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EX-32.1 - CERTIFICATION - ELDORADO ARTESIAN SPRINGS INCeldo_ex321.htm
EX-31.1 - CERTIFICATION - ELDORADO ARTESIAN SPRINGS INCeldo_ex311.htm
EX-32.2 - CERTIFICATION - ELDORADO ARTESIAN SPRINGS INCeldo_ex322.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
(Mark one)
 
þ
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended March 31, 2014
 
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.
(Exact name of registrant as specified in its charter)
 
Colorado
 
84-0907853
(State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer
Identification No.)
 
1783 Dogwood Street
Louisville, Colorado
 
 
80027
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrant’s Telephone Number, Including Area Code: (303) 499-1316
 
Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o   No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o   No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $2,369,536.
 
As of June 27, 2014, the Issuer had a total of 6,036,091 shares of common stock, $.001 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s definitive proxy statement for the 2014 Annual Meeting of Stockholders, expected to be held in September 2014, are incorporated by reference into Part III of this Form 10-K.
 


 
 
 
 
 
TABLE OF CONTENTS
 
      Page
       
PART I
     
       
Item 1.
Business
  3
       
Item 1A.
Risk Factors
  6
       
Item 1B.
Unresolved Staff Comments
  6
       
Item 2.
Properties
  7
       
Item 3.
Legal Proceedings
  7
       
Item 4.
Mine Safety Disclosures
  7
       
PART II
     
       
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities
  8
       
Item 6.
Selected Financial Data
  8
       
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  8
       
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
  13
       
Item 8.
Financial Statements and Supplementary Data
  13
       
Item 9.
Change In and Disagreements with Accountants on Accounting and Financial Disclosure
  14
       
Item 9A.
Controls and Procedures
  14
       
Item 9B.
Other Information
  15
       
PART III
     
                      
     
Item 10.
Directors, Executive Officers and Corporate Governance
  16
       
Item 11.
Executive Compensation
  16
       
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  16
       
Item 13.
Certain Relationships and Related Transactions, and Director Independence
  16
       
Item 14.
Principal Accountant Fees and Services
  16
       
PART IV
     
       
Item 15.
Exhibits and Financial Statement Schedules
  17

 
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PART I

Introductory Note. Cautionary Statement Regarding Forward-Looking Information and Risk Factors Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Eldorado to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Eldorado’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, availability of debt and equity financing, ability to purchase additional water rights, interest rate fluctuations, labor and marketing costs, operating costs, packaging costs, competition, legal claims and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Eldorado. Although Eldorado believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by Eldorado or any other person that the objectives and plans of Eldorado will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

All references in this report to “Company,” “we,” “us,” “our,” or “Eldorado” refer to Eldorado Artesian Springs, Inc.

ITEM 1. BUSINESS.

The Company bottles, markets and distributes natural spring water under the Eldorado Artesian Spring Water brand. The Company also markets and distributes organic vitamin charged spring water under the Eldorado Artesian Spring Water brand. The Company distributes to businesses, homes and offices using its own trucks for distribution primarily in Colorado. The Company also distributes directly to regional warehouses for major grocery store chains and distribution companies.

Industry Background

Bottled water is perceived by many consumers as being a healthy, natural beverage, and this perception has driven demand for this product among many consumers. Recently, reports have been released that show that many water systems in America are contaminated with the residual waste of pharmaceutical drugs, caffeine, steroids and countless other chemicals that are nearly impossible for the municipal treatment systems today to eliminate from the water supply. Further fuel to the water market was provided by the rising health consciousness of people in general, as they have turned away from high caloric and alcoholic beverages in favor of products that are perceived as natural and beneficial.

Bottles used for the smaller packaging, typically in sizes 1.5 liters and smaller, are made of polyethylene terephtalate (PET), a premium clear plastic. These bottles are commonly referred to in the beverage industry as PET bottles. The PET market has been driven by manufacturers who sell their water in smaller, more portable sizes, which are sold at retail and intended to fit the active lifestyles of bottled water consumers. The PET category has been the driving force behind the explosive growth in bottled water consumption. It is the most competitive market, dominated by four of the largest food and beverage companies in the world.

While much of the bottled water market is still highly fragmented and controlled by local brands, consolidation is rapidly occurring, as four companies have come to dominate much of the market. Larger multi-national companies have been active in acquisitions of smaller more regional bottled water companies. Coca-Cola (Dasani) and PepsiCo (Aquafina) have both been successful in producing and marketing their own brands, creating much competition for the smaller regional producers that typically have higher costs of production and distribution.

Company Background

The primary business of the Company is the bottling and sale of spring water from springs located in Eldorado Springs, Colorado on property owned by the Company.  In addition to real property, the wells and springs thereon, and water rights, the Company owns a bottling plant in Louisville, Colorado (including a building and bottling equipment), associated containers and equipment, resort buildings, a residential home, and an outdoor swimming pool which are located on the property in Eldorado Springs, Colorado.
 
 
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The Company began operations by delivering 5 gallon bottles and renting equipment to homes and offices as well as delivering 1 gallon bottles to retailers. In 1994, the Company introduced the 1.5 liter bottle, which was followed, in 1995, with the 1.0 liter, 0.5 liter and 24 ounce bottles.

The Company bottles the same natural spring water that emanates from the source in Eldorado Springs, Colorado. The Company also utilizes additional high speed bottling equipment that is utilized at the Louisville warehouse. By utilizing high speed equipment, and the additional warehouse, bottling and office space, the Company has been able to realize benefits in increased bottling speeds as well as efficiencies in transporting and storing raw materials and finished goods.

The Company has reacted to consumer demands by adding additional products to its service and delivery operations. In order to handle competition from other companies, the Company added filtration products in July 2003. Currently, the Company services approximately 900 filter accounts.

In October 2005, the Company added coffee products and coffee equipment as products to be delivered off of existing route vehicles. The coffee is provided by Green Mountain Coffee Roasters utilizing their various coffee brands to be delivered by our employees. Coffee has been integrated into the Company’s current distribution channel and is a product that is counter-seasonal to water. The Company obtained the initial customers utilizing leads from the existing account base as well as new customers from sales personnel. The Company expects to continue to grow the coffee sector of the business.

In September 2007, the Company introduced a line of Organic Vitamin Charged spring water. The beverage industry has been influenced by the Enhanced segment of the beverage market. The Company believes the Organic Vitamin Charged spring water will compete based on the organic ingredients, superior taste and brand recognition in the Colorado area where we currently distribute our water products. The Company continues to try and grow the distribution of this product off of existing delivery vehicles as well as through other independent distribution companies.

Water Source and Bottling

When we purchased the Eldorado Springs property in 1983, included in the purchase of the real estate were certain water rights that had been decreed for the water sources located on the property. We have the right to beneficially use the water derived from the sources of water that are the subject of the decreed water rights, unless there is a call being made downstream from our location by a water right that is senior to ours. A senior water right would be obtained by those that applied water to a beneficial use prior to the uses associated with our water sources. Because the Eldorado Springs area was not developed until the early 1900’s, there are many senior water rights that could place a call on the stream and, unless we have a recognized replacement source of water or a decreed augmentation plan (“Augmentation Plan”), we would be forced to stop using the water from our sources.

Because demand for our spring water exists on a year round basis, we require a replacement water source that can be delivered to the stream at any time during the year. Since the drought of 2002, we purchased shares of stock of Farmers Reservoir and Irrigation Company (“FRICO”), entitling us to use a pro rata portion of the water belonging to FRICO as operated pursuant to state regulations that govern what are known as Mutual Ditch Companies. The Marshall reservoir is located in close proximity to our water sources in Eldorado Springs and because the water is stored, it can be released upon demand to meet our obligations.

The water represented by our shares in the FRICO system had been historically used for irrigating croplands. This meant that, in addition to obtaining a decreed Augmentation Plan from the Colorado Water Court, we had to obtain a change of use decree in order to use the water for replacing our withdrawals as part of the Augmentation Plan. The Water Court of the State of Colorado entered a Decree on April 16, 2013 approving the change in water rights and the terms and conditions of our Augmentation Plan, subject to the retained jurisdiction clauses normally associated with such actions. The Decree allows us to use the water represented by our FRICO shares as augmentation water to replace our out-of-priority withdrawals from our springs and other sources. It also established the conditions under which we can add other sources of water to the Augmentation Plan for use as additional replacement water. It is possible that our ability to withdraw water from our springs in a particular year may be limited if the water associated with our FRICO shares under drought conditions is not sufficient to meet all of our replacement requirements. Because drought is an ever present possibility in our location, we plan to continue to seek additional sources of replacement and augmentation water to add to our Augmentation Plan.
 
 
4

 
 
Products

The Company is principally in the business of selling bottled artesian spring water.  Sales of the Company's water have historically been made by selling five gallon and three gallon bottles of water directly to homes and businesses, retail grocery stores and distributors located in Colorado. The Company also sells its water at wholesale to retail food stores (grocery chains), by packaging the water into smaller, more convenient sizes which are suitable for retail distribution. The Company rents coolers to customers to dispense the bottled water. The Company also rents and sells filtration equipment to customers for home and office accounts. The Company added coffee and coffee equipment to its product mix delivered to customers from route delivery vehicles. The coffee is packaged by Green Mountain Coffee Roasters and is delivered by the Company’s employees. The Company’s water bottling operation accounted for approximately 98% of the Company’s revenues for the fiscal year ended March 31, 2014. The Company added a line of organic vitamin charged spring water to the product line and those products were available for distribution in September 2007. Additionally, in Eldorado Springs, the Company owns and operates a resort on its property during the summer months and rents a single-family home.

Sales and Distribution

Home/Commercial Delivery Business
Direct delivery of bottled water to homes and businesses has historically been the focus of the Company’s business. The Company’s bottled water delivery business primarily consists of the sale of five gallon and three gallon containers of water to customers who lease water dispensers from the Company.  The Company delivers these bottles directly to customers using trucks owned or leased by the Company.  The Company’s delivery sales are made primarily in the Denver/Boulder, Colorado metropolitan area (but also in selected other cities along the front range). As of March 31, 2014, the Company had approximately 16,500 active delivery accounts, and the delivery business currently accounts for roughly 58% of the Company's revenues. Of the five and three gallon accounts, approximately 50% were home accounts and 50% were commercial accounts.

One Gallon and PET Packaging/Retail Distribution Business
The one gallon case products and PET case products business consists principally of the wholesale distribution of the Company’s case products to grocery store chains with operations primarily in Colorado.  The Company uses its own trucks to deliver its case products to grocery customers’ warehouses in the Denver metropolitan area.  From there, the water is shipped to customers’ grocery stores throughout Colorado.  In addition, because some of the grocery customers’ warehouse distribution extends beyond the State of Colorado, the Company receives some distribution at these customers’ grocery stores located in New Mexico, Wyoming, Kansas, Utah, Oklahoma and Texas.

Marketing

The Company focuses on three major areas in marketing its products: five gallon and three gallon sales, small package products (.5 liter, 1 liter, 24 ounce, 1.5 liter and 1 gallon cases), and brand name recognition.

The five gallon and three gallon products are primarily sold through the acquisition of new accounts attracted by personal sales representatives at local events strategically located throughout the area. The efforts of the staff are augmented by internet marketing, the Company’s website, radio, and occasional television advertisements and by product donation to local events.

The smaller packages and the organic vitamin charged spring water, which are sold principally through retail chain stores, are effectively marketed by using point of purchase inducements to gain new trial customers, usually in the form of discounts in price in conjunction with signage.

The Company attempts to build brand name awareness by sponsoring or participating in many local events. The Company has been a sponsor of many races and events including the Bolder Boulder 10K race, the Eldorado Springs Cancer Research Run, the Taste of Colorado and many other local events.

 
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Supplies

Water bottled by the Company comes from springs located on the Company's property in Eldorado Springs, Colorado which have been flowing for many years.  While the Company could lose rights to the spring water, the Company does not foresee any disruption in the flow of the spring water. The Company currently sources all of its raw materials from outside vendors. Suppliers of the bottles have experienced seasonal shortages resulting from resin shortages. Changes in the supply of the bottles can affect the prices. The Company tries to mitigate possible shortages by maintaining sufficient inventory safety stocks so as not to interrupt production.

Seasonality

Sales tend to be mildly seasonal in the bottled water business. A ten to fifteen percent differential in sales is normally experienced between the peak summer months from May to September and the low winter months from November to March. As a result, revenues tend to be highest in the Company’s first and second fiscal quarters, and somewhat lower in the third and fourth fiscal quarters.

Competition

The bottled water industry has numerous competitors.  Generally, the industry is made up of a few large companies (who own multiple brands), smaller companies whose products are distributed only on a regional or local basis and some private label brands. The Company's competitors include more diversified corporations having substantially greater assets and larger sales organizations than the Company, as well as other small firms. The Company's competitors in the local Denver/Boulder area for home and office delivery include Deep Rock and Sierra Springs. The Company also competes in the retail area for the smaller PET packages, one gallon packages and the organic vitamin charged spring water with products including Aquafina, Arrowhead, Evian, Deep Rock, Dasani, Vitamin Water, Propel, Snapple and various private label brands.  The Company is a smaller regional company compared to the competitors as most of the Company’s products are sold in Colorado. The Company competes on the basis of product quality, customer service, and price.  The Company believes that the products' superior taste, competitive pricing and attractive packaging are significant factors in maintaining the Company's competitive position.

Government Regulation

The Company's bottling operations are subject to regulation by the U.S. Food and Drug Administration and the Colorado Department of Public Health and Environment Consumer Protection Division. Weekly product and source bacteriological tests are required, and annual inspections are performed.

The Company is also subject to regulation under the Colorado Primary Drinking Water Regulations and the United States Safe Drinking Water Act.  These regulations pertain to the operation of the water utility system owned by the Company that services the town of Eldorado Springs.  These regulations are administered by the State of Colorado Health Department Drinking Water Division and regular periodic testing is required for this operation.

The Company operates a swimming pool that is also subject to regulation by the State of Colorado.  These regulations are administered by the Boulder County Health Department and require periodic daily testing and agency inspections.

It is the Company's understanding that it is in compliance with these regulations as communicated by representatives of the responsible local agencies. Compliance with the standards and regulations above do not require material expenditures.

Employees

As of March 31, 2014, the Company had 75 full-time employees. During the summer months, the Company employs approximately 14 seasonal employees for the operation of the pool.

ITEM 1A. RISK FACTORS.

As a smaller reporting company, this item is not required.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.
 
 
6

 
 
ITEM 2. PROPERTIES.

The Company owns property in two locations.

Eldorado Springs, Colorado

The Company owns approximately 42 acres of land in Eldorado Springs, Colorado.  The buildings owned by the Company at this location total approximately 12,000 square feet. The Company uses this warehouse space for the fill station for the spring water as well as for storage of products from time to time. The Company also continues to use office space next to the warehouse. As part of the property in Eldorado Springs, the Company owns the wells and springs thereon and certain water rights.  The Company owns an outdoor swimming pool that is operated during the summer months. Virtually all of the Company's property in Eldorado Springs is pledged as collateral on Company loan balances.

Louisville, Colorado

In August 2001, the Company purchased a new facility in Louisville, Colorado located approximately 10 miles from Eldorado Springs.  This facility is approximately 40,000 square feet. The Company utilizes approximately 9,000 square feet for office space for its corporate headquarters. The facility also serves as the bottling facility and warehouse space for raw and finished materials. The building sits on 6.6 acres owned by the Company. The facility is financed through traditional bank financing.

ITEM 3. LEGAL PROCEEDINGS.

There are no material pending legal proceedings to which the Company is a party or to which any of its properties are subject.
 
ITEM 4. Mine Safety Disclosures

Not applicable.

 
7

 
 
PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Price of Common Stock

The Company’s common stock is traded in the over-the-counter market on the Nasdaq’s OTC Bulletin Board (“OTCBB”) under the symbol “ELDO.”  Corporate Stock Transfer is the Company’s transfer agent and registrar, and is able to respond to inquiries from stockholders on its website: www.corporatestock.com or at its mailing address: 3200 Cherry Creek Drive South, Suite #430, Denver, CO 80209. The quotations presented below reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. The following table sets forth, for the periods shown, high and low sales prices of our common stock, as quoted by the OTCBB:

Fiscal Year 2014
 
High
   
Low
 
  Fourth Quarter through March 31, 2014
  $ 1.89     $ 0.72  
  Third Quarter through December 31, 2013
  $ 0.90     $ 0.66  
  Second Quarter through September 30, 2013
  $ 0.83     $ 0.44  
  First Quarter through June 30, 2013
  $ 0.44     $ 0.44  
 
Fiscal Year 2013
 
High
   
Low
 
  Fourth Quarter through March 31, 2013
  $ 0.83     $ 0.22  
  Third Quarter through December 31, 2012
  $ 0.53     $ 0.12  
  Second Quarter through September 30, 2012
  $ 0.53     $ 0.10  
  First Quarter through June 30, 2012
  $ 0.19     $ 0.08  

The last price at which the Company’s common stock was sold was $1.20 on June 26, 2014.

Holders

The Company had 141 record owners of its common stock as of June 26, 2014.

Dividends

No dividends have been declared or paid to date on the Company's common stock, and the Company does not anticipate paying dividends in the foreseeable future. The Company follows a policy of cash preservation for future use in the business.

Recent Sales of Unregistered Securities

During the year ended March 31, 2014, we did not have any sales of securities in transactions that were not registered under the Securities Act of 1933, as amended, that have not been reported in a Form 8-K or Form 10-Q.

ITEM 6. SELECTED FINANCIAL DATA

As a smaller reporting company, this item is not required.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following Management’s Discussion and Analysis (MD&A) is intended to help the reader understand our Company. The MD&A should be read in conjunction with our consolidated financial statements and accompanying notes. The MD&A includes the following sections:
 
  
Forward Looking Statements
  
Business Overview
  
Results of Operations – Year Ended March 31, 2014 Compared to Year Ended March 31, 2013
  
Liquidity and Capital Resources
  
Contractual Obligations and Commitments
  
Impact of Inflation
  
Recently Issued Accounting Pronouncements

 
8

 
 
Forward Looking Statements

This filing contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements include the plans and objectives of management for future operations, including plans and objectives relating to services offered by and future economic performance of the Company.

The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties that might adversely affect the Company’s operating results in the future in a material way. Such risks and uncertainties include but are not limited to the following: availability of debt and equity financing, ability to purchase additional water rights, interest rate fluctuations, effects of regional economic and market conditions, labor and marketing costs, operating costs, packaging costs, intensity of competition and legal claims.

Business Overview

Eldorado Artesian Springs, Inc. is a Colorado based company that is primarily involved in the bottling and marketing of natural artesian spring water. The spring is located in the foothills of the Colorado Rocky Mountains and is surrounded by thousands of acres of state and city park land. The water rises up through many layers of sandstone under its own artesian pressure. Currently, the Company’s operations consist of its home/commercial delivery business (5 and 3 gallon bottles) and its one gallon and PET (polyethylene terephtalate, a premium clear plastic container) consumer business. The Company also has an organic vitamin charged spring water that is distributed locally off of the Company’s vehicles as well as to regional distribution facilities. The Company’s business includes the sales and rental of filtration and coffee dispensing equipment as well as the sale of coffee. During the summer months, the Company owns and operates a public swimming pool on its property and rents a single-family home on the property year round.

The Company’s headquarters and bottling facility consists of a total of approximately 40,000 square feet in Louisville, Colorado. The water is transported to the facility in stainless steel tanker trucks. Once at the bottling plant, the water is then transferred into stainless steel holding tanks until it is used for bottling.

Results of Operations

Performance Overview – Recent Trends

For the fiscal year ended March 31, 2014, the Company reported an increase in overall revenue of 15.1%. The increase in revenue was primarily due to overall increase in unit volumes across all categories. The number of home and office accounts increased for the fiscal year ended March 31, 2014 and the total units for many products increased to the retail establishments.

The Company continues to utilize advertising and promotional budgets to help promote various products. The Company has been pursuing ways to offer more sizes of the products off of our own delivery vehicles to increase sales to existing customers.

Overall operating expenses increased 10.4% for the year ended March 31, 2014 as compared to the same period ended March 31, 2013. Operating expenses decreased from 68.3% of sales for the fiscal year ended March 31, 2013 to 65.5% of sales for the fiscal year ended March 31, 2014.
 
The Company believes that we are in a position to continue to grow in the markets we presently service by offering additional products and utilizing advertising and promotional budgets for promoting the products.  We will continue to pursue additional business in new and emerging markets.  In addition, we continue to look for ways to decrease operating costs in order to maintain profitability in the future.

 
9

 
 
Year Ended March 31, 2014 Compared to Year Ended March 31, 2013

Sales

Sales for the year ended March 31, 2014 were $11,363,297 compared to $9,875,000 for the same period ended March 31, 2013, an increase of 15.1%.

Sales of the products used in the delivery to homes and offices which include 5 and 3 gallons bottles as well as the rental of dispenser units were 55.4% of sales and increased from $5,664,496 for fiscal year 2013 to $6,293,983 for fiscal year 2014, an increase of $629,487 or 11.1%. Total units of 5 and 3 gallon products increased 9.1% from the fiscal year ended March 31, 2013 to the fiscal year ended March 31, 2014 while the average selling price increased 2.8%. Total revenues for equipment rentals increased 21% from $458,182 for the fiscal year ended March 31, 2013 to $554,321 for the fiscal year ended March 31, 2014. The Company plans to continue to look for additional products to distribute to existing and new customers to increase sales off of existing route vehicles. The Company offers purified drinking water in the 5 gallon bottles for delivery off of existing route vehicles as a lower cost alternative for customers.

The Company increased filter rental and sales from $241,627 in fiscal year 2013 to $282,630 in fiscal year 2014, an increase of $41,003 or 17%. Consumers looking for ways to decrease expenses are substituting filtration units for the 5 and 3 gallon products. The Company also sells coffee and coffee equipment from our existing route vehicles. Sales for coffee, coffee equipment and accessories increased from $258,394 for the fiscal year ended March 31, 2013 to $318,160 for the fiscal year ended March 31, 2014.

Sales of the Company’s PET products (.5 liter to 1.5 liter sizes), including private label products, represented 17.3% of sales for fiscal year 2014 and 17.6% of sales for fiscal year 2013 or $1,967,807 and $1,737,713, respectively. This represented an increase of 13.2%. The Company’s gallon size products were 17.6% of sales or $2,001,624 in fiscal year 2014 compared to 15.1% of sales or $1,490,169 in fiscal year 2013, an increase of 34.3%.

The Company distributes an organic vitamin charged spring water off of existing route vehicles as well as through major distributors throughout Colorado and in portions of surrounding states. Total gross sales for the organic vitamin charge spring water were $154,046 for the fiscal year 2014 compared to $140,443 for the fiscal year 2013.

Gross Profit/Cost of Goods Sold

Cost of goods sold for fiscal year 2014 were $2,861,679, or 25.2% of sales, compared to $2,382,806, or 24.1% of sales for fiscal year 2013. Gross profit increased from $7,492,194 or 75.9% of sales for fiscal year 2013 to $8,501,617 or 74.8% of sales for fiscal year 2014. Overall, gross profit increased 13.5% from the fiscal year ended March 31, 2013.

Cost of goods sold for the home and office products were $411,563, or 6.5% of 5 and 3 gallon sales for fiscal year 2014, compared to $375,787, or 6.6% of 5 and 3 gallon sales for fiscal year 2013. Cost of goods sold for the Eldorado brand 1 gallon products were $981,910, or 49.1% of 1 gallon sales for fiscal year 2014, compared to $719,620, or 48.3% of 1 gallon sales for fiscal year 2013. Cost of goods sold for the PET products were $966,151, or 49.1% of sales for fiscal year 2014, compared to $857,151, or 49.3% of sales for fiscal year 2013.

Operating Expenses
 
Total operating expenses increased to $7,439,316 in fiscal year 2014 from $6,740,602 in fiscal year 2013, an increase of $698,714 or 10.4%. Of the total operating expenses, salaries and related expenses increased to $3,679,471 in fiscal year 2014, or 32.4% of sales, from $3,422,318 in fiscal year 2013, or 34.7% of sales. The increase in salaries and related expenses is due to the increase in overall revenues for the fiscal year 2014.

Administrative and general expenses increased 18.1% to $2,017,330 for fiscal year 2014 as compared to $1,707,923 for fiscal year 2013.  The increase was due in part to the cost of implementing a new CRM system. The Company also had additional costs related to professional fees related to water rights negotiations.

Delivery expenses increased from $876,644 for fiscal year 2013 to $975,805 for fiscal year 2014, an increase of 11.3%. Truck maintenance and leased equipment fees increased over the previous fiscal year as the Company entered into agreements for additional vehicles and had repair costs for damage to the leased vehicles that were taken out of service.
 
 
10

 
 
Advertising and promotion expenses increased 14.8% for fiscal year 2014 compared to fiscal year 2013.  Advertising and promotion expenses were 2.2% of sales for both fiscal year 2014 and 2013.

Depreciation and amortization increased less than 1% for fiscal year 2014 as compared to fiscal year 2013. Depreciation and amortization was 4.5% of sales for fiscal year 2014 and 5.2% of sales for 2013.

Interest, Taxes, Other Income and Other Expenses

Interest expense for the year ended March 31, 2014 decreased 6.1% to $239,826 as compared to $255,333 for the year ended March 31, 2013 due to the refinancing of the outstanding debt.

For the fiscal year ended March 31, 2013, the Company recorded net income tax benefit of $13,406 against our pretax income of $498,508 and released the valuation allowance. For the fiscal year ended March 31, 2014, the Company recorded income tax expense of $320,051 against our pretax book income of $824,518, a 38.9% effective tax rate.

The Company had net income after taxes of $504,467 in fiscal year 2014 compared to net income of $511,914 for fiscal year 2013.

Liquidity and Capital Resources

Trade accounts receivable for the year ended March 31, 2014 were 31.2% more than at year ended March 31, 2013.  This partially resulted from the increase in overall revenue. Days sales outstanding was approximately 42 days at March 31, 2014 and 37 days at March 31, 2013.  In February 2014, the Company implemented a new customer relations management (CRM) system. During the implementation there was a delay in billing the customers which resulted in an increase in the accounts receivable balance as of March 31, 2014. The Company expects billing schedules to return to normal resulting in days sales outstanding returning to previous levels.

Cash flows from operating activities had a net inflow of $876,406 for fiscal year 2014. The cash provided by operating activities represents a decrease of $160,661 from fiscal year 2013. The largest reconciling item between net income and net cash flow from operations was the $514,170 of depreciation and amortization.  The change in operating activities is mainly attributed to increases in accounts receivable and offset by increases in accounts payable. The Company anticipates that cash flow from operations will be available to fund existing obligations for expected cash requirements over the next year.

Cash flows from investing activities resulted in a net outflow of $471,289 for fiscal year 2014 as compared to net outflow of $272,846 for fiscal year 2013, an increase of 72.7%.  This increase represents expenditures on equipment for additional electric water coolers, filtration equipment and coffee dispensing equipment that are rented to delivery customers. Additionally, the Company purchased a new CRM system that is utilized throughout the Company and was implemented in February 2014.

Cash flows from financing activities resulted in a net outflow of $211,204 for fiscal year 2014 as compared to net outflow of $533,758 for fiscal year 2013, a decrease of $322,554.  This decrease was attributable to decreases in payments on line of credit offset by increases on payments of long-term debt and capital leases.

The Company’s cash balance at March 31, 2014 increased to $674,459 by a net amount of $193,913 from $480,546 at March 31, 2013.

The Company has a line of credit with ANB Bank in the amount of $750,000. As of March 31, 2014, the Company did not have a balance on the line of credit. The line of credit is subject to certain borrowing base requirements, requires monthly interest payments calculated at Prime plus 1% with a minimum rate of 5.5%. The borrowing base was $750,000 as of March 31, 2014. The line includes certain reporting and financial covenants, is cross-collateralized by accounts receivable and inventory and is guaranteed by two company executives who are also directors of the Company and one other director of the Company. The line has a maturity date of December 27, 2014.

On February 2, 2012, the Company refinanced debt that was due within the next 12 months and had previously been classified as current debt.  The Company entered into a Commercial Loan Agreement with ANB Bank under which it received proceeds of $2,815,892, which were used to pay off a prior note secured by the Company’s property in Louisville, Colorado. On December 11, 2013, the Company and ANB Bank amended the Commercial Loan Agreement to reduce the fixed interest rate from 5.5% to 5.0%. The loan is now payable at a rate of approximately $17,700 per month, which includes principal and interest.  A single “balloon payment” of the entire unpaid balance of principal and interest will be due on February 2, 2022.
 
 
11

 
 
Also on February 2, 2012, the Company entered into a second Commercial Loan Agreement (the “Second ANB Loan Agreement”) with ANB Bank, which was intended to be in place for a short period while we obtained the loan from the Small Business Administration (“SBA”) described below.  Under the Second ANB Loan Agreement, the Company received proceeds of $1,415,216, which were used to pay off a prior note on the Company’s property in Eldorado Springs, Colorado.  On April 11, 2012, the Company received proceeds of $1,457,000 from the SBA and used such proceeds to pay off the loan made under the Second ANB Loan Agreement. The SBA loan bears interest at a fixed rate of 4.951% for its full 20 year term and is payable at a rate of $10,089 per month until maturity on April 1, 2032.
 
The above loans are secured by substantially all of the assets of the Company, including the real estate in Eldorado Springs and Louisville, Colorado. The loan agreements specify events of default customary to facilities of their type, including any non-payment of principal, interest or other amounts, misrepresentation of representations and warranties, violation of covenants, certain events of bankruptcy or insolvency, certain material judgments, seizure of assets, or other material adverse changes. Upon the occurrence of an event of default, the payments by the Company of all of its outstanding obligations may be accelerated, and the commitments under the loan agreements may be terminated by the respective lender. The loans are guaranteed by two Company executives who are also directors of the Company and one other director of the Company. The loan agreements also include certain performance and reporting covenants.
 
Contractual Obligations and Commitments

The following table sets forth our contractual commitments as of March 31, 2014:

 
Fiscal Year End
 
Long-Term Debt
 and Capital Leases
   
 
Operating Lease
   
 
Total
 
2015
  $ 271,550     $ 345,671     $ 617,221  
2016
    265,262       302,832       568,094  
2017
    168,101       281,262       449,363  
2018
    157,293       261,482       418,775  
2019
    162,978       215,163       378,141  
Thereafter
    3,244,668       109,048       3,353,716  
                         
Total
  $ 4,269,852     $ 1,515,458     $ 5,785,310  

Please refer to notes 4, 5, 7 and 8 in the Consolidated Financial Statements for more information regarding the Company’s future cash commitments.

Impact of Inflation

The Company believes that the results are not dependent upon moderate changes in inflation rates.

Recently Issued Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. New pronouncements assessed by the Company recently are discussed below:

 
12

 
 
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740) amending guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. The guidance requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented as a reduction of a deferred tax asset when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists, with certain exceptions. This accounting guidance is effective prospectively for the Company beginning in the first quarter of fiscal year 2015, with early adoption permitted. While the Company is currently evaluating the impact, its adoption is not expected to have a material impact on the Company’s consolidated financial statements.
 
In July 2013, the FASB issued ASU No. 2013-10, Derivatives and Hedging (Topic 815) permitting entities to designate the Fed Funds Effective Swap Rate as a U.S. benchmark interest rate for hedge accounting purposes. Prior to the issuance of this guidance, only interest rates on direct treasury obligations of the U.S. government and the LIBOR swap rate were considered benchmark interest rates in the U.S. This guidance is effective immediately and can be applied prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. Currently, the Company does not use the Fed Funds Effective Swap Rate as a benchmark interest rate, but may in the future.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, this item is not required.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements of the Company, including the notes thereto, and the report of the independent registered public accounting firm, are included in this Annual Report and begin on page F-1.

 
13

 

Table of Contents
      Page
       
Report of Independent Registered Public Accounting Firm
  F-1
       
Financial Statements
       
 
Balance Sheets
 
F-2
       
 
Statements of Operations
 
F-3
       
 
Statement of Changes in Stockholders' Equity
 
F-4
       
 
Statements of Cash Flows
 
F-5
       
Notes to Financial Statements
  F-6
 
 
 
 

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
Board of Directors and Stockholders
Eldorado Artesian Springs, Inc.
Louisville, Colorado


We have audited the accompanying balance sheets of Eldorado Artesian Springs, Inc. (“the Company”) as of March 31, 2014 and 2013 and the related statements of operations, changes in stockholders' equity and cash flows for the years then ended.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).   Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Eldorado Artesian Springs, Inc. as of March 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.



EKS&H, LLLP

June 27, 2014
Boulder, Colorado
 
 
F-1

 
 
Balance Sheets

   
March 31,
2014
   
March 31,
2013
 
Assets
 
Current assets
           
Cash
  $ 674,459     $ 480,546  
Accounts receivable - trade, net
    1,321,330       1,007,197  
Inventories
    377,907       420,048  
Income tax receivable
    57,358       -  
Prepaid expenses and other
    26,158       41,290  
Deferred tax asset
    29,648       29,648  
Total current assets
    2,486,860       1,978,729  
Non-current assets
               
Property, plant and equipment, net
    3,822,386       3,613,629  
Investments
    361,196       361,196  
Water rights, net
    71,675       71,675  
Deposits
    92,204       108,204  
Other, net
    125,482       123,896  
Total non-current assets
    4.472,943       4,278,600  
Total assets
  $ 6,959,803     $ 6,257,329  

Liabilities and Stockholders' Equity
Current liabilities
           
Accounts payable
  $ 452,494     $ 415,442  
Accrued expenses
    361,026       269,016  
Income taxes payable
    -       8,767  
Customer deposits
    107,191       104,926  
Current portion of capital lease obligations
    82,508       49,341  
Current portion of long-term debt
    189,042       146,325  
Total current liabilities
    1,192,261       993,817  
Non-current liabilities
               
Deferred tax liability
    59,151       7,475  
Capital lease obligations, less current portion
    73,462       45,591  
Long-term debt, less current portion
    3,924,839       4,004,823  
Total non-current liabilities
    4,057,452       4,057,889  
Total liabilities
    5,249,713       5,051,706  
Commitments and contingencies
               
Stockholders' equity
               
Preferred stock, par value $.001 per share; 10,000,000 shares authorized; 0  shares issued and outstanding
    -       -  
Common stock, par value $.001 per share; 50,000,000 shares authorized; 6,036,091 issued and outstanding
    6,036       6,036  
Additional paid-in capital
    1,693,738       1,693,738  
Retained Earnings (Accumulated deficit)
    10,316       (494,151 )
Total stockholders' equity
    1,710,090       1,205,623  
Total liabilities and stockholders' equity
  $ 6,959,803     $ 6,257,329  
 
See notes to financial statements
 
 
F-2

 
 
Statements of Operations
 
   
For the Years Ended
 
   
March 31,
 
   
2014
   
2013
 
Revenues
           
Water and related, net
  $ 11,192,711     $ 9,694,518  
Resort operations
    170,586       180,482  
Total revenues
    11,363,297       9,875,000  
Cost of goods sold
    2,861,679       2,382,806  
Gross profit
    8,501,618       7,492,194  
Operating expenses
               
Salaries and related expenses
    3,679,471       3,422,318  
Administrative and general
    2,017,330       1,707,923  
     Delivery
    975,805       876,644  
Advertising and promotions
    252,540       219,888  
Depreciation and amortization
    514,170       513,829  
Total operating expenses
    7,439,316       6,740,602  
Income from operations
    1,062,302       751,592  
Other income (expense)
               
Interest income
    2,042       2,249  
Interest expense
    (239,826 )     (255,333 )
Total other expense
    (237,784 )     (253,084 )
Income before income taxes
    824,518       498,508  
Income tax (expense)  benefit
               
     Current
    (268,375 )     (8,767 )
Deferred
    (51,676 )     22,173  
Total income tax (expense)  benefit
    (320,051 )      13,406  
Net income available to common shareholders
  $ 504,467     $ 511,914  
                 
Basic common shares outstanding
    6,036,091       6,036,091  
Basic income per common share
  $ 0.08     $ 0.08  
Diluted weighted average common shares outstanding
    6,051,043       6,036,091  
Diluted income per common share
  $ 0.08     $ 0.08  
 
See notes to financial statements

 
F-3

 
 
Statement of Changes in Stockholders' Equity
For the Years Ended March 31, 2014 and 2013
 
                         
                     
(Accumulated
   
 
 
                       Deficit)    
Total
 
   
Common Stock
   
Additional
     Retained      Stockholders’  
   
Shares
   
Amount
   
Paid-in Capital
      Earnings      Equity  
Balance - March 31, 2012
    6,036,091     $ 6,036     $ 1,673,617     $ (1,006,065 )   $ 673,588  
Stock options issued to employees
    -       -       20,121       -       20,121  
Net income
    -       -       -       511,914       511,914  
Balance - March 31, 2013
    6,036,091     $ 6,036     $ 1,693,738     $ (494,151 )   $ 1,205,623  
Net income
    -       -       -       504,467       504,467  
Balance - March 31, 2014
    6,036,091     $ 6,036     $ 1,693,738     $ 10,316     $ 1,710,090  

See notes to financial statements

 
F-4

 

Statements of Cash Flows

   
For the Years Ended
 
   
March 31,
 
   
2014
   
2013
 
Cash flows from operating activities
           
Net income
  $ 504,467     $ 511,914  
Adjustments to reconcile net loss to net cash provided by operating activities
               
Depreciation and amortization
    514,170       513,829  
Deferred income taxes
    51,676       (22,173 )
Stock based compensation
    -       20,121  
Changes in assets and liabilities
               
Accounts receivable
    (314,133 )     (62,390 )
Inventories
    42,141       (83,377 )
Prepaid expenses and other
    12,883       6,428  
Deposits
    -       -  
Accounts payable
    37,052       177,851  
Accrued expenses
    92,010       (57,955 )
Income taxes
    (66,125 )     8,767  
Customer deposits
    2,265       24,052  
Net cash provided by operating activities
    876,406       1,037,067  
Cash flows from investing activities
               
Purchases of property and equipment
    (471,289 )     (272,846 )
Net cash used in investing activities
    (471,289 )     (272,846 )
Cash flows from financing activities
               
Payments on line of credit
    -       (370,051 )
Payments on long-term debt and capital leases
    (230,123 )     (180,238 )
     Borrowings on long-term obligations
    18,919       16,531  
Net cash used in financing activities
    (211,204 )     (533,758 )
Net increase in cash
    193,913       230,463  
Cash – beginning of year
    480,546       250,083  
Cash - end of year
  $ 674,459     $ 480,546  
 
Supplemental disclosure of cash flow information
 
Cash paid during the year for interest was $239,826 (2014) and $255,333 (2013).
 
Cash paid during the year for income taxes was $292,000 (2014) and $0 (2013).
 
The Company acquired $234,975 (2014) and $101,062 (2013) in equipment through capital leases.
 
In May 2012, the Company obtained an SBA loan in the amount of $1,457,000 of which $1,415,216 was used to pay off a short term note with a bank and $41,784 represents loan fees which is included in other long term assets in the accompanied balance sheet.
 
See notes to financial statements
 
F-5

 
 
Note 1 - Description of Business and Summary of Significant Accounting Policies
 
Eldorado Artesian Springs, Inc., (the "Company"), is a Colorado corporation which primarily sells bottled Artesian spring water from springs located in Eldorado Springs, Colorado and rents water dispensers.  The Company sells coffee products and rents coffee equipment to customers. The Company also sells a line of Organic Vitamin Charged Spring Water to retail stores. During the summer months, the Company  operates a natural Artesian spring pool. The Company's bottling and distribution facility is located in Louisville, Colorado.
 
Concentrations of Credit Risk
 
The Company maintains cash in bank accounts that may, at times, exceed FDIC insurance limits.  Financial instruments potentially subjecting the Company to concentrations of credit risk consist primarily of accounts receivable.  The Company grants credit to customers located primarily in Colorado.  The Company periodically performs credit analysis and monitors the financial condition of its clients in order to minimize credit risk.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. At March 31, 2014 and 2013, the Company did not have any cash equivalents.
 
Accounts Receivable
 
The Company extends unsecured credit to its customers in the ordinary course of business. The Company considers a reserve for doubtful accounts based on the creditworthiness of the customer. The provision for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management's best estimate of uncollectible amounts and is determined based on historical performance that is tracked by the Company on an ongoing basis.

Inventories
 
Inventories consist of direct costs which are primarily made up of water bottles and packaging and are stated at the lower of cost or market, determined using the first-in, first-out method (FIFO).
 
Deposits
 
Deposits consist primarily of deposits related to the purchase of equipment.
 
Property, Plant and Equipment
 
Property, plant and equipment are stated at cost.  Machinery, equipment, furniture and fixtures are depreciated using various methods over their estimated useful lives, ranging from 3 to 7 years.  Buildings and improvements are depreciated using the straight-line method over the estimated useful lives for owned assets, ranging from 15 to 39 years.  Depreciable lives on leasehold improvements are the shorter of the lease term or the useful life. Capital leased assets amortize over the estimated useful life or related lease term.
 
Investments

The Company owns investments of capital stock in an investee. This investment entitles the Company to an equal pro rata share of this investee’s irrigation system. As the ownership represents less than 20% ownership of the Company the value of this investment is stated at cost and evaluated for impairment if there are indications of such.

Water Rights
 
Water rights are recorded at cost. As water rights have an indefinite life, no amortization is recognized.
 
 
F-6

 
 
Other Assets
 
Other assets consist of loan fees and other costs which have been recorded at cost and are being amortized using the effective interest method over the term of the loan. The Company expects to amortize approximately $18,500 each year for the next three years.

Long-Lived Assets
 
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered.  The Company looks primarily to the undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. No impairments were deemed necessary during the fiscal years 2014 and 2013.
 
Customer Deposits
 
Customer deposits consist primarily of deposits on bottles and equipment.
 
Stock Based Compensation
 
The Company accounts for stock-based compensation arrangements for employees and recognizes compensation expense for share-based awards based on the grant date estimated fair value of the awards using the Black Scholes option pricing model.  Compensation expense for all share-based awards is recognized in earnings over the requisite service period (generally the vesting period).  The Company records compensation expense related to non-employees over the service periods commensurate with the services provided.  Compensation expense recorded during fiscal year 2014 and 2013 was $0 and $20,121 respectively.
 
Basic and Diluted Loss Per Common Share
 
Basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. Diluted earnings per share is computed in a manner consistent with that of basic earnings per share while giving effect to all potentially dilutive common shares that were outstanding during the period.
 
Potentially dilutive common shares and outstanding options and warrants which have been excluded from the computation of diluted income per share as of March 31, 2014 and 2013 were 99,000 and 104,000, respectively, because their effect would have been antidilutive.
 
Fair Value of Financial Instruments
 
The carrying amounts of financial instruments including cash, receivables, accounts payable and  accrued expenses approximated fair value as of March 31, 2014, because of the relatively short maturity of these instruments. The carrying amount of long-term debt issued approximates fair value as of March 31, 2014 because interest rates on these instruments approximate market interest rates.
 
Revenue Recognition
 
Revenue is recognized on the sale of products as customer shipments are made.  Returns are estimated and recorded at the time of sale.  Rental revenue is recognized on a monthly basis upon commencement of the lease agreement. Water utility revenue is recognized on a monthly basis based upon the monthly contracted rate.
 
Shipping Costs
 
Shipping costs for materials used in the final products are included in the cost of goods. Shipping costs for products delivered to customers are included in total operating expenses.
 
Promotional Expense – Consideration to Vendors
 
The Company recognizes certain promotional expense as a reduction in revenues. These costs included off invoice discounts to resellers and promotions for customers.
 
 
F-7

 
 
Advertising Costs
 
The Company expenses advertising costs as incurred.  Advertising expense for the years ended March 31, 2014 and 2013 were $252,540 and $219,888, respectively.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
 
Recently Issued Accounting Pronouncements
 
The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. New pronouncements assessed by the Company recently are discussed below:

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740) amending guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. The guidance requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented as a reduction of a deferred tax asset when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists, with certain exceptions. This accounting guidance is effective prospectively for the Company beginning in the first quarter of fiscal year 2015, with early adoption permitted. While the Company is currently evaluating the impact, its adoption is not expected to have a material impact on the Company’s financial statements.
 
In July 2013, the FASB issued ASU No. 2013-10, Derivatives and Hedging (Topic 815) permitting entities to designate the Fed Funds Effective Swap Rate as a U.S. benchmark interest rate for hedge accounting purposes. Prior to the issuance of this guidance, only interest rates on direct treasury obligations of the U.S. government and the LIBOR swap rate were considered benchmark interest rates in the U.S. This guidance is effective immediately and can be applied prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. Currently, the Company does not use the Fed Funds Effective Swap Rate as a benchmark interest rate, but may in the future.
 
Note 2 - Balance Sheet Disclosures
 
Accounts receivable consist of the following:
 
   
March 31,
2014
   
March 31,
2013
 
Accounts receivable
           
Accounts receivable
  $ 1,401,330     $ 1,087,197  
Allowance for doubtful accounts
    (80,000 )     (80,000 )
    $ 1,321,330     $ 1,007,197  

Property, plant and equipment consist of the following at:
 
   
March 31,
2014
   
March 31,
2013
 
Property, plant and equipment
           
Land
  $ 1,000,263     $ 1,000,263  
Buildings and improvements
    4,543,436       4,442,756  
Machinery and equipment
    6,228,346       5,844,738  
Office furniture and fixtures
    330,561       329,391  
    CRM/ERP system
    220,807       -  
      12,323,413       11,617,148  
Less accumulated depreciation and amortization
    (8,501,027 )     (8,003,519 )
    $ 3,822,386     $ 3,613,629  
 
 
F-8

 
 
Depreciation expense for the fiscal year ended March 31, 2014 and 2013 was $497,507 and $498,614.

Accrued expenses consist of the following at:
 
   
March 31,
2014
   
March 31,
2013
 
Accrued expenses
           
Accrued payroll and taxes
  $ 153,680     $ 128,914  
Accrued property taxes
    171,000       110,000  
Accrued sales taxes
    36,346       30,102  
    $ 361,026     $ 269,016  
 
Note 3 - Long-Term Debt
 
Long-term debt is as follows:
 
   
March 31,
2014
   
March 31,
2013
 
             
Note payable to a bank with interest fixed at 5.0% until February 2017, at which time the interest rate may change. The note calls for monthly principal and interest payments of $17,690 with unpaid principal and interest due February 2, 2022. The note is cross-collateralized with the line of credit and backed by substantially all assets of the Company and guaranteed by three stockholders who are also directors of the Company.  The note is subject to certain restrictive covenants.
  $ 2,648,620     $ 2,730,449  
 
Note payable to a bank with an effective interest rate of 4.951% for the full 20 year term. The note calls for monthly principal and interest payments of $10,088 effective May 1, 2012 and matures in April 2032. The note is cross collateralized with the line of credit and backed by substantially all assets of the Company and is guaranteed by three stockholders who are also directors of the Company.
  $ 1,348,046     $ 1,405,019  
 
Note payable to a bank with interest fixed at 6% until October 2017. The note calls for monthly principal and interest payments of $349 effective October 2012. The note is cross collateralized with the line of credit and backed by substantially all assets of the Company and is guaranteed by three stockholders who are also directors of the Company.
  $ 9,873     $ 15,680  
 
Note payable to a bank with interest fixed at 6% until May 2017. The note calls for monthly principal and interest payments of $444 effective June 2013. The note is cross collateralized with the line of credit and backed by substantially all assets of the Company and is guaranteed by three stockholders and officers of the Company.
  $ 15,342     $ -  
 
Agreement with a vendor for CRM software. Agreement calls for monthly payments of $4,000 until February 2016.
  $ 92,000     $ -  
      4,113,881       4,151,148  
Less current portion
    (189,042 )     (146,325 ) 
    $ 3,924,839     $ 4,004,823  

 
F-9

 
 
Maturities of Long-Term Debt Obligations:

Year Ending March 31,
     
2015
  $ 189,042  
2016
    204,661  
2017
    155,239  
2018
    157,293  
2017
    162,978  
             Thereafter
    3,244,668  
       Total payments
    4,113,881  
Less current portion
    (189,042 )
       Long-term debt obligation
  $ 3,924,839  
 
Note 4 – Line of Credit
 
The Company has a line of credit with ANB Bank in the amount of $750,000. As of March 31, 2014, the Company did not have a balance on the line of credit. The line of credit is subject to certain borrowing base requirements, requires monthly interest payments calculated at Prime plus 1% with a minimum rate of 5.5%. The borrowing base was $750,000 as of March 31, 2014. The line includes certain reporting and financial covenants, is cross-collateralized by substantially all assets of the Company and is guaranteed by two Company executives who are also directors of the Company and one other director of the Company. The line has a maturity date of December 27, 2014.
 
Note 5 - Capital Leases
 
The Company acquired assets under the provisions of a long-term lease.  For financial reporting purposes, minimum lease payments relating to the assets have been capitalized.  The leases have various expiration dates between November 2015 and February 2020.  Amortization of the leased property is included in depreciation expense.
 
The assets under capital lease have cost and accumulated amortization as follows:
 
   
March 31,
 
   
2014
 
Cost
  $ 320,200  
Less accumulated amortization
    (164,229 )
    $ 155,971  
Maturities of capital lease obligations are as follows:
 
Year Ending March 31,
     
2015
  $ 93,713  
2016
    67,841  
2017
    14,053  
Total minimum lease payments
    175,607  
Amount representing interest
    (19,637 )
Present value of net minimum lease payments
    155,970  
Less current portion
    (82,508 )
Long term capital lease obligation
  $ 73,462  
 
 
F-10

 
 
Note 6 - Income Taxes
 
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Deferred tax liabilities and assets are determined based on the differences between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse.  The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized based on available evidence. Net operating losses in the amount of approximately $590,000 for state taxes begin to expire in 2028.
 
The Company is subject to income taxes in the U.S. federal jurisdiction, and various state and local jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In the United States, the tax years 2010-2013 remain open to examination by the federal Internal Revenue Service and the tax years 2009-2013 remain open for various state taxing authorities. The Company has not taken any uncertain tax positions.  The net current and long-term deferred tax assets and liabilities in the accompanying balance sheet include the following:
 
   
March 31,
2014
   
March 31,
2013
 
Current deferred tax asset
  $ 29,648     $ 29,648  
Current deferred tax liability
    -       -  
Net current deferred tax asset
  $ 29,648     $ 29,648  
Long-term deferred tax asset
    26,522       61,364  
Long-term deferred tax liability
    (85,673 )     (68,839 )
Net long-term deferred tax liability
  $ (59,151 )   $ (7,475 )

Temporary differences giving rise to the net deferred tax (liability) asset are as follows:
 
Allowance for doubtful accounts
  $ 29,648     $ 29,648  
Property and equipment
    (85,673 )     (68,839 )
Net operating loss and credits
    26,522       61,364  
    $ (29,503 )   $ 22,173  
 
The following is a reconciliation of the statutory federal income tax rate applied to pre-tax accounting net income compared to the income tax expense (benefit) in the statements of income:
 
   
For the Years Ended
 
   
March 31,
 
   
2014
   
2013
 
             
Federal income taxes computed at statutory rate
  $ 280,336     $ 169,493  
State income taxes
    23,760       25,581  
Stock based compensation
    -       6,841  
Other
    15,955       13,481  
Valuation allowance
    -       (228,802 )
    $ 320,051     $ (13,406 )
 
 
F-11

 
 
Note 7 – Commitments and Contingency
 
Operating Leases
 
The Company leases delivery trucks, vehicles, equipment and property under non-cancelable operating leases.  Rent expense for these leases was $446,302 and $415,812 for the years ended March 31, 2014 and 2013, respectively.
 
Future minimum lease payments under these leases are approximately as follows:
 
Year Ending March 31,
     
2015
  $ 345,671  
2016
    302,832  
2017
    281,262  
2018
    261,482  
2019
    215,163  
Thereafter
    109,048  
    $ 1,515,458  

Renewable Energy Service Agreement

On June 11, 2009, the Company entered into a twenty year renewable energy service agreement with Eldorado Springs Solar, LLC, an unrelated third party, to design, install, own, operate and maintain a solar electricity generating system at our property in Louisville, Colorado. The Company will purchase all of the solar electricity generated by the system which will provide approximately 50% of the electricity needs at the facility in Louisville, Colorado. The agreement provides a guaranteed energy rate schedule for 10 years with a reset rate in year eleven for the electric cost. If the Company was to terminate the agreement the Company would be required to pay a termination penalty. As of March 31, 2014, this penalty would be approximately $350,000. The Company also has the option to purchase and take title to the system starting in year eleven. During the fiscal year ended March 31, 2014, the Company expensed approximately $11,750 in utility costs under this agreement.
 
Note 8 – Contingency
 
When we purchased the Eldorado Springs property in 1983, included in the purchase of the real estate were certain water rights that had been decreed for the water sources located on the property. We have the right to beneficially use the water derived from the sources of water that are the subject of the decreed water rights, unless there is a call being made downstream from our location by a water right that is senior to ours. A senior water right would be obtained by those that applied water to a beneficial use prior to the uses associated with our water sources. Because the Eldorado Springs area was not developed until the early 1900’s there are many senior water rights that could place a call on the stream and unless we have a recognized replacement source of water or a decreed augmentation plan (“Augmentation Plan”), we would be forced to stop using the water from our sources.

Because demand for our spring water exists on a year round basis, we require a replacement water source that can be delivered to the stream at any time during the year. Since the drought of 2002, we purchased shares of stock of FRICO, entitling us to use a pro rata portion of the water belonging to FRICO as operated pursuant to state regulations that govern what are known as Mutual Ditch Companies. The Marshall reservoir is located in close proximity to our water sources in Eldorado Springs and because the water is stored, it can be released upon demand to meet our obligations.

The water represented by our shares in the FRICO system had been historically used for irrigating croplands. This meant that, in addition to obtaining a decreed Augmentation Plan from the Colorado Water Court, we had to obtain a change of use decree in order to use the water for replacing our withdrawals as part of the Augmentation Plan. The Water Court of the State of Colorado entered a Decree on April 16, 2013 approving the change in water rights and the terms and conditions of our Augmentation Plan, subject to the retained jurisdiction clauses normally associated with such actions. The Decree allows us to use the water represented by our FRICO shares as augmentation water to replace our out-of-priority withdrawals from our springs and other sources. It also established the conditions under which we can add other sources of water to the Augmentation Plan for use as additional replacement water. It is possible that our ability to withdraw water from our springs in a particular year may be limited if the water associated with our FRICO shares under drought conditions is not sufficient to meet all of our replacement requirements. Because drought is an ever present possibility in our location, we will continue to seek additional sources of replacement and augmentation water to add to our Augmentation Plan.
 
 
F-12

 
 
Note 9 - Stockholders' Equity
 
Stock Options
 
The Company has a qualified stock plan, the 2008 Incentive Stock Plan, pursuant to which 2,000,000 shares were reserved for issuance.  As of March 31, 2014, 1,950,000 shares were available for future grant.  Additionally, the Company previously had a qualified stock plan, the 1997 Stock Option Plan, which expired in 2007, pursuant to which 875,000 shares were reserved for issuance.  As of March 31, 2014, 49,000 shares were reserved for issuance pursuant to outstanding grants and no shares were available for future grant as the plan has expired.  The 2008 Incentive Stock Plan and the 1997 Stock Option Plan, referred to herein as the Plans, and the shares issuable there under, are both registered on Form S-8 with the Securities and Exchange Commission.  The Plans provide for the grant of options and other equity based awards to employees, directors and consultants of the Company and are administered by the Company’s Board of Directors.
 
 
The following table presents the activity for options outstanding:
 
         
Weighted
 
         
Average
 
   
Stock
   
Exercise
 
   
Options
   
Price
 
Outstanding - March 31, 2012
    111,000     $ 1.55  
Granted
    -       -  
Forfeited/canceled
    (7,000 )     1.20  
Exercised
     -       -  
Outstanding - March 31, 2013
    104,000       1.57  
Granted
    -       -  
Forfeited/canceled/expired
    (5,000 )     0.88  
Exercised
     -       -  
Outstanding - March 31, 2014
    99,000     $ 1.60  

The following table presents the composition of options outstanding and exercisable:
                                                           
      Options Outstanding     Options Exercisable  
Exercise Prices
   
Number
   
Price*
   
Life*
   
Number
   
Price*
 
$ 0.875       10,000     $ 0.88       1.08       10,000     $ 0.88  
  1.00       9,000       1.00       0.08       9,000       1.00  
  1.65       14,000       1.65       2.09       14,000       1.65  
  1.75       16,000       1.75       3.09       16,000       1.75  
  1.80       50,000       1.80       4.05       50,000       1.80  
Total - March 31, 2014
      99,000     $ 1.60       2.96       99,000     $ 1.60  

*Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, in years, respectively.
 
Compensation expense recorded during the years ended March 31, 2014 and 2013 for options granted under the 2008 and 1997 Incentive Stock Plan was $0 and $20,121.  As of March 31, 2014 all options granted under the 1997 Incentive Stock Plan were fully vested and 50,000 options were fully vested under the 2008 Incentive Stock Plan.
 
Note 10 - Employee Benefit Plan
 
The Company has adopted a 401(k) profit sharing plan for its employees.  Employees become eligible to participate in the plan once they have completed one year of service and have reached 21 years of age.  Contributions by the Company and employees vest immediately.  The Company matches 100% of employee’s contributions up to 3% of the employee’s gross pay.  The Company matched approximately $52,600 for the year ended March 31, 2014 and $43,100 for the year ended March 31, 2013.  No discretionary profit sharing contributions were approved by the Board of Directors for the years ended March 31, 2014 and 2013.

 
F-13

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness Of Disclosure Controls And Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.

Our principal executive officer and principal financial officer, in consultation with EKS&H LLLP, our independent registered public accounting firm, identified a control deficiency that they believed constituted a material weakness in our internal control over financial reporting. The material weakness related to our lack of technical expertise regarding complex accounting matters associated with certain income tax calculations. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective in ensuring that material information required to be disclosed is included in the reports that we file with the Securities and Exchange Commission. Our management believes that this material weakness did not impact the reliability of our financial statements for the year ended March 31, 2014.

Management's Annual Report On Internal Control Over Financial Reporting

Our management, under the supervision of our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of the inherent limitations of internal control over financial reporting, misstatements may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, with the participation of our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of March 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), referred to as the Internal Control—Integrated Framework. Based on this assessment, management, with the participation of our principal executive officer and principal financial officer, has determined that we did not maintain effective internal controls over financial reporting as of March 31, 2014.  Management has identified a material weakness in the operation of our internal controls over financial reporting as it relates to the lack of technical expertise regarding complex accounting matters associated with certain income tax calculations.  A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.
 
 
14

 
 
Remediation Of Material Weaknesses in Internal Control Over Financial Reporting
 
In light of the conclusion that our internal control over financial reporting was not effective, our management is in the process of implementing a plan intended to remediate such ineffectiveness and to strengthen our internal controls over financial reporting through the implementation of certain remedial measures, including obtaining the assistance of experienced financial personnel to enhance our financial reporting capabilities and assist our principal financial officer as the need arises.
 
Changes In Internal Control Over Financial Reporting
 
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As described above, in the future we intend to obtain the assistance of experienced financial personnel to enhance our financial reporting capabilities.
 
ITEM 9B. OTHER INFORMATION

None.

 
15

 
 
PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The required information for this item is incorporated by reference to the Company’s Proxy Statement for the 2014 Annual Meeting of Shareholders, since such Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after the end of the Company’s fiscal year pursuant to Regulation 14A.

The Company’s Board of Directors has adopted a code of ethics to provide guidance on maintaining the Company’s commitment to being honest and ethical in its business endeavors. The code of ethics applies to the Company’s directors, executive officers and employees and covers a wide range of business practices, procedures and basic principles regarding corporate and personal conduct. The Company undertakes to provide without charge, upon request, a copy of the code of ethics. A request for the code of ethics can be made in writing to the Company’s Chief Financial Officer, Eldorado Artesian Springs, Inc., 1783 Dogwood Street, Louisville, CO 80027.

ITEM 11. EXECUTIVE COMPENSATION

The required information for this item is incorporated by reference to the Company’s Proxy Statement for the 2014 Annual Meeting of Shareholders, since such Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after the end of the Company’s fiscal year pursuant to Regulation 14A.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The required information for this item is incorporated by reference to the Company’s Proxy Statement for the 2014 Annual Meeting of Shareholders, since such Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after the end of the Company’s fiscal year pursuant to Regulation 14A.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The required information for this item is incorporated by reference to the Company’s Proxy Statement for the 2014 Annual Meeting of Shareholders, since such Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after the end of the Company’s fiscal year pursuant to Regulation 14A.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The required information for this item is incorporated by reference to the Company’s Proxy Statement for the 2014 Annual Meeting of Shareholders, since such Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after the end of the Company’s fiscal year pursuant to Regulation 14A.

 
16

 
 
PART IV
ITEM 15. EXHIBITS

(a)  
Documents Filed as Part of this Report

(1)  
Financial Statements. The financial statements of Eldorado Artesian Springs, Inc., which are listed on the Table of Contents to Financial Statements appearing on page 16 of this Annual Report.

(2)  
Financial Statement Schedules. All schedules for which provision is made in the applicable accounting regulations of the SEC are omitted because of the absence of conditions under which they are required or because the required information is included in the financial statements and related notes thereto.

(3)  
Exhibits. The following is a list of exhibits filed as part of this Annual Report on Form 10-K.
 
Exhibit No.
 
Description
 
Location
         
3.1
 
Articles of Incorporation and Bylaws
 
Incorporated by reference to Exhibit 3 to the Registration Statement (No. 33-6738-D)
         
3.2.
 
Amended Articles of Incorporation
 
Incorporated by reference to Exhibit 3.1 to Eldorado’s Form 10-KSB for the fiscal year ended March 31, 1998
         
3.3   Amended and Restated Articles of Incorporation   Incorporated by reference to Exhibit 3.1 to Eldorado’s Form SB-2/A (Registration Statement No.  333-68553) filed with the Securities and Exchange Commission on November 21, 2000
         
3.4
 
 
Amended and Restated Bylaws
 
Incorporated by reference to Exhibit 3.2 to Eldorado’s Form SB-2/A (Registration Statement No. 333-68553) filed with the Securities and Exchange Commission on July 2, 1999
         
10.1*
 
1997 Stock Option Plan
 
Incorporated by reference to Exhibit 10.1 to Registration Statement No. 333-68553
         
10.2
 
Promissory Note with First National Bank of Boulder County dated June 27, 1997
 
Incorporated by reference to Exhibit 10.2 to Registration Statement No. 333-68553
         
10.3
 
Deed of Trust dated June 27, 1997
 
Incorporated by reference to Exhibit 10.3 to Registration Statement No. 333-68553
         
10.4
 
Small Business Administration Note – U.S. Bank, August 21, 2001
 
Incorporated by reference to Exhibit 10.4 to Eldorado’s Form 10-KSB for the fiscal year ended March 31, 2003
         
10.5
 
U.S. Bank, August 21, 2001 Deed of Trust
 
Incorporated by reference to Exhibit 10.5 to Eldorado’s Form 10-KSB for the fiscal year ended March 31, 2003
         
10.6
 
U.S. Small Business Administration Note – Bank of West August 21, 2001
 
Incorporated by reference to Exhibit 10.6 to Eldorado’s Form 10-KSB for the fiscal year ended March 31, 2003
         
10.7
 
Bank of West, August 21, 2001, Deed of Trust
 
Incorporated by reference to Exhibit 10.7 to Eldorado’s Form 10-KSB for the fiscal year ended March 31, 2003
         
10.8   Contract to Buy and Sell Real Estate (Commercial)   Incorporated by reference to Exhibit 10.1 to Eldorado’s Form 10-QSB for the quarter ended September 30, 2001
         
10.9   Contract to Buy and Sell Real Estate (Residential)   Incorporated by reference to Exhibit 10.2 to Eldorado’s Form 10-QSB for the quarter ended September 30, 2001
         
10.10   Contract to Buy and Sell Real Estate (Residential)   Incorporated by reference to Exhibit 10.3 to Eldorado’s Form 10-QSB for the quarter ended September 30, 2001
         
10.11
 
Note receivable – Doug Larson
 
Incorporated by reference to Exhibit 10.8 to Eldorado’s Form 10-KSB for the fiscal year ended March 31, 2003
 
 
17

 
 
         
10.12
 
Doug Larson – Pledge agreement
 
Incorporated by reference to Exhibit 10.9 to Eldorado’s Form 10-KSB for the fiscal year ended March 31, 2003
         
10.13
 
Note receivable – Kevin Sipple
 
Incorporated by reference to Exhibit 10.10 to Eldorado’s Form 10-KSB for the fiscal year ended March 31, 2003
         
10.14
 
Kevin Sipple – Pledge agreement
 
Incorporated by reference to Exhibit 10.11 to Eldorado’s Form 10-KSB for the fiscal year ended March 31, 2003
         
10.15
 
Management Consulting and Finders Agreement, dated as of January 4, 2005, by and between the Company and Capital Merchant Bank, LLC
 
Incorporated by reference to Exhibit 10.1 to Eldorado’s Form 8-K filed with the Securities and Exchange Commission on January 11, 2005
         
10.16
 
Warrant to Purchase Shares of Common Stock, dated January 4, 2005
 
Incorporated by reference to Exhibit 10.2 to Eldorado’s Form 8-K filed with the Securities and Exchange Commission on January 11, 2005
         
10.17
 
Water Lease Agreement with Denver Wells, LLC dated August 31, 2006
 
Incorporate by reference to Exhibit 10.14 to Eldorado’s Form 8-K filed with the Securities and Exchange Commission on October 4, 2006
         
10.18   Commercial Loan Agreement with American National Bank dated February 20, 2007   Incorporated by reference to Exhibit 10.18 to Eldorado’s Form 10-KSB filed with the Securities and Exchange Commission on June 26, 2007
         
10.19   Commercial Loan Agreement with American National Bank dated October 11, 2007   Incorporated by reference to Exhibit 10.1 to Eldorado’s Form 10-QSB filed with the Securities and Exchange Commission on November 14, 2007
         
10.20   Purchase and Sale Agreement with Farmers Reservoir and Irrigation Company Marshall Lake Division Shares dated February 28, 2007   Incorporated by reference to Exhibit 10.20 to Eldorado’s Form 10-QSB filed with the Securities and Exchange Commission on November 14, 2007
         
10.21   Purchase and Sale Agreement with Farmers Reservoir and Irrigation Company Marshall Lake Division Shares dated August 2, 2007   Incorporated by reference to Exhibit 10.21 to Eldorado’s Form 10-QSB filed with the Securities and Exchange Commission on November 14, 2007
         
10.22   Water Use Agreement with the City of Louisville, Colorado dated October 16, 2007   Incorporated by reference to Exhibit 10.22 to Eldorado’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2007
         
10.23   Purchase and Sale Agreement with Farmers Reservoir and Irrigation Company Marshall Lake Division Shares dated March 21, 2008   Incorporated by reference to Exhibit 10.23 to Eldorado’s Form 10-KSB filed with the Securities and Exchange Commission on June 27, 2008
         
10.24*   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
         
10.25   First Amendment to Water Lease Agreement dated July 15, 2008   Incorporated by reference to Exhibit 10.24 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on August 1, 2008
 
 
18

 
 
         
10.26   Commercial Loan Agreement with American National Bank dated March 17, 2009 (including Debt Modification Agreement dated March 17, 2009)   Incorporated by reference to Exhibit 10.26 to Eldorado’s Form 10-K filed with the Securities and Exchange Commission on June 29, 2009.
         
10.27   Commercial Loan Agreement with ANB Bank, dated February 2, 2012   Incorporated by reference to Exhibit 99.1 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on February 13, 2012.
         
10.28   Promissory Note between Eldorado Artesian Springs, Inc. and ANB Bank, dated February 2, 2012   Incorporated by reference to Exhibit 99.2 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on February 13, 2012.
         
10.29   Deeds of Trust between Eldorado Artesian Springs, Inc. and ANB Bank, dated February 2, 2012   Incorporated by reference to Exhibit 99.3 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on February 13, 2012.
         
10.30   Agreement to Provide Insurance between Eldorado Artesian Springs, Inc. and ANB Bank, dated February 2, 2012   Incorporated by reference to Exhibit 99.4 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on February 13, 2012.
         
10.31   Commercial Loan Agreement with ANB Bank, dated February 2, 2012   Incorporated by reference to Exhibit 99.5 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on February 13, 2012.
         
10.32   Promissory Note between Eldorado Artesian Springs, Inc. and ANB Bank, dated February 2, 2012   Incorporated by reference to Exhibit 99.6 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on February 13, 2012.
         
10.33   Deeds of Trust between Eldorado Artesian Springs, Inc. and ANB Bank, dated February 2, 2012   Incorporated by reference to Exhibit 99.7 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on February 13, 2012.
         
10.34   Agreement to Provide Insurance between Eldorado Artesian Springs, Inc. and ANB Bank, dated February 2, 2012   Incorporated by reference to Exhibit 99.8 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on February 13, 2012.
         
10.35   Promissory Note between Eldorado Artesian Springs, Inc. and the U.S. Small Business Administration, dated February 2, 2012.   Incorporated by reference to Exhibit 99.9 to Eldorado’s Form 8-k filed with the Securities and Exchange Commission on February 13, 2012.
         
10.36   Amendment to Commercial Loan Agreement with ANB Bank, dated December 11, 2013.   Incorporated by reference to Exhibit 10.36 to Eldorado’s Form 10-Q filed with the Securities and Exchange Commission on February 14, 2014.
         
23.1   Consent of EKS&H LLLP   Filed herewith
         
 
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
 
Filed herewith
         
 
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
 
Filed herewith
         
 
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
 
Filed herewith
         
 
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
 
Filed herewith
         
101**
 
Financial Statements from the Annual Report on Form 10-K of Eldorado Artesian Springs for the year ended March 31, 2014, formatted in XBRL: (i) Balance Sheets; (ii) Statements of Operations; (iii) Statements of Stockholders Equity; (iv) Statements of Cash Flow; and (iv) Notes to Financial Statements
 
Filed herewith
 

*        Management contract or compensatory plan

**        In accordance with Rule 406T of Regulation ST, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
 
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
ELDORADO ARTESIAN SPRINGS, INC.
 
       
Dated: June 27, 2014
By:
/s/ Douglas A. Larson  
   
Douglas A. Larson,
 
   
President (Principal Executive Officer)
 
       
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Name and Capacity
 
Date
 
       
/s/ Douglas A. Larson  
June 27, 2014
 
Douglas A. Larson,
     
President and Director
     
       
/s/ Cathleen Shoenfeld  
June 27, 2014
 
Cathleen Shoenfeld,
     
Chief Financial Officer, Chief Accounting Officer
     
(Principal Financial and Accounting Officer), Secretary
     
       
/s/ Jeremy S. Martin  
June 27, 2014
 
Jeremy S. Martin,
     
Vice-President and Director
     
       
/s/ Kevin M. Sipple
 
June 27, 2014
 
Kevin M. Sipple,
     
Director
     
       
/s/ J. Ross Colbert  
June 27, 2014
 
J. Ross Colbert,
     
Director
     
 
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