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 September 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
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(State or other jurisdiction of (IRS Employer Identification No.)
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
----- -----
Number shares of common stock outstanding at the latest practicable date,
September 30, 2000 : 2,995,495.
<PAGE>
ELDORADO ARTESIAN SPRINGS, INC.
INDEX
Page
----
Part I - Financial Information
Item 1 - Financial Statements
Balance Sheets September 30, 2000 (Unaudited) and March 31, 2000..F - 1
Unaudited Statements of Operations For the Six Months and
Three Months Ended September 30, 2000 and September 30, 1999.....F - 2
Unaudited Statements of Cash Flows For the Six Months Ended
September 30, 2000 and September 30, 1999 .......................F - 3
Notes to Unaudited Financial Statements ..........................F - 4
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations ..........................................F - 5
Part II - Other Information ............................................F - 8
Signature Page .........................................................F - 9
<PAGE>
ELDORADO ARTESIAN SPRINGS, INC.
Balance Sheets
September 30, March 31,
2000 2000
------------ ------------
(Unaudited)
Assets
Current assets
Cash $ 266,049 $ 360,644
Accounts receivable
Trade, net 852,163 680,122
Other 37,920 37,633
Inventories 234,154 198,781
Prepaid expenses and other 21,574 43,604
Deferred income taxes 18,165 18,165
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Total current assets 1,430,025 1,338,949
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Property, plant & equipment - net 1,827,857 1,798,744
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Other assets
Water rights - net 103,398 105,642
Other, net 131,433 50,863
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Total other assets 234,831 156,505
----------- -----------
$ 3,492,713 $ 3,294,198
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 322,200 $ 140,327
Accrued expenses 123,797 109,921
Deposits 124,244 114,337
Current maturities of long-term debt 277,349 244,489
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Total current liabilities 847,590 609,074
Long-term liabilities
Long-term debt 1,233,548 1,275,858
Deferred income taxes 76,158 76,158
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Total liabilities 2,157,296 1,961,090
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Stockholders' equity
Common stock, par value $.001 per share;
50,000,000 shares authorized; 2,995,495
issued and outstanding 2,995 2,995
Preferred stock, par value $.001 per share;
10,000,000 shares authorized; 0 issued
and outstanding -- --
Additional paid-in capital 984,656 984,656
Retained earnings 347,766 345,457
----------- -----------
1,335,417 1,333,108
$ 3,492,713 $ 3,294,198
=========== ===========
See notes to financial statements.
F - 1
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ELDORADO ARTESIAN SPRINGS, INC.
Unaudited Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
September 30, September 30,
--------------------------------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Water and related ........... $ 1,659,067 $ 1,366,110 $ 3,077,047 $ 2,589,732
Pool ........................ 60,662 50,382 83,042 68,641
Rentals ..................... 12,900 11,900 25,800 24,800
----------- ----------- ----------- -----------
Net revenue ............... 1,732,629 1,428,392 3,185,889 2,683,173
Cost of goods sold ............. 381,115 227,862 637,914 439,467
----------- ----------- ----------- -----------
Gross profit ................... 1,351,514 1,200,530 2,547,975 2,243,706
----------- ----------- ----------- -----------
Operating expenses
Salaries and related ........ 678,992 570,105 1,255,713 1,019,470
Administrative and general .. 254,706 184,412 480,026 380,550
Delivery .................... 106,786 79,424 179,803 144,821
Advertising and promotions .. 268,191 165,908 385,861 343,772
Depreciation and amortization 90,884 78,541 178,472 156,611
----------- ----------- ----------- -----------
1,399,559 1,078,390 2,479,875 2,045,224
----------- ----------- ----------- -----------
Operating income ............... (48,045) 122,140 68,100 198,482
----------- ----------- ----------- -----------
Other income (expense)
Interest income ............. 2,785 1,663 5,318 3,360
Interest expense ............ (31,990) (32,496) (69,865) (59,367)
----------- ----------- ----------- -----------
(29,205) (30,833) (64,547) (56,007)
----------- ----------- ----------- -----------
(Loss) income before income
taxes ......................... (77,250) 91,307 3,553 142,475
Provision for income taxes ..... (27,037) 31,436 1,244 49,866
----------- ----------- ----------- -----------
Net (loss) income .............. (50,213) 59,871 $ 2,309 $ 92,609
=========== =========== =========== ===========
Basic (loss) earnings per
common share .................. (.02) .02 .00 .03
=========== =========== =========== ===========
Weighted average number of
shares outstanding ............. 2,995,495 2,995,495 2,995,495 2,995,495
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F - 2
<PAGE>
ELDORADO ARTESIAN SPRINGS, INC.
Unaudited Statements of Cash Flows
Six Months Ended
September 30,
--------------------------
2000 1999
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Cash flows from operating activities
Net income $ 2,309 $ 92,609
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Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 178,472 156,611
Changes in certain assets and liabilities
Accounts receivable (172,328) (86,366)
Inventories (35,373) (19,042)
Prepaid expenses and other 22,030 (11,165)
Accounts payable 181,873 36,744
Accrued expenses 13,876 16,466
Deposits 9,907 21,929
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198,457 115,177
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Net cash provided by operating activities 200,766 207,786
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Cash flows from investing activities
Purchase of property and equipment (90,649) (112,309)
Purchases of other assets (83,472) (10,414)
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Net cash flows used in investing activities (174,121) (122,723)
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Cash flows from financing activities
Payments on long-term debt (121,240) (34,162)
Deferred offering costs - (66,212)
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Net cash flows used in financing activities (121,240) (100,374)
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Net decrease in cash (94,595) (15,311)
Cash-- beginning of period 360,644 361,439
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Cash-- ending of period $ 266,049 $ 346,128
========== ==========
Supplemental disclosures of cash flow information:
Cash paid for interest for the six months ended September 30, 2000 and
September 30, 1999 was $69,865 and $59,367, respectively.
Supplemental disclosures of noncash investing activity:
During the six months ended September 30, 2000 and 1999, equipment was
acquired through a capital lease for $111,790 and $66,734, respectively.
See notes to financial statements.
F - 3
<PAGE>
ELDORADO ARTESIAN SPRINGS, INC.
Notes to Unaudited Financial Statements
Note 1 - Summary of Significant Accounting Policies
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Interim Unaudited Financial Statements
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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 six
months ended September 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.
F - 4
<PAGE>
ELDORADO ARTESIAN SPRINGS, INC.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, ability to purchase additional water rights, 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 a unique geologic source. 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 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.
The bottled water industry is considered by many analysts to be the fastest
growing major market in the beverage industry. The bottled water industry has
exhibited consistent annual growth over the last twenty years and the dollar
amount of sales grew at a rate of 14% for 1999. According to a major reporter of
bottled water statistics, bottled water sales increased to a $4.9 billion dollar
business in 1999. Along with sales and volume, per person consumption has
increased to nearly 15.5 gallons, up from 13 gallons in 1998. Driving the
market's growth is the premium PET bottle segment which was up 35% in 1999,
accounting for two-thirds of the market's overall growth. 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.
F - 5
<PAGE>
ELDORADO ARTESIAN SPRINGS, INC.
Results of Operations
Net revenues for the six months ended September 30, 2000 increased $502,716 or
18.7% compared to the same period ended September 30, 1999. Net revenues for the
three months ended September 30, 2000 increased $304,237 or 21.3%. Five and
three gallons product sales increased 8.9% for the six months ended September
30, 2000 compared to the same period of fiscal 1999. Sales of the one gallon
products increased 32.3% for the six months ended September 30, 2000 compared to
the same period of fiscal 1999. Sales of the PET products (1.5 liters and
smaller) generated the largest increase in revenues and increased 56.6% for the
six months ended September 30, 2000 compared to the same period of fiscal 1999.
Five and three gallon product sales account for 66.5% of net revenues, PET
products account for 20.8% of revenues and one gallon products account for 9.6%
of revenues.
For the six months ended September 30, 2000 cost of goods sold was $637,914
compared to $439,467 for the six months ended September 30, 1999. For the three
months ended September 30, 2000 costs of goods sold was $381,115 compared to
$227,862 for the three months ended September 30, 1999. Resulting gross profit
was 80.0% of revenues for the six months ended September 30, 2000 compared with
a gross profit of 83.6% for the six months ended September 30, 1999. Gross
profit increased 13.6% from $2,243,706 for the six months ended September 30,
1999 to $2,547,975 for the six months ended September 30, 2000. Gross profit
increased 12.6% for the three months ended September 30, 2000. The decrease in
gross profit percentage is the result of the increased revenue associated with
the PET products and the one gallon products as they have a lower gross margin
due to additional packaging costs. In addition, the company was forced to
purchase one-gallon containers from an out-of-state vendor at premium prices
while its normal local vendor was undergoing renovations. The Company has
resumed local purchasing in July 2000.
Operating expenses for the six months ended September 30, 2000 increased 21.3%
to $2,479,875 from $2,045,224 for the same period of fiscal 1999. For the three
months ended September 30, 2000, operating expenses increased 29.8% compared to
the same period of fiscal 1999. Salaries and related expenses increased 23.2%
for the six months ended September 30, 2000. Salaries and related expenses were
$1,255,713 or 39.4% of sales for the six months ended September 30, 2000
compared to $1,019,470 or 38.0% of sales for the same period of fiscal 1999. For
the three months ended September 30, 2000 salaries and related expenses
increased 19.1% compared to the three months ended September 30, 1999. The
increase in salaries and related expenses is due to the increase in revenues for
the same period and the increased wages involved in obtaining and servicing new
and existing customers. The increase in salaries and related expenses is also
due to the additional costs of operating within a limited amount of space. The
Company has plans to move the bottling facility at which time management expects
more efficient operations. In addition, the Company is incurring additional
personnel and operating expenses as a result of product volume growth straining
processing in the near term as production and delivery requirements increase
faster than the expansion facilities can be completed. While the Company is
making every effort to mitigate these effects, the Company believes additional
costs and expenses will be incurred until the expansion facilities are fully
operational in June 2001.
F - 6
<PAGE>
ELDORADO ARTESIAN SPRINGS, INC.
For the six months ended September 30, 2000 advertising and promotional expenses
were $385,861 or 12.1% of sales compared to $343,772 or 12.8% of sales for the
same period of fiscal 1999. For the three months ended September 30, 2000
advertising and promotional expenses were $268,191 or 15.5% of sales compared to
$165,908 or 11.6% of sales for the same period of fiscal 1999. Additional
advertising expenditures were incurred during the six months ended September 30,
2000, and management expects that advertising and promotional expenses will
remain at the historical level of approximately 10% of annual sales. Eldorado
incurs a higher portion of their advertising costs during the first half of the
fiscal year due to the summer months falling during this period.
Delivery expenses increased 24.2% to $179,803 or 5.6% of sales for the six
months ended September 30, 2000 compared to $144,821 or 5.4% of sales for the
same period ended September 30, 1999. For the three months ended September 30,
2000 delivery expenses increased 34.4% compared to the same period of fiscal
1999. Delivery costs increased due to the increase in revenues and the costs
associated with the operation of delivery vehicles.
General and administrative expenses for the six months ended September 30, 2000
increased 26.1% to $480,026 from $380,550 for the same period of fiscal 1999.
For the three months ended September 30, 2000 general and administrative
expenses increased $70,294 or 38.1%. The increase in general and administrative
expenses is due to the increase in revenues.
Depreciation and amortization increased 14% for the six months ended September
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 six months of fiscal 2000 was $2,309
compared to $92,609 for the six months ended September 30, 1999. The effect of
operating the business with a limited bottling facility has had a negative
effect on the net income resulting in a 97.5% decrease for the six months ended
September 30, 2000. Eldorado currently has plans to build an off-site warehouse
and bottling facility to allow increased production capacity. Construction is
expected to be completed by June 2001. At that time, operating expenses and cost
of goods are expected to be more consistent with the increase in revenues
resulting in an increase in net income
Liquidity and Capital Resources
Trace accounts receivable for the six months ended September 30, 2000 were 25.3%
higher than at the year ended March 31, 2000. Days sales outstanding at
September 30, 2000 remained relatively consistent with September 30, 1999, at
approximately 50 days.
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
September 30, 2000, 558,000 options were outstanding, of which 237,100 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.
F - 7
<PAGE>
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
------------------------------
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
F - 8
<PAGE>
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
November __, 2000
F - 9
