FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 2000
Commission File Number: 33-6738-D
Eldorado Artesian Springs, Inc.
(Exact name of registrant as specified in its charter as amended)
Colorado 84-0907853
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation) Or organization)
PO Box 445, Eldorado Springs, Colorado 80025
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(Address of principal executive offices) (Zip Code)
(303) 499-1316
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(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
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Number shares of common stock outstanding at the latest practicable date, June
30, 2000 : 2,995,495.
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ELDORADO ARTESIAN SPRINGS, INC.
INDEX
Page
Part I - Financial Information
Item 1 - Financial Statements
Balance Sheets June 30, 2000 (Unaudited) and March 31, 2000..........1
Unaudited Statements of Operations For the Three Months Ended
June 30, 2000 and June 30, 1999.....................................2
Unaudited Statements of Cash Flows For the Three Months Ended
June 30, 2000 and June 30, 1999.....................................3
Notes to Unaudited Financial Statements..............................4
Item 2 - Management's Discussion or Plan of Operation.........................5
Part II - Other Information ..................................................8
Signatures....................................................................9
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ELDORADO ARTESIAN SPRINGS, INC.
Balance Sheets
June 30, March 31,
2000 2000
------------- -------------
(Unaudited)
Assets
Current assets
Cash $ 277,883 $ 360,644
Accounts receivable
Trade, net of allowance for
doubtful accounts of $50,000 797,197 680,122
Other 10,455 37,633
Inventories 189,703 198,781
Prepaid expenses and other 48,342 43,604
Deferred income taxes 18,165 18,165
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Total current assets 1,341,745 1,338,949
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Property, plant & equipment - net 1,794,686 1,798,744
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Other assets
Water rights - net 104,520 105,642
Other, net 91,117 50,863
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Total other assets 195,637 156,505
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$ 3,332,068 $ 3,294,198
============= =============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 160,332 $ 140,327
Accrued expenses 95,976 109,921
Customer deposits 115,426 114,337
Current maturities of long-term debt 255,633 244,489
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Total current liabilities 627,367 609,074
Long-term liabilities
Long-term debt 1,242,913 1,275,858
Deferred income taxes 76,158 76,158
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Total liabilities 1,946,438 1,961,090
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Stockholders' equity
Common stock, par value $.001 per
share; 50,000,000
Additional paid-in capital 984,656 984,656
Retained earnings 397,979 345,457
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1,385,630 1,333,108
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$ 3,332,068 $ 3,294,198
============= =============
See notes to financial statements.
1
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ELDORADO ARTESIAN SPRINGS, INC.
Unaudited Statements of Operations
For the Three Months Ended
June 30,
--------------------------------
2000 1999
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Revenue
Water and related $ 1,417,980 $ 1,223,622
Pool 22,380 18,259
Deposits 12,900 12,900
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Net revenue 1,453,260 1,254,781
Cost of goods sold exclusive of
Gross profit 1,196,461 1,043,176
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Operating expenses
Salaries and related 576,721 449,365
Administrative and general 225,320 196,138
Delivery 73,017 65,369
Advertising and promotion 117,670 177,864
Depreciation and amortization 87,588 78,070
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1,080,316 966,806
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Operating income 116,145 76,370
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Other income (expense)
Interest income 2,533 1,697
Interest expense (37,875) (26,871)
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(35,342) (25,174)
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Income before income taxes 80,803 51,196
Provision for income taxes 28,281 18,430
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Net income $ 52,522 $ 32,766
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Basic earnings per common share $ .02 $ .01
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Weighted average number of shares
outstanding 2,995,495 2,995,495
============= =============
See notes to financial statements.
2
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ELDORADO ARTESIAN SPRINGS, INC.
Unaudited Statements of Cash Flows
Three Months Ended
June 30,
--------------------------------
2000 1999
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Cash flows from operating activities
Net income $ 52,522 $ 32,766
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Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 87,588 78,070
Changes in certain assets and
liabilities
Accounts receivable (89,897) (9,947)
Inventories 9,078 21,179
Prepaid expenses and other (4,738) 6,235
Accounts payable 20,005 (30,080)
Accrued expenses (13,945) 10,109
Customer deposits 1,089 (1,643)
Other - (17,400)
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9,180 56,523
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Net cash provided by operating
activities 61,702 89,289
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Cash flows from investing activities
Purchase of property and equipment (44,807) (46,206)
Purchases of other assets (41,705) (9,286)
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Net cash flows used in investing
activities (86,512) (55,492)
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Cash flows from financing activities
Payments on long-term debt (57,951) (39,022)
Deferred offering costs - (2,179)
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Net cash flows used in financing
activities (57,951) (41,201)
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Net (decrease) in cash (82,761) (7,404)
Cash-- beginning of period 360,644 361,439
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Cash-- ending of period $ 277,883 $ 354,035
============= =============
Supplemental disclosures of cash flow
information:
Cash paid for interest for the three months ended June 30, 2000 and June 30,
1999 was $37,875 and $26,871, respectively. Cash paid for income taxes for
the three months ended June 30, 2000 and 1999 was $9,960 and $0,
respectively.
Supplemental disclosures of noncash investing activity:
During the three months ended June 30, 2000 and 1999, equipment was acquired
through a capital lease for $36,150 and $54,711, respectively.
See notes to financial statements.
3
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ELDORADO ARTESIAN SPRINGS, INC.
Notes to Unaudited Financial Statements
Note 1 - Summary of Significant Accounting Policies
Interim Unaudited Financial Statements
The interim financial statements are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The results of operations for the
three months ended June 30, 2000 and 1999 are not necessarily indicative of the
results of the entire year. The financial statements included herein are
presented in accordance with the requirements of Form 10-QSB and consequently do
not include all of the disclosures normally made in the registrant's annual Form
10-KSB filing. These financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Form 10-KSB
for the year ended March 31, 2000.
Note 2 - Stockholders' Equity
Stock Option Plan
On May 1, 2000, the Company granted 61,000 options to employees under the
Company's 1997 Stock Option Plan to purchase common stock at $3.875 per share,
fair market value at the date of the grant.
4
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ELDORADO ARTESIAN SPRINGS, INC.
Item 2: MANAGEMENT'S DISCUSSION OR PLAN OF OPERATION
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, interest rate fluctuations, effects of regional economic
and market conditions, labor and marketing costs, operating costs, packaging
costs, intensity of competition and legal claims.
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, assuring a well
protected source. The artesian springs located on the Company's property emanate
from one of the most unique geologic sources in the world. The water is
naturally purified as it rises up through many layers of sandstone under its own
artesian pressure. Eldorado Artesian Spring water is bottled at the source in
its natural state and is not chemically treated in any way. Currently,
Eldorado's operations consist of its home/commercial delivery business of 5 and
3 gallon bottles. In addition, Eldorado also bottles and delivers smaller
bottles in sizes of .5 liter, 1.0 liter and 1.5 liter. Bottles used for smaller
packaging are made of polyethylene terephtalate, a premium clear plastic. These
bottles are commonly referred to in the beverage industry as PET bottles.
Beverage industry analysts announced that bottled water is the fastest growing
major category in the entire beverage industry. The bottled water industry as
whole is a $4.9 billion business and is currently growing at a rate of 14% per
year. In 1999, the total U.S. bottled water market will pass the 4 billion
gallon mark for the first time. The non-sparkling PET segment of the bottled
water industry is currently the fastest growing segment of the bottled water
market. Over the last seven years, the PET segment has grown at a 27% compounded
annual growth rate. In 1999, this segment was expected to achieve a high of 1.2
billion gallons and continue with strong growth of approximately 30%. With
growing concern over the quality of municipal tap waters, the growth of the
bottled water market is expected to continue to grow in all areas.
5
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ELDORADO ARTESIAN SPRINGS, INC.
Results of Operations
Net revenues for the three months ended June 30, 2000 increased $198,479 or
15.8% compared to the same period ended June 30, 1999. Five and three gallons
product sales increased 12.1% for the three months ended June 30, 2000 compared
to the same periods of fiscal 1999. Sales of the one-gallon products increased
13.7% for the three months ended June 30, 2000, compared to the same periods of
fiscal 1999. Sales of the PET products (1.5 liters and smaller) generated the
largest increase in revenues and increased 42.9% for the three months ended June
30, 2000 compared to the same periods of fiscal 1999. Five and three gallon
product sales account for 55.7% of net revenues, PET products account for 20.7%
of revenues and one gallon products account for 8.1% of revenues.
For the three months ended June 30, 2000, cost of goods sold was $256,799
compared to $211,605 for the three months ended June 30, 2000. Resulting gross
profit was 82.3% of revenues for the three months ended June 30, 2000, which is
consistent with a gross profit of 83.1% of revenues for the three months ended
June 30, 1999. Gross profit increased 14.7% from $1,043,176 for the three months
ended June 30, 1999, to $1,196,461 for the three months ended June 30, 2000. The
increase in gross profit for the three months ended June 30, 2000, is the result
of increased sales.
Operating expenses for the three months ended June 30, 2000, increased 11.7% to
$1,080,316 from $966,805 for the same period of fiscal 1999. Salaries and
related expensed increased 28.3% for the three months ended June 30, 2000. The
increase in salaries and related expenses is consistent with the increase in
revenues for the same period and the increased wages involved in obtaining and
servicing new and existing customers.
General and administrative expenses were $225,320 or 15.5% of sales for the
three months ended June 30, 2000, compared to $196,138 or 15.6% of sales for the
three months ended June 30, 1999. For the three months ended June 30, 2000,
advertising and promotional expenses were $117,670 or 8.1% of sales compared to
$177,864 or 14.2% of sales for the same period of fiscal 1999. Management
expects that advertising and promotional expenses will increase in the next
three months for additional advertising expenditures that have been planned.
Management expects that advertising and promotional expenses will remain
approximately 10% of revenues. Selling and delivery expenses increased 11.7% to
$73,017 or 5.0% of sales for the three months ended June 30, 2000, compared to
$65,369 or 5.2% of sales for the same period ended June 30, 1999.
Depreciation and amortization increased 12.2% for the three months ended June
30, 2000. Eldorado has continued to purchase additional equipment associated
with the increase in additional home and commercial accounts.
Eldorado's net income for the first three months of fiscal 2000 was $52,522
compared to $32,766 for the three months ended June 30, 1999. This represents an
increase of 60.3% compared to the three months ended June 30, 1999 and is
attributable to the increase in revenues for the three months ended June 30,
2000.
6
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Liquidity and Capital Resources
Trade accounts receivable for the three months ended June 30, 2000 were 17.2%
higher than at year ended March 31, 2000. This resulted from the 16% increase in
revenues for the three months ended March 31, 2000. Days sales outstanding was
approximately 50 days for June 30, 2000. Days sales outstanding was
approximately 49 days for June 30, 1999. Management has implemented new credit
policies to manage the accounts more effectively.
On May 19, 1998, the company registered 875,000 shares of common stock of the
company pursuant to the 1997 stock option plan. The plan provides for the grant
of stock options to employees, directors and consultants of the company. As of
June 30, 2000, 558,000 options were outstanding, of which 274,600 are fully
vested. All of the options were granted at an option price representing 100% of
the fair market value on the date of the grant as determined by the Board of
Directors.
7
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ELDORADO ARTESIAN SPRINGS, INC.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
No legal proceedings have been filed on behalf of or against the Company, nor
have any claims been made.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
There have been no defaults on any securities. The Company has no obligations
with regard to dividends and no preferred stock.
Item 4. Submission of Matters to a Vote of the Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
8
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Signatures
Pursuant to the requirements 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.
By: /s/ Douglas Larson
Douglas A. Larson, President
By: /s/ Kevin M. Sipple
Kevin M. Sipple, Secretary
By: /s/ Cathleen Collins
Cathleen Collins, Chief Financial Officer
9
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