,923Deferred tax asset
    
    
    29,064
    
    
    
    29,064Total current assets
    
    
    1,509,455
    
    
    
    1,308,202Non-current assetsProperty, plant and equipment  net
    
    
    4,339,863
    
    
    
    4,160,850Notes receivable  related party
    
    
    568,690
    
    
    
    547,822Water rights  net
    
    
    76,844
    
    
    
    79,088Deposits
    
    
    104,004
    
    
    
    14,004Other  net
    
    
    130,777
    
    
    
    139,834Total non-current assets
    
    
    5,220,178
    
    
    
    4,941,598Total
    
    $
    6,729,633
    
    
    $
    6,249,800Liabilities and Stockholders EquityCurrent liabilitiesLine of credit
    
    $
    356,150
    
    
    $
    306,150Accounts payable
    
    
    609,558
    
    
    
    288,490Accrued expenses
    
    
    178,633
    
    
    
    232,316Customer deposits
    
    
    102,661
    
    
    
    94,304Income taxes payable
    
    
    58,410
    
    
    
    31,035Current portion of long-term debt
    
    
    150,449
    
    
    
    136,855Total current liabilities
    
    
    1,455,861
    
    
    
    1,089,150Non-current liabilitiesLong-term debt, less current portion
    
    
    2,998,250
    
    
    
    3,077,982Deferred tax liability
    
    
    160,149
    
    
    
    149,024Deferred gain on the sale of real estate
    
    
    357,544
    
    
    
    357,544Total non-current liabilities
    
    
    3,515,943
    
    
    
    3,584,550Total liabilities
    
    
    4,971,804
    
    
    
    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
    
    
    267,841
    
    
    
    156,9981,757,829
    
    
    
    1,576,100Total
    
    $
    6,729,633
    
    
    $
    6,249,800
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ELDORADO ARTESIAN SPRINGS, INC.
 Unaudited Statements of Operations
 For the Three Months Ended
    
    
    For the Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005RevenueWater and related
    
    $
    2,126,638
    
    
    $
    2,101,246
    
    
    $
    4,291,552
    
    
    $
    4,067,260Resort operations
    
    
    73,350
    
    
    
    76,436
    
    
    
    121,312
    
    
    
    102,611Net revenue
    
    
    2,199,988
    
    
    
    2,177,682
    
    
    
    4,412,864
    
    
    
    4,169,871Cost of goods sold
    
    
    473,628
    
    
    
    436,383
    
    
    
    966,440
    
    
    
    837,548Gross profit
    
    
    1,726,360
    
    
    
    1,741,299
    
    
    
    3,446,424
    
    
    
    3,332,323Operating expensesSalaries and related
    
    
    811,479
    
    
    
    834,041
    
    
    
    1,613,097
    
    
    
    1,609,620Administrative and general
    
    
    390,318
    
    
    
    399,717
    
    
    
    814,083
    
    
    
    770,348Delivery
    
    
    219,530
    
    
    
    225,231
    
    
    
    421,138
    
    
    
    405,857Advertising and promotions
    
    
    73,631
    
    
    
    68,141
    
    
    
    140,360
    
    
    
    144,522Depreciation and
amortization
    
    
    119,304
    
    
    
    118,693
    
    
    
    231,464
    
    
    
    241,3001,614,262
    
    
    
    1,645,823
    
    
    
    3,220,142
    
    
    
    3,171,647Operating income (loss)
    
    
    112,098
    
    
    
    95,476
    
    
    
    226,282
    
    
    
    160,676Other income (expense)Other income
    
    
    92,300
    
    
    
    
    
    
    
    92,300
    
    
    
    Interest income
    
    
    10,530
    
    
    
    9,774
    
    
    
    20,866
    
    
    
    19,368Interest expense
    
    
    (73,306
    )
    
    
    (61,642
    )
    
    
    (141,605
    )
    
    
    (119,314
    )29,524
    
    
    
    (51,868
    )
    
    
    (28,439
    )
    
    
    (99,946
    )Net income (loss) before
provision for income taxes
    
    
    141,622
    
    
    
    43,608
    
    
    
    197,843
    
    
    
    60,730Income tax (expense) benefit
    
    
    (50,000
    )
    
    
    (15,000
    )
    
    
    (87,000
    )
    
    
    (21,000
    )Net income (loss)
    
    $
    91,622
    
    
    $
    28,608
    
    
    $
    110,843
    
    
    $
    39,730Basic earnings (loss) per
common share
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.04
    
    
    $
    0.01Diluted earnings (loss) per
common share
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.03
    
    
    $
    0.01Weighted average number of
common shares outstanding
    
    
    3,004,495
    
    
    
    2,995,495
    
    
    
    3,000,178
    
    
    
    2,995,495Weighted average number of
dilutive shares outstanding
    
    
    3,046,286
    
    
    
    3,001,207
    
    
    
    3,267,789
    
    
    
    2,999,515
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ELDORADO ARTESIAN SPRINGS, INC.
 Unaudited Statement of Changes in Stockholders Equity
For the Three Months Ended September 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,843
    
    
    $
    110,843Balance  September 30, 2006
    
    
    3,004,495
    
    
    $
    3,004
    
    
    $
    1,486,984
    
    
    $
    267,841
    
    
    $
    1,757,829
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ELDORADO ARTESIAN SPRINGS, INC.
 Unaudited Statements of Cash Flows
 Six Months EndedSeptember 30,2006
    
    
    2005Cash flows from operating activitiesNet income
    
    $
    110,843
    
    
    $
    39,730Adjustments to reconcile net income to net cash provided by
operating activitiesDepreciation and amortization
    
    
    231,464
    
    
    
    241,300Deferred income tax
    
    
    11,125
    
    
    
    21,000Stock based compensation
    
    
    50,149
    
    
    
    Accrued interest on related party note receivable
    
    
    (20,868
    )
    
    
    (19,368
    )Changes in certain assets and liabilitiesAccounts receivable
    
    
    (43,752
    )
    
    
    (64,025
    )Inventories
    
    
    (1,087
    )
    
    
    (76,878
    )Prepaid expenses and other
    
    
    (32,847
    )
    
    
    5,525Accounts payable
    
    
    321,068
    
    
    
    118,089Accrued expenses
    
    
    (53,683
    )
    
    
    (63,413
    )Income tax payable
    
    
    30,375
    
    
    
    Customer deposits
    
    
    8,357
    
    
    
    16,794Net cash provided by operating activities
    
    
    608,144
    
    
    
    218,754Cash flows from investing activitiesPurchases of property and equipment
    
    
    (399,176
    )
    
    
    (66,833
    )Deposits
    
    
    (90,000
    )
    
    
    Net cash flows used in investing activities
    
    
    (489,176
    )
    
    
    (66,833
    )Cash flows from financing activitiesPayments on long-term obligations
    
    
    (66,138
    )
    
    
    (92,045
    )Proceeds on line of credit
    
    
    50,000
    
    
    
    6,150Proceeds from exercise of stock options
    
    
    20,737
    
    
    
    Net cash flows provided by (used in) financing activities
    
    
    4,599
    
    
    
    (85,895
    )Net increase in cash
    
    
    123,567
    
    
    
    66,026Cash  beginning of period
    
    
    86,558
    
    
    
    38,702Cash  end of period
    
    $
    210,125
    
    
    $
    104,728
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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
    6




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Valuation and Expense Information under SFAS 123(R)
   Six
Months Ended September 30, 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
  8




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Note 5  Commitments
    Note 6  Recently Issued Accounting Pronouncements
   9




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10




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Item 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
   Overview
     11




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Revenues
       12




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Cost of Goods Sold and Gross Profit
  Operating Expenses
  Salaries and Related Expenses
  General and Administrative Expenses
  Advertising and Promotions
  13




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Delivery Expenses
  Depreciation and Amortization
  Other Income and Interest Expense
   Income Taxes
  Net Income
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Liquidity and Capital Resources
        Fiscal Year End
    
    Long-Term Debt
    
    
    Operating Lease
    
    
    Total2007
    
    $
    150,449
    
    
    $
    330,849
    
    
    $
    481,2982008
    
    
    145,419
    
    
    
    261,264
    
    
    
    406,6832009
    
    
    154,872
    
    
    
    253,132
    
    
    
    408,0042010
    
    
    164,964
    
    
    
    136,575
    
    
    
    301,5392011
    
    
    175,744
    
    
    
    95,481
    
    
    
    271,225Thereafter
    
    
    2,357,251
    
    
    
    34,259
    
    
    
    2,391,510Total
    
    $
    3,148,699
    
    
    $
    1,111,560
    
    
    $
    4,260,259
  Other Recent Accounting Developments
  15




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Item 3: CONTROLS AND PROCEDURES
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PART II  OTHER INFORMATION
  Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    To elect four (4) Directors, Douglas Larson, Kevin Sipple, Jeremy Martin and George Schmitt,
to serve until the next Annual Meeting of Shareholders until their successors are duly elected
and qualified.
 2.
    
    To ratify the appointment of Ehrhardt Keefe Steiner and Hottman, P.C., independent certified
public accountants for the Company for the fiscal year ended March 31, 2007.
  Item 6. Exhibits
 (a)
    
    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: November 14, 2006
    By:
    /s/ Douglas LarsonDouglas Larson, PresidentDate: November 14, 2006
    By:
    /s/ Cathleen ShoenfeldCathleen Shoenfeld, Chief Financial Officer 19




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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
 20