SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)
[X]     Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
        Act of 1934 for the fiscal year ended  October 31, 2000

                  or

[ ]     Transition  report  pursuant  to  Section 13 or 15(d) of the  Securities
        Exchange  Act of 1934 for the  transition  period from_______ to _______

                        Commission File Number 333-45226

                           VERMONT PURE HOLDINGS, LTD.
                 (Exact name of business issuer in its charter)



                DELAWARE                                     03-0366218
-------------------------------------              -----------------------------
     (State or other jurisdiction of              I.R.S. Employer Identification
     incorporation or organization)                          Number


    P.O. BOX C, ROUTE 66, CATAMOUNT INDUSTRIAL PARK, RANDOLPH, VERMONT 05060
    ------------------------------------------------------------------------
              (Address of principal executive offices and zip code)

         Issuer's telephone number, including area code: (802) 728-3600

Securities registered pursuant to Section 12(g) of the Act:

         None

Securities registered pursuant to Section 12(b) of the Act:

         Common Stock, par value $.001 per share
                    (Title of Class)

Check  whether  the Issuer:  (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 [ ]

Check if no disclosure of delinquent  filers  pursuant to Item 405 of Regulation
S-K is contained herein, and no disclosure will be contained, to the best of the
Issuer'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.
Yes [X] No [ ]

The Issuer's revenues for the most recent fiscal year were $35,124,813.

Based on the last  sale at the  close of  business  on  January  19,  2001,  the
aggregate  market value of the Issuer's common stock held by  non-affiliates  of
the Issuer was approximately $26,972,552.

The number of shares  outstanding of the Issuer's Common Stock, $.001 par value,
was 20,167,773 on January 19, 2001.

Transitional Small Business Disclosure Format (check one):  Yes []  No [X]



<PAGE>


ITEM 1.  BUSINESS.

         The Company bottles, markets and distributes natural spring water under
the  Vermont  Pure(R)  and  Hidden  Spring(R)  brands and  distilled  water with
minerals  added  under the  Crystal  Rock(R)  brand to the retail  consumer  and
home/office  markets.  The Company sells its products  primarily in New England,
New York and New Jersey as well as Mid-Atlantic and Mid-Western states.

INDUSTRY BACKGROUND

         Bottled water has been and  continues to be one of the fastest  growing
segments of the beverage  industry.  According  to studies  prepared by Beverage
Marketing Corporation,  total bottled water consumption on a per capita basis in
the United  States  increased  77%, or 6.7  gallons,  from 1990 to 1999.  Annual
consumption  increased  from 8.8 gallons per capita in 1990 to 15.5  gallons per
capita  in  1999.   Bottled   water  volume  in  the  United  States  has  grown
significantly,  increasing  from  approximately  2.2 billion  gallons in 1990 to
approximately  4.3 billion  gallons in 1999.  The retail sales value in 1990 was
approximately  $2.6 billion and has grown to approximately $5.0 billion in 1999.
In the period 1993 to 1999,  bottled water has been the fastest growing beverage
category in the United States

         The  bottled  water  market is divided  into two  distinct  categories:
non-sparkling  (defined as still or  non-carbonated  water),  which accounts for
approximately  91% of bottled  water sales,  and sparkling  (carbonated),  which
accounts for  approximately 9% of bottled water sales.  Non-sparkling  water was
responsible for 99% of the incremental volume increase from 1990 to 1999. All of
the Company's  natural spring water and distilled  water with minerals added are
in the non-sparkling category.

         The Company believes that consumers perceive bottled water as a healthy
and refreshing beverage alternative to beer, liquor,  wine, soft drinks,  coffee
and tea. The Company  anticipates  that sales of bottled  water will continue to
grow as  consumers  focus on health  and  fitness,  alcohol  moderation  and the
avoidance  of both  caffeine and sodium.  Bottled  water has become a mainstream
beverage  as  the  centerpiece  of  consumers'  healthy  living  lifestyles.  In
addition,  the Company believes that the development and continued growth of the
bottled water industry since the early 1980's reflects  growing public awareness
of the potential contamination and unreliability of municipal water supplies.

         In recent years, the bottled water industry has experienced  periods of
consolidation. Large multi-national companies such as Perrier (owned by Nestle),
Groupe  Danone and Suntory  Water Group have been active  acquirers of small and
medium sized  regional  bottled  water  companies.  The primary  drivers of this
consolidation  are  incremental  growth through  acquiring the customer base and
synergies  resulting from  integration into existing  operations.  Additionally,
permitting  spring sources has been increasingly more difficult due to increased
state and federal regulation.  Companies that have a strong and densely serviced
customer  base and permitted  natural  spring sites are  attractive  targets for
acquisitions.  Another  significant impact in the industry has been the entrance
of major soft drink bottlers into the bottling and  distribution  segment of the
indusry.  Both  Coca-Cola  and Pepsi Cola have started  producing  and marketing
their own brands of reverse osmosis  drinking water within the last three years.
Consequently,  by 2000 both companies,  based on dollar sales,  have entered the
top 10 bottled water companies in the United States.


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COMPANY BACKGROUND

         Incorporated in Delaware in 1990, the Company developed Vermont Pure(R)
Natural Spring Water as its flagship brand in the still,  non-carbonated  retail
consumer  category.  Over the next decade,  the Company grew  aggressively  both
internally  and  through  acquisition.  Growth  in the  retail  consumer  market
resulted from establishing  productive  relationships with beverage distributors
throughout the Northeast as well as brand and product extensions. In addition to
Vermont Pure(R), in 1995 the Company started re-marketing the Company's original
trademark Hidden Spring(R), a brand that it had acquired upon its inception. The
Company also utilizes excess capacity to co-pack retailers  private brands.  The
Company  expanded  product  lines to include  more sizes and  features,  such as
sports caps on selected bottle sizes for convenient single serve and multi-packs
for the grocery and convenience store channels.

         The growth in the Home and Office delivery  category has  predominantly
been fueled by market expansion through  acquisition in New England and Northern
New York and subsequent  internal growth in those acquired markets.  The Company
began to pursue this  acquisition  strategy in 1996 to minimize  its reliance on
the retail  consumer  side of the  business.  Prior to 1996 the retail  business
represented 90% of total sales revenue. Additional benefits of the Home & office
channel  are  higher  gross  margins,   approximately  70%,  and  less  seasonal
influence.  During this time, the Company expanded its product lines to leverage
its distribution  system.  In particular,  coffee, a product counter seasonal to
water,  became the second leading  product in the system and grew to account for
almost 10% of the Company's  total sales.  The Company  purchases  coffee future
contracts to maintain  price and supply  stability.  Since coffee is a commodity
the Company can not insure that future  supplies and pricing will not be subject
to volatility  in the world commodity  markets.  Any  interruption  in supply or
dramatic increase in pricing may have an adverse affect on the business.

     To accommodate the growing demand for bottled spring water, the Company has
increased its investment in plant and  equipment.  When the company was founded,
the assets  included one spring on 1.7 acres of land, a 9,000 square foot office
facility and bottling plant in Randolph,  Vermont.  Since that time, the Company
has acquired  additional  springs on  approximately 65 acres of land and built a
second  office,  bottling  and  warehouse  facility  of  32,000  square  feet in
Randolph,  Vermont which was recently  expanded to  approximately  72,000 square
feet. It also  developed a  five-gallon  bottling  facility near Albany,  NY and
expanded  distribution  centers  in New  England  and  Northern  New  York  (see
Property).  The  Company  has the  original  office  and  bottling  facility  in
Randolph, Vermont listed for sale.

     As the Company  entered its second  decade in 2000,  it  continued  to grow
internally and with small  acquisitions  in the home and office area. At the end
of fiscal year 2000, the Company consummated a merger involving the Crystal Rock
Spring Water Company of Watertown,  Connecticut.  In terms of sales, the Company
nearly  doubled  its size as a  result  of this  transaction.  In  addition,  it
significantly  accelerated  its home and office growth strategy and added to its
management  depth.  Following  the  acquisition,  the  home and  office  segment
accounts for 75% of sales with the retail products comprising the balance.

     Crystal  Rock  is a  bottled  water  manufacturer  focusing  on the  still,
non-carbonated,  segment of the bottled water industry.  Its primary business is
the marketing and distribution of Crystal Rock brand of purified and mineralized
drinking  water  to the home and  office  delivery  markets.  The  company  also
distributes coffee and other refreshment type products, and vending services in

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Connecticut,  New York and  Massachusetts.  To achieve merger synergies  Crystal
Rock  closed and  absorbed  Vermont  Pure route  operations  in  Bloomfield  and
Shelton,  CT. The Vermont Pure brand is  distributed  and available  through the
Crystal Rock operations.

         Crystal  Rock was founded in 1914 by Henry Baker,  Sr.,  who  delivered
water in 1/2 gallon containers by horse drawn wagon in Stamford, Connecticut. In
1965 Henry E. Baker, Jr. became President, representing the second generation of
Bakers to manage  Crystal Rock.  Under Henry Baker's  tenure as President in the
`60s and `70s Crystal Rock constructed a bottling plant in Stamford, Connecticut
and successfully implemented a strategy to expand sales to the office coffee and
refreshment  service market.  In 1975 John Baker joined Crystal Rock, with Peter
Baker joining in 1977.

         With expansion continuing into the `80s, Crystal Rock constructed a new
facility in 1988 in  Watertown,  Connecticut.  The 72,000  square foot  bottling
facility  replaced the Stamford  facility as a bottling plant and became Crystal
Rock's  headquarters.  With  the  construction  of the new  facility  came a new
strategy to market  purified and mineralized  drinking  water.  This process can
easily be  replicated  in any market that Crystal  Rock  targets for  expansion.
Maintaining the strategy to penetrate the office coffee and refreshment  service
market,  Crystal Rock realized a customer mix of 75% commercial  accounts to 25%
residential by 1989.

         Crystal Rock is recognized as a water industry leader in the ability to
successfully and continually maintain such integration of coffee and refreshment
products  into  its  bottled  water  business.   This  is  evident  through  the
recognition  that the Bakers have received  from the IBWA.  Henry E. Baker was a
Board  member  for 20 years and is in the IBWA Hall of Fame.  Peter K. Baker has
served as a Board member and Chairman of the association

         In 1993, John B. Baker and Peter K. Baker were appointed  Co-Presidents
of the growing  enterprise.  Contributing to growth in the `90s were a number of
acquisitions of various office coffee and water companies.

         By focusing on the home and office  delivery  sector,  Crystal Rock has
intentionally concentrated efforts on the largest and most profitable segment of
the industry. By offering over 500 products for sale to Crystal Rock's customers
the value of the home and office account base is maximized.  Utilization of 100%
of truck space and  equitable  sales  commission  plans to Crystal  Rock's Route
Sales Personnel creates efficiencies and maintains profitability. A major factor
in Crystal Rock's  ability to duplicate its success in other  territories is the
water manufacturing process.

         Vermont Pure Holdings, Ltd. is now primarily comprised of two operating
subsidiaries,  Crystal Rock Spring Water Company and Vermont Pure Springs,  Inc.
It is presently integrating the extensive home and office delivery operations of
both companies.  In the coming year, this category will be approximately  75% of
the Company's  total sales.  This places the Company fourth in the United States
and second in the northeast region for this type of  distribution.  Peter Baker,
as President of the Company is coordinating this effort.

         The Company continues to upgrade and expand its bottling  operations in
Connecticut,  New York and Vermont. Jack Baker, as Executive Vice President,  is
in  charge  of  the  merged  companies  production,   engineering,  and  quality
initiatives. Tim Fallon and Bruce MacDonald remain the Company's Chief Executive
and Chief Financial Officer, respectively.

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<PAGE>

     To finance the merger, the Company  re-financed  existing debt and borrowed
additional funds from Webster Bank of Watertown, Connecticut. It also financed a
substantial  amount of purchase price from the former Crystal Rock shareholders.
This  debt is  subordinated  to the bank.  The  increased  debt  will  result in
significantly  higher  interest costs for the Company in the future.  Management
expects that growth and  efficiencies  gained through  integration will increase
the cash flow and  profitability  sufficiently to pay down the debt on schedule.
(For more information concerning the Company's debt, see Note 8 to the Financial
Statements.)

         To date,  the  Company  has not  experienced  significant  problems  in
integrating its acquired businesses with its existing  operations.  However, the
acquisition of new  businesses,  particularly  one of the size and complexity of
Crystal Rock may require management to devote time and energy to the successful,
efficient and timely  integration  of operations,  labor forces,  administrative
systems   (including   accounting   practices  and   procedures  and  management
information  systems),  and varying  corporate  cultures.  Although  the Company
expects to complete the merger  synergies  there can be no  assurances  that the
Company  will be  successful  with this  integration.  Any  failure  to  realize
expected synergies could have an adverse effect on the company.

WATER SOURCES AND BOTTLING OPERATIONS

         The primary sources of the natural spring water used by the Company are
springs located at the Company's  properties in Randolph and Tinmouth,  Vermont,
and a spring owned by a third party in Stockbridge,  Vermont, that is subject to
a water supply contract in favor of the Company.

         Percolation  through  the earth's  surface is  nature's  best filter of
water. The Company believes that the  exceptionally  long percolation  period of
natural spring water in the north central  Vermont area and in particular in the
area  of its  springs  assures  a high  level  of  purity.  Moreover,  the  long
percolation period permits the water to become mineralized and Ph balanced.

         Management believes that the age and extended percolation period of its
natural  spring water  provides the natural  spring water with certain  distinct
attributes: a purer water; noteworthy mineral characteristics including the fact
that the water is sodium  free and has a  naturally  balanced  Ph;  and a light,
refreshing taste.

         In  addition  to  drawing  water  from  its own  springs,  the  Company
purchases  bulk  quantities  of water from natural  springs owned or operated by
non-affiliated  entities.  All of such springs are approved  sources for natural
spring  water.  See  "Government  Regulation".  During  fiscal  1999  and  1998,
purchases of spring water from a  non-affiliated  source in Vermont  amounted to
approximately  half of the Company's  usage of spring  water.  During the latest
fiscal  year,  usage from the third party  source  amounted to 8% of total water
usage.  The Company is actively  exploring the acquisition of additional  spring
sources that would enable it to reduce its reliance on third-party springs.

         The  Company  has for  several  years  purchased  spring  water from an
unaffiliated source in Stockbridge, Vermont. Until late 1999, the Company had no
contract with respect to this source.  Commencing in November  1999, the Company
has obtained a 50-year water supply  contract to purchase,  on a first  priority
basis,  up to 5,000,000  gallons per month from the spring  owner.  Because this
amount is well in excess of the Company's  current needs and within the apparent
capacity of the spring,  the Company believes it can readily meet its bulk water
supply needs for the foreseeable future. An interruption or contamination of any
of its spring sites would  materially  affect the Company.  The Company believes

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that it could find  adequate  supplies of bulk spring water from other  sources,
but  that  it  might  suffer  inventory  shortages  or  inefficiencies,  such as
increased purchase or transport costs, in obtaining such supplies.

         Municipal water is the primary raw water source for the Crystal Rock(R)
brand.  Although  the water source is currently  made  available  from the local
municipality,  if the source were eliminated,  Crystal Rock could purchase water
from other sources and have it shipped to the Watertown  manufacturing facility.
The raw  water  is  purified  through  a  number  of  processes  beginning  with
filtration.  Utilizing carbon and ion exchange filtration systems,  chlorine and
other volatile compounds and dissolved solids are removed.  After the filtration
process,  98% of all impurities are removed by reverse osmosis and any remaining
impurities  are removed  through  distillation.  This  process  produces  highly
purified water in conformance with U.S. Pharmacopoeia (23rd Revision).  Purified
water is ozonated  (the process of  injecting  ozone (O(3)) into the water as an
agent  to  prohibit  the  formation  of  bacteria)  prior  to  storage  in  four
30,000-gallon   storage   tanks.   Prior  to   bottling,   drinking   water  has
pharmaceutical  grade minerals  including calcium and potassium added for taste.
The water is again  ozonated and bottled in a fully  enclosed  clean room with a
high efficiency  particulate air, or HEPA,  filtering system designed to prevent
any airborne  contaminants from entering the bottling area,  assuring a sanitary
filling environment.

         The Company is highly  dependent  on the  integrity  of the sources and
processes  by which it  derives  its  product.  Natural  occurrences  beyond the
control of the Company such as drought,  earthquake or other geological changes,
a  change  in the  chemical  or  mineral  content  or  purity  of the  water  or
environmental pollution may affect the amount and quality of the water emanating
from the springs  the  Company  uses.  Any such  occurrence  may have an adverse
impact on the  business of the  Company.  The Company is also  dependent  on its
availability of water and its bottling processes.  An interruption may result in
an inability to meet market demand and/or negative impact the cost to bottle the
products.  Finally, the distribution and consumption of the product is dependent
on other businesses and consumers.  There is a possibility that integrity of the
product  could  be  changed  either   inadvertently   or  by  tampering   before
consumption.  Even if such an  event  was not  attributed  to the  Company,  the
product's integrity may be irreparably harmed.  Consequently,  the Company would
experience economic hardship.

PRODUCTS

         The  Company's  natural  spring  water is sold in the  retail  consumer
market  under the Vermont  Pure and Hidden  Spring  brands,  packaged in various
bottle  sizes  ranging  from 8 ounces to 1.5 liters and sold in single units and
plastic rings of six and eight bottles. Products are sold in 12-pack and 24-pack
cases.  In recent years,  sales indicate that the preferred  container sizes are
"single  serve"  sizes" - 750 ml and  500ml.  The  Company  uses a sports cap on
various product sizes to create convenience and add extra value.  Consumer sizes
are bottled in clear PET (polyethylene  terephthalate)  recyclable  bottles that
are perceived in the marketplace as a high quality package. Although the Crystal
Rock brand is bottled in this type of bottle for retail sale, in similar  sizes,
this outlet does not comprise a significant  amount of the Company's  sales. The
Company's  three major brands are sold in three and five gallon bottles to homes
and offices  throughout  New England and New York.  In general,  Crystal Rock is
distributed  in Southern New England  while  Vermont Pure and Hidden  Spring are
distributed  in Northern  New  England  and  Upstate  and Western New York.  The
Company rents water coolers to dispense bottled water.  Coolers are available in
various consumer  preferences such as cold, and hot & cold dispensing  units. In
conjunction  with the home and office  accounts,  the Company also distributes a
variety of coffee,  tea and other hot beverage  products  and related  supplies,
other consumable products used around the office, and offers vending services in
some  locations.  The Company rents or supplies multi burner coffee  machines to

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customers. In addition, the Company supplies whole beans and coffee grinders for
fresh ground coffee as well as cappuccino  machines to  restaurants.  Coffee has
grown to become the Company's  second largest  selling  product,  accounting for
close to 10% of total sales.  The Company sells its own branded coffee  (Crystal
Rock(R) and Vermont  Pure(R)) as well as other  national  brands,  most notably,
Green Mountain Coffee Roasters(R).

MARKETING

     The Company  generally  markets its products as "premium"  domestic bottled
water products in two categories.

         HOME AND OFFICE DELIVERY

     The Company  distributes  and  markets  its water in five and three  gallon
bottles as "premium" bottled water products.  It seeks brand  differentiation by
offering quality service. Home and office sales are generated and serviced using
directly operated facilities, Company employees and vehicles.

     The Company also uses tele-marketers and outside/cold-call  sales personnel
to market its home and office  delivery.  The sales effort is supported  through
promotional giveaways and Yellow Page advertising,  as well as radio, television
and billboard ad campaigns.  The Company also sponsors  local area  professional
sports and professional sporting events, participates in trade shows and is very
visible in community and charitable events.

     The Company markets its home and office delivery service throughout most of
New England and New York.

         RETAIL CONSUMER (PET)

     In the  retail  consumer  category,  a premium  bottled  water  product  is
distinguished  from other available  bottled water products by being packaged in
small portable  containers,  typically PET recyclable  bottles.  PET bottles are
sleek,  clear  plastic  and the  Company  believes  that this is the  "ultimate"
consumer  bottle package  because it is clean,  clear,  light and recyclable and
generally is perceived by consumers to be upscale. The Company believes that the
high quality  packaging of its products enhances their image as premium domestic
bottled water products.

     The Company  prices its Vermont Pure brand  competitive  to other  domestic
premium brands but lower than imported premium water products. The Hidden Spring
products  are  similarly  packaged  and sold to retail  grocery and  convenience
markets.  Both of these brands,  as well as Crystal  Rock,  are marketed off the
Company's own delivery routes.

     The Crystal  Rock brand is marketed by  assimilating  the same  consistent,
refreshing  taste in a small  package that  customers  have relied on from their
coolers in their homes and offices.  It has also been actively  distributed  for
sponsorship of organizations and events.

     The Company  markets its spring water products by  highlighting  the unique
characteristics of the Company's water, namely a natural spring source,  purity,
mineral  composition and desirable taste. The Company also uses the image of the
State of Vermont in its marketing and brand identification. The Company believes
that products  originating  from Vermont have the general  reputation  for being
pure, wholesome, trustworthy and natural.

     The Company has focused its consumer product marketing and sales activities
in the eastern and mid-western United States. The Company currently  distributes

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its products in the New England, New York, New Jersey, Mid-Atlantic and Northern
Mid-Western  states and the  Northern  Virginia -  Washington,  D.C. - Baltimore
metropolitan area.

         SLOTTING FEES

         For the Company to achieve placement of its retail consumer products in
certain  supermarket chains and individual  supermarket stores, it may sometimes
be necessary for the Company to purchase  shelf space by paying  slotting  fees.
Typically,  supermarket  chains and prominent  local  supermarkets  impose these
charges as a one time payment  before the products are permitted in the store or
chain.  Other types of retail outlets such as individual  convenience stores and
delicatessens  less frequently  impose slotting fees. The fees are negotiated on
an individual basis. As the Company has become better established and its brands
have  achieved  greater  recognition,  the Company has become less  dependent on
slotting fees to gain space. Nevertheless, like many producers of food products,
the Company pays slotting fees in some cases, and expects to continue to do so.

         ADVERTISING AND PROMOTION

         The Company advertises its products primarily through print, television
and radio media. In connection with this advertising,  the Company uses point of
sale, in-store displays, price promotions, store coupons,  free-standing inserts
and cooperative and trade  advertising.  The Company has also actively  promoted
its products through  sponsorship of various  organizations and sporting events.
In recent years, the Company has sponsored  professional golf and tennis events,
as well as major  ski  areas and  sports  arenas,  and  various  charitable  and
cultural organizations, such as Special Olympics, the Susan G. Koman Foundation,
the Multiple Sclerosis Society, and the Vermont Symphony Orchestra.

         DISTRIBUTION AND SALES

         HOME AND OFFICE DELIVERY

         The Company sells and delivers products directly to its customers using
its employees and route delivery  trucks.  Deliveries are made to customers on a
regularly  scheduled  basis.  Water is bottled in the  Company's  facilities  in
Watertown,  Connecticut,  Randolph, Vermont, and Halfmoon, New York. The Company
also uses a third party co-packer in Syracuse,  New York. The Company  maintains
numerous  distribution  locations throughout its market area (see Property).  An
inventory  of water  dispensing  equipment,  a variety of coffee,  tea and other
refreshment products and related supplies is distributed from these locations as
well. Product is shipped between the production and distribution sites by either
the Company's own trucks or contracted carrier. The recent increase in petroleum
and diesel products has had an adverse effect on  transportation  expenses.  The
Company has tried to pass on increases  to  consumers  but there is no guarantee
that it will be successful in passing on these price increases. Any petroleum or
diesel  supply  shortages or price  increases  would have an adverse  affect the
Company's operations and expense structure.

         The company  also  utilizes  outside  distributors  in  areas  that the
company currently does not distribute its product.  Distributor sales  represent
less than one percent of total revenue.

         RETAIL CONSUMER (PET)

         The Company uses major beverage  distributors  for the  distribution of
most of its retail consumer products,  and distributes its home/office  products

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directly. Using distributors is typical in the beverage industry as an efficient
use of capital for maximum market penetration.  Beverage  distributors  purchase
the products of many  companies and then wholesale them to retail chains or make
bulk retail sales.  Distributors  generally have established  relationships with
local retail outlets for beverage products and facilitate obtaining shelf space.
Occasionally, the Company sells its products directly to grocery store chains.

         The  Company  distributes  its Vermont  Pure(R)  brand with a number of
distributors.  The Company is  obligated to supply the  distributors  with their
requirements of the Vermont Pure brand at established prices.  Arrangements with
the  distributors  of  the  Hidden   Spring(R)  brand  are,  in  general,   less
restrictive.

         During 2000,  the Company  modified its  distribution  agreements  with
certain  distributors  in the  metropolitan  New York  City  area.  As a result,
Vermont Pure is the exclusive spring water brand carried by these distributors.

         As discussed elsewhere, the Company is pursuing an acquisition strategy
to purchase independent home and office bottlers and distributors in New England
and New York  State.  Management's  decision  to expand in this  market has been
driven by,  among  other  things,  attractive  margins  and good cash flows from
equipment rentals, as well as by the advantages of product diversification, such
as diminished reliance on a single segment of the market.  Moreover, the Vermont
Pure and  Crystal  Rock  brands in the multi  gallon or home and office  setting
affords  consumers  an  opportunity  to sample the  product,  which the  Company
believes augments retail sales and contributes to brand awareness.

         The Company ships its consumer products from its bottling facilities in
Randolph,  Vermont by common carrier either  directly to beverage  distributors,
retail outlets or to authorized  warehouses for later  distribution  to beverage
distributors  and retail  outlets.  Storage  is  charged on a per pallet  basis.
Transportation costs vary according to the distance of the shipment.

         The  Company  employs  a  sales  force  of 8  persons  for  retail  and
distributor coverage on a geographic basis. The Company's sales personnel act as
liaison  between  distributors/customers  and the Company for ordering  product,
facilitating distribution, servicing retail outlets, and warehouse distribution.
Sales  personnel   actively  seek  to  expand  the  number  of  retail  outlets,
distributors, and participate in overall market development.

CONTRACT PACKAGING

         The Company utilizes excess capacity to bottle private label brands for
grocery and food service  distributors.  The Company also packs five gallon home
and  office  containers  for third  parties.  Contract  packaging  is very price
competitive  and  typically  is performed  under  short-term  arrangements.  The
Company  seeks  opportunities  for contract  packaging for a variety of reasons,
including the fact that it develops favorable  relationships with retail chains.
In fiscal year 2000,  contract packing  represented 7% of total sales revenue of
the combined Vermont Pure and Crystal Rock operations.

SUPPLIES

         The  Company  currently  sources  all its raw  materials  from  outside
vendors.  On the retail PET business the Company  sources PET bottles,  caps and
corrugated  packaging under supply  agreements  ranging from one to three years.
Pricing is fixed in the agreement with pass through formulas for price increases

                                       9
<PAGE>

or  decreases  based  on total  market  prices  for  these  commodities.  Due to
increases in demand or shortage of key raw  materials,  the Company has at times
had difficulty sourcing raw materials.  Supply shortages or subsequent increases
in  pricing  of these  materials  have had an  adverse  effect on the  Company's
expense  structure.  The Company entered into a new supply agreement for bottles
effective January1, 2001 that enables the Company to significantly  light-weight
its bottles.  The Company will  experience  savings in raw  materials due to the
reduction  in  gram  weight  of  resin  and  have  a  favorable  impact  on  the
environment.  Based on this  project,  the  Company  will  reduce  the amount of
plastic in its containers and subsequently reduce the amount of plastic entering
the waste stream by over 1,000,000 lbs. per year.  Management believes that this
reduction in raw materials and a stable resin market will  stabilize the cost of
goods for fiscal year 2001. Notwithstanding these expectations,  the company may
experience  shortages or unscheduled price increases that would adversely effect
its cost of goods.

         The merger of Crystal  Rock and  Vermont  Pure has nearly  doubled  the
Company's operations in the Home and Office category and, as a result,  afforded
the Company the  opportunity  to increase  its  combined  buying  power for such
things as bottles, dispensing equipment, supplies, and administrative needs. The
Company has  experienced  some success in this area since the  completion of the
merger and expects further synergies to be realized.  The company is a member of
the  Quality  Bottlers  Cooperative  (QBC).  QBC  is  a  purchasing  cooperative
comprised of the largest  independent  home & office in the United  States.  QBC
acts as a purchasing and negotiating  agent to acquire  national pricing for the
cooperative on common materials such as bottles,  water coolers, cups, and other
supplies.  QBC  believes  due to its  size  that  it  can  effectively  purchase
equipment and supplies at levels  competitive to larger national  entities.  The
company also  believes  that its  relationship  with other QBC members  provides
access to potential acquisition targets.

         No  assurance  can be given that the Company will be able to obtain the
supplies  it  requires  on a timely  basis or that the  Company  will be able to
obtain them at prices that allow it to maintain the profit  margin it has had in
the past. Any raw material disruption or price increase may result in an adverse
impact on the financial condition and prospects for the Company.

         For information about the Company's water sources,  see "Description of
Water Sources and Bottling Processes."

SEASONALITY

         The Company's  business is seasonal,  with the consumer  portion of the
business  being  somewhat  more seasonal  than the home and office  market.  The
period from June to September  represents the peak period for sales and revenues
due to  increased  consumption  of  beverages  during the  summer  months in the
Company's core  Northeastern  United States market. As the larger share of total
sales has trended toward the home and office category, the business, as a whole,
has become less seasonal.

COMPETITION

         Management believes that bottled water historically has been a regional
business  in the  United  States.  As a  result,  there  are  numerous  bottling
operations within the United States producing a large number of branded products
which are offered in local  supermarkets and other retail outlets in the smaller
consumer  sizes  and sold to the home  and  office  markets  in one  gallon  and
multiple gallon containers.


                                       10
<PAGE>

     The United States bottled water market is dominated by large multi-national
companies such as Nestle(Perrier  Group),  Groupe Danone,  and the Suntory Water
Group.  Perrier markets such regional  brands such as Poland Spring,  Deer Park,
Ice Mountain,  Great Bear,  Arrowhead,  Calistoga,  Ozarka,Zephyr Hills, and its
recent  acquisition  Aberfoyle  Springs.  Groupe Danone  distributes  nationally
Evian, Dannon, Naya and regionally Sparkletts. Suntory markets primarily through
the home & office channel  regional  brands such as Belmont  Springs,  Kentwood,
Crystal  Springs,  Sierra  Springs,  and Hinckley  Springs.  Recently Pepsi Cola
(Aquafina) and Coca-Cola (Dasani) have begun marketing drinking water in the PET
retail segment  leveraging  their  production and  distribution  infrastructure.
These global  competitors have greater  resources and their brands may be better
established than the company's trademarks.

     The Company also faces increased competition from Canadian suppliers at low
prices due to the exchange rate  differential and governmental  subsidies in the
retail PET  business.  Additionally  there are regional  well-established  water
companies  that could  have an adverse  effect on the  company's  business.  The
Company  also  faces  competition  from the fast  growing  "private  label"  and
contract-packaged  brands of natural  spring  water.  These brands  compete on a
low-price  basis and often occupy  premium shelf space because they are retailer
brands (also see "Contract Packaging").

     The home and office market has several  national or large  competitors such
as Perrier Group (Poland Spring, Deer Park, and Great Bear), Suntory Water Group
(Belmont Springs), and IONICS (AquaCool). Additionally the company competes with
smaller  regional  bottlers such as Monadnock  (Boston),  Leisure Time (NY), and
Mayer Brothers (Buffalo).

     The Company competes on the basis of pricing,  customer service, quality of
its  products,  association  with the image of the State of Vermont,  attractive
packaging,  and brand  recognition.  Crystal Rock  competes on the purity of the
distilled  product with minerals added back for taste. The Company considers its
trademarks,  trade  names  and  brand  identities  to be very  important  to its
competitive position, and defends its brands vigorously.

     The Company  feels that  installation  of  filtration  units in the home or
commercial setting poses a competitive threat to the business.  To address this,
the Company makes available plumbed in filtration units on a limited basis.

TRADEMARKS

     The Company sells its bottled water  products under the trade names Vermont
Pure Natural Spring Water,  Crystal Rock, Hidden Spring, and Stoneridge.  It has
rights to other trade names  including,  Pequot Natural Spring Water,  Excelsior
Spring Water, Happy Spring Water and Vermont Naturals.  The Company's trademarks
as well as label  design  are  registered  with the  United  States  Patent  and
Trademark Office.

GOVERNMENT REGULATION

     The Federal Food and Drug Administration ("FDA") regulates bottled water as
a "food." Accordingly, the Company's bottled water must meet FDA requirements of
safety for human  consumption,  of processing  and  distribution  under sanitary
conditions  and of  production in  accordance  with the FDA "good  manufacturing
practices." To assure the safety of bottled water, the FDA has

                                       11
<PAGE>

established quality standards that address the substances that may be present in
water which may be harmful to human health as well as substances that affect the
smell,  color and taste of water.  These quality  standards  also require public
notification  whenever the microbiological,  physical,  chemical or radiological
quality of bottled water falls below standard. The labels affixed to bottles and
other  packaging  of the water are  subject  to FDA  restrictions  on health and
nutritional  claims for foods  under the Fair  Packaging  and  Labeling  Act. In
addition all drinking water must meet Environmental  Protection Agency standards
established  under  the  Safe  Drinking  Water  Act  for  mineral  and  chemical
concentration and drinking water quality and treatment which are enforced by the
FDA.

         The Company is subject to the food labeling regulations required by the
Nutritional  Labeling and  Education  Act of 1990.  The  regulations,  which are
administered  by the  Secretary  of Health and Human  Services  through the FDA,
require all  companies  which offer food for sale and have annual gross sales of
more than $500,000,  including the Company,  to place uniform labels  disclosing
the amounts of  specified  nutrients  on all food  products  intended  for human
consumption and offered for sale. The act contains  exemptions and modifications
of labeling  requirements  for  certain  types of food  products,  such as those
served  in  restaurants  and  other  institutions,  bulk  foods,  foods in small
packages and foods containing  insignificant amounts of nutrients.  The act also
establishes  the  circumstances  in which  companies may place nutrient  content
claims or health  claims on labels.  The Company  believes it is in  substantial
compliance with these regulations.

         The Company is subject to periodic, unannounced inspections by the FDA.
Upon  inspection,  the  Company  must be in  compliance  with all aspects of the
quality standards and good  manufacturing  practices for bottled water, the Fair
Packaging  and  Labeling  Act,  and all other  applicable  regulations  that are
incorporated in the FDA quality standards.

         In May 1996, new FDA regulations  became  effective which redefined the
standards  for the  identification  and  quality of bottled  water.  The Company
believes  that it  meets  the  current  regulations  of the FDA,  including  the
classification as spring water.

         The Company also must meet state regulations in a variety of areas. The
Department  of Health of the  State of  Vermont  regulates  water  products  for
purity, safety and labeling claims. Bottled water sold in Vermont must originate
from an "approved  source."  The water  source must be  inspected  and the water
sampled,  analyzed and found to be of safe and wholesome quality.  The water and
the source of the water is subject to an annual "compliance  monitoring test" by
the  State of  Vermont.  In  addition  the  Company's  bottling  facilities  are
inspected by the Department of Health of the State of Vermont.

         The  Company's  product  labels  are  subject to state  regulation  (in
addition to the federal requirements) in each state where the water products are
sold. These  regulations set standards for the information that must be provided
and the basis on which any therapeutic claims for water may be made. The Company
has received  approval for its Vermont Pure and its Hidden Spring brands from 49
states.

         The   bottled   water   industry   has  a   comprehensive   program  of
self-regulation.  The  Company is a member of the  International  Bottled  Water
Association  ("IBWA").  As a member of the IBWA,  the Company's  facilities  are
inspected  annually  by  an  independent  laboratory,  the  National  Sanitation
Foundation  ("NSF").  By means of unannounced NSF inspections,  IBWA members are
evaluated on their  compliance with the FDA  regulations  and the  association's
performance requirements which in certain respects are more stringent than those
of the federal and various state regulations.

                                       12
<PAGE>


EMPLOYEES

         As of January 19, 2001, the Company had 323 full-time  employees and 24
part-time employees. None of the employees belongs to a labor union. The Company
believes that its relations with its employees are good.

         The continued success of the Company will depend in large part upon the
expertise  of senior  management.  In  conjunction  with the merger with Crystal
Rock, Timothy G. Fallon,  Chairman and Chief Executive Officer;  Peter K. Baker,
President;  John B. Baker, Executive Vice President; and Bruce MacDonald,  Chief
Financial   Officer,   Treasurer  and  Secretary  have  entered  into  five-year
employment  contracts  with the Company.  These  agreements do not prevent these
employees from resigning.  The departure or loss of Mr. Fallon or Peter Baker in
particular  could have a negative  effect on the business and  operations of the
combined entity.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The Company owns office,  bottling and warehouse properties and natural
springs in Randolph, Vermont. It also has owned a spring and recharge acreage in
Sharon  Springs,  New York since 1991.  The Company  rents on a monthly basis an
office in an office suite in While Plains, New York.

         The Company rents warehouse  space in different  locations from time to
time for the purpose of the  trans-shipment of its bottled water products to its
distributors and retailers. This space is rented on a per pallet basis.

         As part of the Company's home and office  delivery  operations,  it has
entered  into  or  assumed  various  lease  agreements  for  properties  used as
distribution  points and office space.  The  following  table  summarizes  these
arrangements:

LOCATION                 LEASE EXPIRATION    SQ. FT.                 ANNUAL RENT
---------                ----------------    -------                 -----------
Williston, VT            July, 2003           8,500                  $    53,380
Wilmington, MA           October, 2003       10,670                  $    82,159
Rochester, NY            August, 2003         8,000                  $    24,000
Buffalo, NY              September, 2005     10,000                  $    60,000
Syracuse, NY             December, 2005      10,000                  $    34,500
Halfmoon, NY             April, 2008         22,500                  $   118,125
Plattsburgh, NY          August, 2004         3,640                  $    20,568
Watertown, CT            October, 2010       72,000                  $   360,000
Stamford, CT             October,2010        22,000                  $   216,000
White River Junction, VT March, 2004          3,275                  $    16,211

     In  conjunction  with the Crystal  Rock  merger,  the Company  entered into
ten-year lease  agreements to lease the buildings that it currently  utilizesfor
operations  in Watertown  sand  Stamford CT. The landlord for the buildings is a
Baker family trust.

          The  Company   expanded  its  bottling   plant  in  Randolph,   VT  to
approximately  72,000 square feet to accommodate  increased bottling  operations
and to gain the efficiencies of internal warehouse space. To increase efficiency

                                       13
<PAGE>

the Company shut down  operations  in a separate  9,000 square foot building and
moved the  operations  into the  expanded  facility.  The  smaller  building  is
presently on the market to be sold.  In addition,  in January,  2001 the Company
sold substantially all of its land in Sharon Springs, NY.

ITEM 3.  LEGAL PROCEEDINGS.

         In March of 1999, the Company  contracted with Descartes Systems Group,
Inc.  ("Descartes"),  an Ontario corporation,  to provide professional  services
related to the design,  installation,  maintenance,  operation  and training for
computer hardware and software.  The computer hardware and software was marketed
to the Company as a product that would  provide  computerized  management of the
Company's  direct  distribution  through its delivery  network,  and  associated
billing and accounting.

        On July 27, 2000,  the Company  filed a lawsuit  against  Descartes  and
an affiliate of Descartes entitled  VERMONT  PURE  HOLDINGS,  LTD.  V. DESCARTES
SYSTEMS GROUP, INC. AND ENDGAME SYSTEMS,  INC. F/K/A DSD SOLUTIONS, INC., in the
United States District Court for the District of Vermont. The action is docketed
as Civil Action No.2:00-CV-269. The Company has sought monetary  damages against
Descartes and Endgame in an amount  exceeding  $100,000 for the Company's losses
associated with failures of the systems and services provided by the defendants.
In addition,  the Company has sought a  Declaratory  Judgment  invalidating  the
defendant's demand for payments in the amount of $411,841.10.

         The  defendants  have filed a motion in response to the suit to dismiss
it based on the premise  that the federal  court is not the proper  jurisdiction
and the case should be  arbitrated  in Ontario,  Canada.  As of the date of this
disclosure,  no ruling  has been made in the  matter.  The  Company  intends  to
vigorously  prosecute the lawsuit and has  discontinued  the use of products and
services of the defendants.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         On  October  5,  2000,  the  Company  held  a  special  meeting  of the
shareholders  at 10:00  AM at the  office  of  Foley,  Hoag & Eliot  in  Boston,
Massachusetts to consider and vote upon proposals to:

         1.    Approve  and  adopt  the   agreement   and  plan  of  merger  and
               contribution  dated May 5, 2000,  as amended,  among Vermont Pure
               Holdings,  Ltd.,  VP Merger Parent Inc.,  VP  Acquisition  Corp.,
               Crystal Rock Spring Water Company and the stockholders of Crystal
               Rock.

         2.    Amend the 1998 Stock Option Plan to increase the number of shares
               from 500,000 to 1,500,000 and to make other amendments.

         3.    Adjourn the special meeting if necessary to solicit more proxies.

         A total of votes were cast as follows:

                                      "FOR"          "AGAINST"       "ABSTAIN"
                                      -----          ---------       ---------
                Proposal #1         6,428,476          41,243          14,100
                Proposal #2         5,581,714         885,225          16,900
                Proposal #3         6,430,209         189,535          44,075


                                       14
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Common  Stock is traded on the  American  Stock  Exchange  ("AMEX")
under the symbols "VPS". The table below indicates the range of the high and low
prices  of the  Common  Stock as  reported  by AMEX.  Prior to May 18,  1999 the
Company traded its common stock on the Nasdaq  SmallCap Market under the symbols
"VPUR".


           FISCAL YEAR ENDED OCTOBER 31, 1998                  High        Low

                    First Quarter .......................      $4.56       $3.81
                    Second Quarter ......................      $5.44       $3.63
                    Third Quarter .......................      $4.88       $3.88
                    Fourth Quarter ......................      $4.50       $2.75


         FISCAL YEAR ENDED OCTOBER 30, 1999

                  First Quarter..........................      $4.81       $3.13
                  Second Quarter..........................     $4.50       $3.81
                  Third Quarter..........................      $3.88       $3.81
                  Fourth Quarter.........................      $3.63       $2.63

         FISCAL YEAR ENDED OCTOBER 31, 2000

                  First Quarter..........................      $3.00       $2.50
                  Second Quarter..........................     $3.75       $3.69
                  Third Quarter..........................      $4.00       $3.00
                  Fourth Quarter.........................      $3.75       $3.00

         The last reported sale price of the Common Stock on the American  Stock
Exchange on January 19, 2001 was $2.62.

         The Company had 235 record owners of the Common Stock as of January 19,
2001. As of that date,  the Company  believes that there were in excess of 1,500
beneficial holders of the Common Stock.

         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 has adopted a policy of cash preservation for future use in
the business.

SECURITIES SOLD AND EXEMPTION FROM REGISTRATION CLAIMED.

         On October 5, 2000,  the Company  acquired all of the capital  stock of
Crystal Rock Spring Water Company in a transaction in which the  stockholders of
Crystal  Rock  contributed  their  stock  to the  Company.  Simultaneously,  the
Company's  wholly  owned  subsidiary  merged with the  Company's  publicly  held
predecessor, then known as Vermont Pure Holdings, Ltd. (now Platinum Acquisition
Corp.),  in a transaction  in which the  stockholders  of Vermont Pure Holdings,
Ltd. received shares of common stock of the Company on a one-for-one  basis. The
issuance of common stock to the public  stockholders  was  registered  under the
Securities Act of 1933.


                                       15
<PAGE>

         In exchange for their stock,  the stockholders of Crystal Rock (members
of the Baker family and related  family  trusts)  received cash in the amount of
$10.2 million,  the Company's 12% subordinated  promissory notes due 2007 in the
original  principal  amount  of  $22.6  million,  and  9,873,015  shares  of the
Company's common stock valued at $3.15 per share. For more information, see Note
6 of Notes to Financial Statements.

         The  Company's  common  stock was  issued to the  former  Crystal  Rock
stockholders  in  a  private  transaction  exempt  under  Section  4(2)  of  the
Securities Act of 1933 and Rule 506 of Regulation D.

         ITEM 6.  SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

                                             Fiscal Years Ended
<S>                  <C>             <C>            <C>           <C>           <C>

                          October 31,    October 30,   October 31,   October 27,    October 26,
                             2000           1999           1998         1997          1996
                       -------------   ------------   ------------  ------------  ------------
Net sales              $  35,124,813   $ 31,396,375   $ 29,169,185  $ 17,685,442  $ 11,878,829

Net Income (loss)      $  (2,382,678)  $  3,398,641   $  2,858,750  $  1,067,395  $ (1,267,331)

Net Income (loss)
  per share- diluted   $        (.22)  $        .31   $        .26  $        .11  $      (.13)

Total assets           $ 110,825,640   $ 33,834,230   $ 26,173,503  $ 16,546,766  $ 9,971,394

Long term obligations  $  51,888,257   $ 13,733,268   $ 10,422,803  $  5,739,889  $ 2,878,353
</TABLE>



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

FORWARD-LOOKING STATEMENTS

         When used in the Form 10-K and in future  filings by the  Company  with
the  Securities  and  Exchange  Commission,  the words or phrases  "will  likely
result"  and  "the  Company   expects",   "will  continue",   "is  anticipated",
"estimated",  "project",  or  "outlook" or similar  expressions  are intended to
identify  "forward-looking   statements"  within  the  meaning  of  the  Private
Securities  Litigation Reform Act of 1995. The Company wishes to caution readers
not to place undue  reliance  on any such  forward-looking  statements,  each of
which  speak only as of the date made.  Such  statements  are subject to certain
risks and  uncertainties  that could cause actual  results to differ  materially
from  historical  earnings and those  presently  anticipated  or projected.  The
Company has no obligation to publicly  release the result of any revisions which
may  be  made  to any  forward-looking  statements  to  reflect  anticipated  or
unanticipated  events  or  circumstances   occurring  after  the  date  of  such
statements.


                                       16
<PAGE>

RESULTS OF OPERATIONS

         YEAR ENDED OCTOBER 31, 2000 COMPARED TO YEAR ENDED OCTOBER 30, 1999

     Sales  for 2000 were  $35,125,000  compared  to  $31,396,000  for 1999,  an
increase  of  $3,729,000  or 12%.  2000 sales  attributable  to the merger  with
Crystal Rock were  $2,023,000,  which  represented  7  percentage  points of the
overall 12 point increase.  Excluding revenues attributable to the merger, sales
for 2000 net of acquisitions were $33,102,000.  Revenue growth was primarily due
to growth of home and office delivery markets.

     Sales of the Company's retail-size products were $14,561,000, a decrease of
9%  compared  to  $15,996,000  in 1999.  The sales  decline is  attributable  to
decreased  average  selling  prices as a result  of  increased  competition  and
changes in distributor  relationships.  In addition, an unseasonably cool, rainy
summer in 2000 negatively impacted overall beverage sales in the Company's major
market,  the  Northeastern  United  States.  Prices  continue  to  fall  in  the
marketplace  with  the  entrance  of  large  competitors  that  have  low  water
processing, bottling, and raw material costs. Year to year average selling price
was down 12%.  Vermont Pure brand sales  decreased 26% compared to 1999.  Hidden
Spring  brand sales were up 18% for the year,  due to continued  growth  through
market  expansion  in  secondary  distribution  channels.  During the year,  the
Company  increased the private label volume that it bottles,  resulting in an 8%
increase in sales for these products.  Total case sales were up 4%. The increase
in volume was due to the continued  growth of Hidden Spring,  which increase 19%
during the year and private labels brands,  which increased 28% during the year.
Vermont  Pure case volume  decreased  15%. The decrease in revenue and volume of
the  Vermont  Pure brand in 2000  compared  to 1999 was a result of the  Company
terminating its  distribution  agreement with its largest  distributor in April,
1999. This major customer  accounted for 16% of the Company's volume in 1999 and
30% in 1998. The Company  terminated  this  distribution  agreement  because the
distributor had indicated that it planned to bottle and distribute its own brand
of  water.  Alternative   distribution   arrangements  were  significantly  less
effective  in late 1999 and early  2000.  However in March,  2000,  the  Company
modified its agreements  with its new  distributors in the New York City area so
that Vermont Pure is the exclusive water being distributed by those companies.

         Net of the  merger  with  Crystal  Rock,  sales for the home and office
delivery  category  of the  business  increased  in  2000  to  $18,541,000  from
$15,400,000  in 1999, an increase of $3,142,000 or 20%. The increase in internal
growth in existing  market areas is a result of strong market growth for bottled
water, in general, and greater brand awareness.  In addition to internal growth,
the Company completed a major expansion into the home and office market with the
merger  with  Crystal  Rock.  Sales  attributable  to the  merger  in 2000  were
$2,023,000 resulting in total home and office sales of $20,564,000.

         Cost of goods sold for 2000 were $14,682,000, or 42% of sales, compared
to $11,742,000 or 37% of sales,  for 1999. The increase in cost of goods sold as
a percentage of sales  compared to the prior year is partially  attributable  to
lower average selling prices combined with increases in raw materials for retail
products.  These  factors more than offset the fact that higher sales volume for
both retail and home and office packages continue increase  efficiency and lower
costs per unit. The Company  experienced price increases for bottles,  caps, and
corrugated  paper that averaged 8-10% during the year. A new supply contract for
bottles  as well as a  decrease  in resin  costs in January, 2001 is expected to
result  in lower  bottle  costs  over  the  next  12-18  months.  Management  is
reconfiguring packaging design to use less material and ultimately achieve lower
packaging costs by mid-2001.  The Company's  retail products cost more to bottle

                                       17
<PAGE>

because the process is more complex and it requires more  material,  labor,  and
handling.  The home and office category is characterized by lower bottling costs
because of larger sizes and re-fillable  bottles.  Of the Company's total sales,
home and  office  were 59% in 2000 - up from  49% in  1999.  As a result  of the
product mix and higher sales, in general, the gross profit increased $788,000 to
$20,442,000, or 58% of sales in 2000, from $19,654,000 or 63% of sales, in 1999.

         Total operating  expenses  increased to $21,391,000 from $17,019,000 in
1999, an increase of $4,372,000,  or 26%. Of these amounts, selling, general and
administrative  ("SG&A")  expenses were $16,425,000 and $13,149,000 for 2000 and
1999, respectively,  an increase of $3,276,000, or 25%. The increase in selling,
general and  administrative  expenses was reflective of the increase in home and
office sales. This category is characterized by higher selling expenses than the
retail category.  The Company experienced  significant increases during the year
for  personnel  costs as tight labor markets drove costs higher and fuel expense
increased  nearly 75%. Since the merger with Crystal Rock occurred at the end of
the fiscal year, many of the synergies used to rationalize  that transaction had
not yet  materialized.  The Company incurred  $110,000 of non-recurring  charges
related to the merger with  Crystal  Rock that were  included in SG&A  expenses.
These  expenses were related to personnel  changes and  elimination of a product
line. Net of non-recurring charges, SG&A expenses increased 24%. In addition, as
a result of the merger with  Crystal  Rock the Company  owned and  operated  two
major delivery accounting systems. The Company decided to consolidate operations
on one system and  consequently  wrote down  $1,292,000  for the system that was
terminated.  This charge  consisted of licensing,  installation,  training,  and
consulting  costs.  Advertising  expenses  decreased to  $2,754,000 in 2000 from
$3,258,000  in 1999,  a decrease of  $504,000,  or 15%.  The decrease is related
primarily to the Company's use of different  distribution  channels that require
less  promotional  support  and the  Company's  strategy  to compete  with lower
pricing  instead of  promotion.  However,  given the  competitive  nature of the
industry,  the  Company  anticipates  that it is  likely  to  continue  to spend
significant  amounts in the future for advertising and promotion as it continues
to promote and develop brand recognition and increase market penetration. It can
give no  assurances  that  increases in spending or lower pricing will result in
higher sales. As a result of the merger with Crystal Rock,  amortization expense
increased  to $802,000 in 2000 from  $612,000 in 1999,  an increase of $190,000.
The Company booked  $58,733,000 of goodwill in fiscal year 2000,  primarily as a
result of the merger.  This is being  amortized  over 30 years  resulting  in an
annual charge of approximately  $1,950,000 per year. Although it will not impact
the cash flow of the Company, amortization will have a substantial impact on the
Company's  profitability  in future  years.  During the year,  the  compensation
committee of the Board of Directors  approved the extension of exercise  periods
for  stock  options  for  certain   employees  and   directors.   It  recognized
compensation expense of $119,000 in conjunction with this.

         Loss  from  operations   totaled  $948,000   compared  to  profit  from
operations in 1999 of $2,635,000, a decrease of $3,583,000. Net interest expense
increased to $1,893,000 from  $1,030,000 in 1999, an increase of $863,000.  This
was  reflective  of higher  interest  rates and increased  borrowing  during the
period for operating  capital,  capital  expansion,  and the merger with Crystal
Rock. The Company  increased its debt  approximately  $33,000,000 as a result of
the merger  with  Crystal  Rock.  It is  expected  that this debt will  increase
interest approximately  $3,600,000 in the first year of combined operations.  In
the years following interest will decrease but continue to be a very significant
cost for the Company.  Also in conjunction with the financing of the merger, the
Company  wrote  off fees and  expenses  amounting  to  $406,000  related  to the
financing  it closed with First Union and Key Banks in January  when it expected
to charge these over the five year term of the facility.  Additional  expense of
$181,000  was  incurred on the write down of land the Company  owned in New York
State.  The land was  originally  purchased  by the  Company  in 1991 for spring

                                       18
<PAGE>

development.  The  development  did not  take  place  and the  land  was sold in
January, 2001.  Miscellaneous income represents a cash settlement of litigation.
For more  information,  see Note 12a to the Financial  Statements.  The net loss
before  taxes of  $3,152,000  in 2000  compared  to net income  before  taxes of
$1,605,000 in 1999 is a decrease of $4,757,000. The decrease in profitability is
a result of decline in the  Company's  sales  growth  trend due to the  weather,
lower selling  prices,  higher  material costs,  and ongoing  integration  costs
related to operations as well as $2,108,000 of non-recurring costs.

         The net loss of $2,383,000 compared to net income of $3,399,000 in 1999
was a decrease of $5,782,000.  The Company recorded a tax benefit of $769,000 in
2000  compared to $1,793,000  in 1999.  The decrease in the benefit  corresponds
with the interruption in the Company's profit trend and is a partial recognition
of the Company's total available deferred tax assets of approximately $5,527,000
at October  31,  2000,  based on an  evaluation  of likely  utilization.  If the
Company returns to profitability,  the remaining $973,000 of unrecorded deferred
tax benefits  will be  available  for  recognition  in future years Based on the
weighted number of shares of common stock  outstanding of 10,992,995 during 2000
the net loss was $.22 per share.  This  compares to net income of $.33 per share
based on 10,279,377  weighted average shares and diluted net income per share of
$.31 per share based on the  weighted  number of shares of diluted  common stock
outstanding of 10,790,722 in 1999.

         In December, 1999, the United States Securities and Exchange Commission
released Staff Accounting Bulletin No. 101 ("SAB No.101"),  "Revenue Recognition
in  Financial   Statements".   (The  implementation  date  of  SAB  No.101,  was
subsequently  amended  by  SAB  No.101A  and  SAB  No.101B.)  Under  SAB  No.101
additional  guidance on revenue  recognition  criteria  and  related  disclosure
requirements  are  required.  Implementation  of SAB No.101 is required no later
than the than the fourth fiscal quarter of fiscal years beginning after December
15, 1999, but is effective  retroactively to the beginning of that fiscal period
(per SAB  No.101B).  Company  management  has  evaluated  the  standard  and the
reporting  implications  thereof,  and has  determined  that there will not be a
significant impact on the Company's operating results.

         YEAR ENDED OCTOBER 30, 1999 COMPARED TO YEAR ENDED OCTOBER 31, 1998

                  Sales for 1999 were  $31,396,000  compared to $29,169,000  for
1998, an increase of $2,227,000 or 8%. 1999 sales  attributable  to acquisitions
made during the year were $2,137,000,  which  represented 7 percentage points of
the overall 8 point increase.  Excluding revenues  attributable to acquisitions,
sales for 1999 net of  acquisitions  were  $29,259,000.  The  Company's  revenue
growth  trend  was  slowed   primarily  due  to  the  Company   terminating  its
distribution  agreement with its largest distributor which resulted in some loss
of sales  revenue as new  distributors  were  brought on line.  The  Company's 1
percentage point (1999 over 1998) increase in sales,  net of  acquisitions,  was
accounted for by increases in the following  distribution channels: 6 points for
Hidden Spring,  5 points for private label and 6 points for  home/office.  These
were  mostly  offset by the 16 point  decrease in retail size  Vermont  Pure,  a
direct result of the change in distribution  networks.  Due to the fact that the
Company  operates on a "52-53 week"  reporting  year, 1999 had 52 weeks of sales
while 1998 had 53 weeks of sales.

         Sales of the Company's retail-size products were $15,996,000 in 1999, a
decrease of 8% compared to 1998, when sales of these products were  $17,455,000.
The sales decline is partially  attributable to the termination of the Company's
agreement with its largest  distributor  and decreased  average  selling prices.
Year to year  average  selling  price per case was down 28%.  Vermont Pure brand
sales decreased 34% compared to 1998.  Hidden Spring brand sales were up 89% for

                                       19
<PAGE>

the  year,  due to  continued  growth  through  market  expansion  in  secondary
distribution  channels.  During the year,  the Company  increased  the number of
private label customers that it packs for, resulting in an 83% increase in sales
for these products.

         Sales  for the  home  and  office  delivery  category  of the  business
increased  in 1999 to  $15,400,000  from  $11,714,000  in 1998,  an  increase of
$3,686,000  or 31%. In addition to internal  growth,  the Company  continued  to
expand  its  home  and  office  distribution  through  acquisitions.  New  sales
attributable  to  acquisitions  in 1999 were  $2,137,000.  Net of  acquisitions,
home/office  sales  increased  13% in 1999.  The increase in internal  growth in
existing  market areas is a result of strong market growth for bottled water, in
general, and greater brand awareness.

         Cost of goods sold for 1999 were $11,742,000 or 37% of sales,  compared
to $11,550,000, or 40% of sales, for 1998. The decrease in cost of goods sold as
a percentage of sales  compared to the prior year is partially  attributable  to
lower bottling costs as a result of higher production volumes and more efficient
production,  and an increase in home and office  distribution,  which has better
margins.  The Company's mix of sales  continued to skew more toward  product for
home and  office  delivery-  to 49% in 1999 from 40% in 1998,  in large part the
result of  acquisitions.  The home and office category is characterized by lower
bottling costs because of larger sizes and re-fillable bottles. As a result, the
gross profit was higher in 1999,  $19,654,000 or 63% of sales, than in 1998 when
it was $17,619,000, or 60% of sales.

         Total  operating   expenses  increased  to  $17,019,000  in  1999  from
$15,555,000  in 1998,  an  increase  of  $1,464,000,  or 9%.  Of these  amounts,
selling,  general and  administrative  expenses were $13,149,000 and $10,235,000
for 1999 and 1998, respectively, an increase of $2,914,000, or 28%. The increase
in selling,  general and administrative expenses was due to increased personnel,
rent  and  lease  expenses  needed  to grow  the  business  as well as  expenses
associated with the businesses acquired in 1999.  Advertising expenses decreased
to $3,258,000 in 1999 from $4,702,000 in 1998, a decrease of $1,444,000, or 31%.
The decrease is related primarily to the Company's use of different distribution
channels that require less promotional support.  However,  given the competitive
nature of the industry, the Company anticipates that it is likely to continue to
spend  significant  amounts in the future for  advertising  and  promotion as it
continues to develop brand  recognition and increase market  penetration but can
give no  assurances  that  increases  in spending  will result in higher  sales.
Amortization  expense  decreased  slightly to $612,000 in 1999 from  $617,000 in
1998, a decrease of $5,000.

         Profit from  operations in 1999 was  $2,635,000  compared to $2,065,000
for 1998, an increase of $570,000.  Net interest expense increased to $1,030,000
in 1999 from  $755,000 in 1998,  an increase of  $275,000.  The  increase  was a
result of  greater  amounts  borrowed  during the  period  primarily  related to
acquisitions.  The  improvement  in profit  before income taxes to $1,605,000 in
1999 from  $1,412,000  in 1998 was the result of increased  sales and  decreased
manufacturing and operating costs, on a per unit basis.

         Net income of  $3,399,000  in 1999  compared to  $2,859,000 in 1998, an
improvement  of $540,000.  The Company  recorded a tax benefit of  $1,793,000 in
1999 compared to $1,447,000 in 1998. This benefit reflects a partial recognition
of the  Company's  total  available  deferred tax assets of  approximately  $4.6
million at October 30, 1999,  based on an evaluation of likely  utilization.  If
the Company  continues to be  profitable,  the remaining  $832,000 of unrecorded
deferred tax benefits will be available  for  recognition  in future  years.  No
assurance  can be given that the Company  will be  profitable  in the future and
that these tax benefits will actually be used.  Based on the weighted  number of
shares of common stock  outstanding  of  10,279,377  during 1999 and  10,248,389

                                       20
<PAGE>

during  1998,  the basic  net  income  per  share  was $.33 and $.28 per  share,
respectively.  Based on the  weighted  number of shares of diluted  common stock
outstanding of 10,790,722 and 10,927,025 for the same  respective  periods,  the
diluted  net  income  per share was $.31 per share in 1999 and $.26 per share in
1998.

LIQUIDITY AND CAPITAL RESOURCES

         At October 31,  2000,  the Company had working  capital of  $2,977,000.
This  represents a decrease of $51,000 from the $3,028,000 of working capital on
October 30, 2000. The small decrease is indicative that working capital has been
largely unaffected by the Company' operating loss and the merger.  Specifically,
the Company  reserved cash for the large increase in the current  portion of the
long-term  debt. At the same time, the increased  level of accounts  payable and
accrued expenses were offset by the increase in receivables.

         Cash flow used in operations  was  $1,432,000 for the fiscal year ended
October 31, 2000 as compared to cash provided from operations of $740,000 in the
fiscal year ended  October 30, 1999,  an increase of  $692,000.  The increase of
cash provided from operations  primarily  reflects  increased non-cash expenses,
depreciation  and  amortization  in  2000.  In  addition,  in 1999  the  Company
experienced   an  increase  of  current   assets  at  year-end   resulting  from
construction   in  progress  and  inventory   buildup   compared  to  2000  when
construction had been completed and inventory build had not yet started.

         Cash flows from  investing  activities had a net outflow of $19,155,000
compared to $4,026,000  in 1999.  The increase of  $15,129,000  of cash used for
investment activities from 1999 to 2000 was primarily attributable to $3,681,000
for capital  expenditures  and  $10,330,000  for  acquisitions.  The majority of
capital  expenditures were for expansion of the Company's  facility in Randolph,
Vermont.  The remainder of capital expenditures were in the normal course of the
Company's business - vehicles, bottles, and water dispensing, manufacturing, and
computer  equipment.  The Company used cash for small  acquisitions  to increase
density in existing home and office markets.

         On October 1, 1999, the Company issued a $975,000  non-interest bearing
convertible  debenture due September  30, 2001 to Middlebury  Venture  Partners,
Inc. ("Middlebury",  fomerly Marcon Capital Corporation).  As a result of claims
the Company made under the loan documents,  the Company received $1,270,000 from
the obligor. Of the proceeds received, $975,000 was invested in a Certificate of
Deposit and is restricted as collateral in favor of Middlebury until the note is
converted.

         In January the Company  closed an agreement  with First Union  National
Bank to increase  the line of credit to $25 million.  Of the $25  million,  $4.3
million was  allocated to a letter of credit to  underwrite a new bond issue for
the Randolph,  Vermont  building  expansion as well as new production  equipment
purchases  the balance is for working  capital and  acquisitions  and subject to
certain customary covenants.

         On May 5, 2000 Vermont Pure  Holdings,  Ltd.  entered into an Agreement
and Plan of Merger and Contribution  ("the  Agreement") with Crystal Rock Spring
Water Company. Crystal Rock was a privately held company based in Watertown, CT.
The agreement provided for the formation of a new publicly held holding company,

                                       21
<PAGE>

also to be known as Vermont Pure  Holdings,  Ltd., own the two  businesses.  The
merger and contribution,  pursuant to the agreement, were consummated on October
5, 2000. Existing shareholders of Vermont Pure received stock of the new holding
company on a 1-for-1  basis.  Shareholders  of Crystal Rock  received  9,873,015
shares  of  Vermont  Pure  Springs  common  stock.  In  addition,  Crystal  Rock
shareholders  received  $10,241,000  in cash and a  subordinated  note  from the
Company for $22,600,000.

         To finance to the merger with Crystal Rock, the Company  entered into a
loan  agreement with Webster Bank and  Manufacturers  and Traders Trust Company,
effective October 5, 2000. The financing  provides for a $31,000,000  seven-year
term loan. In addition to providing the cash to the sellers,  proceeds were used
to payoff and  consolidate  existing  Vermont Pure and Crystal Rock debt and the
expenses  of the  transaction.  The note  requires  payments  of  principal  and
interest  over its term.  With the  proceeds of the note,  in addition to paying
cash to the  sellers  the  Company  paid  all of the  debt to  First  Union  and
bondholders,  other bank debt,  selected  leases,  and expenses  incurred in the
transaction. (For additional information about these arrangements, see Note 6 to
the Financial Statements.)

         The commitment  also provides for a $5,000,000  working capital line of
credit for operating capital, capital expenditures, and acquisitions. There is a
separate  limit  within  the  line for  letters  of  credit  which  the  Company
predominantly uses for its insurance needs. The line of credit, is for two years
with interest payable monthly.

         Both facilities are initially priced at the current LIBOR interest rate
plus 175 basis  points and are  secured by a lien  against  all of the assets of
Vermont Pure  Holdings  and its  subsidiaries.  The interest  rate is subject to
periodic  adjustments based on evaluation of the Company's senior funded debt to
EBITDA ratio. In addition,  there are other customary covenants that the Company
must achieve to comply with the agreement

         In  addition to the senior  bank debt  associated  with the merger with
Crystal Rock, the Company  financed the  transaction  with notes to the sellers.
The notes are for a total of $22,600,000,  bear an interest rate of 12%, are for
a term of seven years, and are subordinated to the bank.  Quarterly payments for
the first  three  years  are  interest  only with  principal  and  interest  due
quarterly in the fourth  through  seventh year and the principal  balance due at
maturity.  (For additional  information about these arrangements,  see Note 6 to
the Financial Statements.)

         At October 31,  2000,  the Company has recorded a deferred tax asset of
$4,554,000.  Based on projected profitability,  the realization of such deferred
tax asset would take approximately three more years.

         The  Company  continues  to  pursue  an active  program  of  evaluating
acquisition opportunities. To complete any acquisitions, the Company anticipates
using its capital resources and obtaining financing from outside sources. Except
for the  current  loan  facilities  discussed  above,  the  Company has no other
current  arrangements with respect to, or sources of,  additional  financing for
its business or future  plans.  There can be no assurance  given that  financing
will be available to the Company on acceptable terms or at all.

         Inflation has not had a material impact on the Company's  operations to
date.


                                       22
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risks  relating to the Company's  operations  result  primarily from
changes  in  interest  rates and  commodity  prices  (the  resin  prices for PET
bottles).

INTEREST RATE RISKS

     At October 31, 2000 the Company had approximately  $32,000,000 of long term
debt subject to variable  interest  rates.  Under the  revolving  line of credit
agreement  with Webster Bank the Company  currently  pays  interest at a rate of
LIBOR plus  1.75%.  A  hypothetical  100 basis  increase in the LIBOR rate would
result in an additional $114,000 of interest expense on an annualized basis. The
Company uses interest rate "swap"  agreements to curtail  interest rate risk. In
conjunction  with the financing  for the Crystal Rock merger it  terminated  two
such agreements in October,  2000. On November 3, 2000, the Company entered into
a swap  agreement  with Webster Bank to fix  $8,000,000 of its long term debt at
8.32% interest for three years.

COMMODITY PRICE RISKS

         PLASTIC - PET

     Although the Company has a three-year  contract  with its vendors that sets
the purchase  price of its PET  bottles,  the vendors are entitled to pass on to
the Company any resin price  increases.  These  prices are related to supply and
demand  market  factors for PET and, to a lesser  extent the price of petroleum,
from where PET is derived. A hypothetical resin price increase of $.05 per pound
would result in an approximate price increase per bottle of $.005 or, at current
volume levels, $300,000 a year.

         COFFEE

     The cost of the  Company's  coffee  purchases  are  dictated  by  commodity
prices.  It enters into contracts to mitigate market  fluctuation of these costs
by fixing the price for certain periods. Currently it has fixed the price of its
anticipated  supply  through  December 31, 2001 at "green"  prices  ranging from
$.83-$.91 per pound. The Company is not insulated from price fluctuations beyond
that date. At existing  sales  levels,  an increase in pricing of $.10 per pound
would  result in  approximately  $100,000  of  additional  cost  annually to the
Company  if it had not fixed its  pricing.  In this case,  competitors  that had
fixed pricing might have a competitive advantage.

ITEM 8.  FINANCIAL STATEMENTS AND OTHER SUPPLEMENTARY DATA

     Since  inception,  the Company has not changed  accountants  and has had no
disagreement  on any matter of  accounting  principles or practices or financial
statement disclosure.

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

     Financials  statements  and  their  footnotes  are set  forth on pages  F-1
through F-21

<PAGE>

Index to Financial Statements.

         Financial Statements:                                              Page

                  Independent Auditors Report                                F-2

                  Consolidated Balance Sheet                                 F-3

                  Consolidated Statement of Operations                       F-4

                  Consolidated Statement of Changes in Stockholders Equity   F-5

                  Consolidated Statement of Cash Flows                       F-6

                  Notes to Consolidated Financial Statements                 F-7










                                       F-1

<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
Vermont Pure Holdings, Ltd.
Randolph, VT   05060


         We have audited the accompanying consolidated balance sheets of Vermont
Pure Holdings, Ltd. and Subsidiaries as of October 31 2000 and October 30, 1999,
and the related consolidated statements of operations,  changes in stockholders'
equity and cash flows for the years ended  October 31,  2000,  October 30, 1999,
and October 31, 1998. 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 generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  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 consolidated financial position of Vermont
Pure  Holdings,  Ltd.  and  Subsidiaries  as of October 31, 2000 and October 30,
1999,  and the  results of their  operations  and their cash flows for the years
ended  October 31, 2000,  October 30, 1999,  and October 31, 1998 in  conformity
with generally accepted accounting principles.

                                            /s/ Feldman Sherb & Co., P.C.
                                                Feldman Sherb & Co., P.C
                                                Certified Public Accountants

New York, New York
January 5, 2001


                                       F-2
<PAGE>

              VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES

                       CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                               October 31,             October 30,
                                                                                  2000                    1999
                                                                            -----------------        ----------------
<S>                                                                     <C>                         <C>

                                 ASSETS

CURRENT ASSETS:
        Cash                                                              $        1,408,158          $      367,018
        Investments - money market fund (restricted balance)                       3,301,064                       -
        Investments - certificate of deposit (restricted balance)                    975,000                       -
        Accounts receivable - net of allowance                                     6,725,810               3,525,238
        Notes Receivable                                                                   -                 975,000
        Inventory                                                                  2,778,535               2,711,709
        Current portion of deferred tax asset                                        798,000                 601,922
        Other current assets                                                       1,145,311                 781,968
                                                                          -------------------      ------------------
          TOTAL CURRENT ASSETS                                                    17,131,878               8,962,855
                                                                          -------------------      ------------------
PROPERTY AND EQUIPMENT - net of accumulated depreciation                          21,052,513              11,122,258
                                                                          -------------------      ------------------
OTHER ASSETS:
        Intangible assets - net of accumulated amortization                       68,469,382              10,443,207
        Deferred tax asset                                                         3,756,000               3,182,914
        Other assets                                                                 415,867                 122,996
                                                                          -------------------      ------------------
          TOTAL OTHER ASSETS                                                      72,641,249              13,749,117
                                                                          -------------------      ------------------
TOTAL ASSETS                                                              $      110,825,640       $      33,834,230
                                                                          ===================      ==================

                  LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
        Accounts payable                                                  $        4,535,118       $       3,443,208
        Current portion of customer deposits                                          50,525                  45,033
        Accrued expenses                                                           2,738,930                 851,371
        Current portion of long term debt                                          6,821,673               1,414,930
        Current portion of obligations under capital leases                            9,064                 180,589
                                                                          -------------------      ------------------
          TOTAL CURRENT LIABILITIES                                               14,155,310               5,935,131

        Long term debt                                                            51,411,510               1,663,893
        Long term obligations under capital leases                                    16,747                 379,583
        Line of credit                                                               460,000              11,689,792
        Customer deposits                                                          2,453,334                 684,334
                                                                          -------------------      ------------------
          TOTAL LIABILITIES                                                       68,496,901              20,352,733
                                                                          -------------------      ------------------
STOCKHOLDERS' EQUITY:
        Preferred  stock - $.001 par  value,  500,000  authorized
        shares,  none issued  and  outstanding
        Common  stock -
           $.001 par value, 50,000,000 authorized shares, 20,217,774
           issued and outstanding shares at October 31, 2000 and
         10,339,758 at October 30, 1999                                               20,218                  10,340
        Paid in capital                                                           54,249,016              23,197,724
        Accumulated deficit                                                      (11,940,495)             (9,557,817)
        Treasury stock, at cost, 50,000 shares as of October 30, 1999                      -                (168,750)
                                                                          -------------------      ------------------
          TOTAL STOCKHOLDERS' EQUITY                                              42,328,739              13,481,497
                                                                          -------------------      ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $      110,825,640       $      33,834,230
                                                                          ===================      ==================


</TABLE>

                 See notes to consolidated financial statements

                                      F-3

<PAGE>
                  VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>                                                                                           Years Ended
                                                                   -----------------------------------------------------------


                                                                       October 31,         October 30,          October 31,
                                                                           2000                1999                 1998
                                                                   ------------------   -----------------    -----------------
<S>                                                              <C>                   <C>                  <C>

SALES                                                              $      35,124,813     $    31,396,375      $    29,169,185

COST OF GOODS SOLD                                                        14,682,361          11,742,003           11,549,871
                                                                   ------------------   -----------------    -----------------
GROSS PROFIT                                                              20,442,452          19,654,372           17,619,314
                                                                   ------------------   -----------------    -----------------
OPERATING EXPENSES:
          Selling, general and administrative expenses                    16,424,730          13,149,023           10,235,168
          Advertising expenses                                             2,753,734           3,257,918            4,702,498
          Writedown of computer software                                   1,291,719                   -                    -
          Amortization                                                       801,695             612,057              616,854
          Other compensation                                                 118,670                   -                    -
                                                                   ------------------   -----------------    -----------------
TOTAL OPERATING EXPENSES                                                  21,390,548          17,018,998           15,554,520
                                                                   ------------------   -----------------    -----------------
INCOME (LOSS) FROM OPERATIONS                                               (948,096)          2,635,374            2,064,794
                                                                   ------------------   -----------------    -----------------
OTHER INCOME (EXPENSE):
          Interest                                                        (1,893,087)         (1,030,151)            (755,326)
          Debt exit fees and expenses                                       (405,972)                  -                    -
          Loss on writedown of land                                         (180,837)                  -                    -
          Miscellaneous                                                      276,150                   -              102,282
                                                                   ------------------   -----------------    -----------------
TOTAL OTHER                                                               (2,203,746)         (1,030,151)            (653,044)
                                                                   ------------------   -----------------    -----------------
INCOME (LOSS) BEFORE INCOME TAXES                                         (3,151,842)          1,605,223            1,411,750

INCOME TAX BENEFIT                                                           769,164           1,793,418            1,447,000
                                                                   ------------------   -----------------    -----------------
NET INCOME (LOSS)                                                  $      (2,382,678)   $      3,398,641     $      2,858,750
                                                                   ------------------   -----------------    -----------------
NET INCOME (LOSS) PER SHARE - BASIC                                $           (0.22)   $           0.33     $           0.28
                                                                   ==================   =================    =================
NET INCOME (LOSS) PER SHARE - DILUTED                              $           (0.22)   $           0.31     $           0.26
                                                                   ==================   =================    =================
Weighted Average Shares Used in Computation - Basic                       10,992,995          10,279,377           10,248,389
                                                                   ==================   =================    =================
Weighted Average Shares Used in Computation - Diluted                     10,992,995          10,790,722           10,927,025
                                                                   ==================   =================    =================
</TABLE>
                 See notes to consolidated financial statements

                                       F-4





<PAGE>
                  VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                    Common        Stock        Paid in      Treasury     Stock       Accumulated
                                 ---------------------------                ------------------------
                                    Shares      Par Value      Capital       Shares      Amount        Deficit           Total
                                 ---------------------------------------------------------------------------------------------------
<S>                               <C>           <C>         <C>              <C>        <C>         <C>               <C>

Balance, October 25, 1997           10,131,980    $ 10,132    $ 22,447,092          -           -     $ (15,815,208)    $ 6,642,016

Issuance of common stock               155,207         156         632,957                                                  633,113

Acquisition of treasury stock                                                  50,000     (168,750)                        (168,750)

Net income                                                                                                2,858,750       2,858,750

                                ----------------------------------------------------------------------------------------------------
Balance, October 31,1998            10,287,187      10,288      23,080,049     50,000     (168,750)     (12,956,458)      9,965,129

Issuance of common stock                52,571          52         117,675                                                  117,727

Net Income                                                                                                3,398,641       3,398,641

                                ----------------------------------------------------------------------------------------------------
Balance, October 30,1999            10,339,758      10,340      23,197,724     50,000     (168,750)      (9,557,817)     13,481,497

Common stock issued for acquisition  9,873,016       9,873      31,090,127                                               31,100,000

Sale of common stock                     5,000           5          11,245                                                   11,250

Stock compensation                                                 118,670                                                  118,670

Retirement of treasury stock                                      (168,750)   (50,000)     168,750                                -

Net loss                                                                                                 (2,382,678)     (2,382,678)

                                ----------------------------------------------------------------------------------------------------
Balance, October 31, 2000           20,217,774    $ 20,218    $ 54,249,016          -          $ -    $ (11,940,495)   $ 42,328,739
                                ----------------------------------------------------------------------------------------------------

</TABLE>

                 See notes to consolidated financial statements

                                       F-5

<PAGE>
                        VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                      October 31,      October 30,     October 31,
                                                                                         2000             1999             1998
                                                                                   ----------------  --------------  ---------------
<S>                                                                                 <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income/(loss)                                                                $ (2,382,678)    $ 3,398,641      $ 2,858,750
     Adjustments to reconcile net income (loss)
       to net cash provided by operating activities:

       Depreciation                                                                      2,083,204       1,489,384        1,150,000
       Amortization                                                                        801,695         612,057          616,854
       Increase in deferred tax asset                                                     (769,164)     (1,793,418)      (1,447,000)
       Gain on settlement of note receivable                                              (295,000)              -                -
       Loss on disposal of property and equipment                                          101,499          72,315           93,808
       Non cash compensation                                                               118,670

     Changes in assets and liabilities
       (net of effect of acquisitions):

       (Increase) Decrease in accounts receivable                                           93,831        (250,476)        (985,349)
       (Increase) Decrease in inventory                                                    559,824        (720,525)        (783,421)
       (Increase) in other current assets                                                 (163,905)       (558,998)          65,657
       (Increase) Decrease in other  assets                                                 80,218      (1,466,274)        (567,567)
       (Decrease) in accounts payable                                                       83,972         435,578        1,768,238
       Increase in customer deposits                                                        76,651        (225,038)         (81,525)
       (Decrease) Increase in accrued expenses                                           1,043,446        (253,500)         117,910
                                                                                   ----------------  --------------  ---------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                      1,432,263         739,746        2,806,355
                                                                                   ----------------  --------------  ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of property, plant and equipment                                          (3,680,793)     (2,115,945)      (2,983,313)
     Purchase of property, plant and equipment
        from bond financing                                                             (2,467,931)              -                -
Purchase of money market investment from bond financing                                 (4,125,424)              -                -
     Reduction of money market investment account                                        2,467,931               -                -
     Reduction of money market investment account for pay-off of bond issuance           1,657,493               -                -
     Purchase of money market investment for pay-off of remaining bond issuance         (3,301,064)              -                -
     Purchase of certificate of deposit securing outstanding debt                         (975,000)                               -
     Proceeds from sale of fixed assets                                                    329,550         113,752           67,000
     Collection of note receivable                                                       1,270,000               -                -
     Cash used for acquisitions - net of cash acquired                                 (10,330,062)     (2,023,610)      (4,458,889)
                                                                                   ----------------  --------------  ---------------
NET CASH USED IN INVESTING ACTIVITIES                                                  (19,155,300)     (4,025,803)      (7,375,202)
                                                                                   ----------------  --------------  ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds of line of credit                                                          5,658,208       2,905,999          843,979
     Proceeds from debt                                                                 35,067,765       1,278,420       11,233,158
     Principal payments of debt                                                           (726,307)       (780,355)        (509,172)
     Principal payment of debt relating to refinancing                                 (21,246,739)              -       (6,942,605)
     Exercise of stock options                                                                   -          87,740                -
     Sale of common stock                                                                   11,250               -           10,950
                                                                                   ----------------  --------------  ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                               18,764,177       3,491,804        4,636,310
                                                                                   ----------------  --------------  ---------------
NET INCREASE  IN CASH                                                                    1,041,140         205,747           67,463

CASH - Beginning of year                                                                   367,018         161,271           93,808
                                                                                   ----------------  --------------  ---------------
CASH  - End of year                                                                    $ 1,408,158       $ 367,018        $ 161,271
                                                                                   ================  ==============  ===============
Cash paid for interest                                                                 $ 1,579,381       $ 852,638        $ 755,326
                                                                                   ================  ==============  ===============
Cash paid for taxes                                                                    $   118,503       $       -        $       -
                                                                                   ================  ==============  ===============
NON-CASH FINANCING AND INVESTING ACTIVITIES:
     Equipment acquired under capital leases                                           $   145,844       $ 212,315        $  89,273

                                                                                   ================  ==============  ===============
</TABLE>
                 See notes to consolidated financial statements

                                       F-6


<PAGE>


<PAGE>

                  VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

1.       BUSINESS OF THE COMPANY

         Vermont  Pure  Holdings,   Ltd.  (the  "Company")  is  engaged  in  the
         production,  marketing and distribution of bottled water. The Company's
         products  are  sold   predominately   in  the   Northeast  as  well  as
         Mid-Atlantic  and  Mid-Western  states.  Distribution  is  accomplished
         through a network of  independent  beverage  distributors  and with the
         Company's own trucks and employees.

         SIGNIFICANT ACCOUNTING POLICIES

         a.   Basis of  Presentation  - The  consolidated  financial  statements
              include the accounts of the Company and its  subsidiaries  Vermont
              Pure Springs,  Inc.,  Crystal Rock Spring Water Company  ("Crystal
              Rock"),  Excelsior Spring Water Co., Inc. and   Adirondack  Coffee
              Services,  Inc. The Company's  subsidiaries are wholly owned.  All
              material  intercompany  profits,  transactions,  and balances have
              been eliminated.

         b.   FISCAL YEAR - In fiscal year 1998 and 1999 the Company operated on
              a "52-53 week" reporting year. Fiscal year 1999 had 52 weeks while
              fiscal  year 1998 had 53  weeks.  On April  30,  2000 the  Company
              changed to a calendar  month  basis of  reporting.  The reason for
              this  change  is to be  more  compatible  with  software  used  in
              operation of the business and allow for ease of  consolidation  of
              the financial  statements  from the Company's  subsidiaries.  This
              change had no material effect on the Company's results.

         c.   CASH  EQUIVALENTS  -  The  Company  considers  all  highly  liquid
              temporary  cash  investments,  with an original  maturity of three
              months or less when purchased, to be cash equivalents.

         D.   ACCOUNTS  RECEIVABLE - Accounts  receivable  are  presented net of
              allowance  for doubtful  accounts.  The allowance was $732,133 and
              $348,167 at October 31, 2000 and October 30,  1999,  respectively.
              Amounts charged to expense were $334,011,  $187,113, and $192,527,
              respectively, during the years ended October 31, 2000, October 30,
              1999, and October 31, 1998.

         e.   INVENTORIES  -  Inventories  consist  primarily  of the  packaging
              material,  labor and overhead  content of the Company's  products.
              Such  inventories  are stated at the lower of cost or market using
              average costing.

         f.   PROPERTY  AND  EQUIPMENT - Property  and  equipment  are stated at
              cost.  Depreciation is calculated on the straight-line method over

                                      F-7
<PAGE>

              the estimated  useful lives of the assets,  which range from three
              to ten years for equipment, and from ten to 40 years for buildings
              and improvements.

         g.   INTANGIBLE  ASSETS  -  The Company records  goodwill in connection
              with its  acquisitions.  Goodwill is amortized over 30 years.  The
              value of covenants not to compete are amortized  over  the term of
              the agreements.

         h.   SECURITIES  ISSUED FOR  SERVICES - The Company  accounts for stock
              and options  issued for  services by  reference to the fair market
               value of the  Company's  stock on the  date of stock  issuance or
              option grant. Compensation expense is recorded for the fair market
              value of the  stock  issued,  or in the case of  options,  for the
              difference  between the stock's  fair market  value on the date of
              grant and the option  exercise price. In the event that recipients
              are required to render  future  services to obtain the full rights
              in the securities  received,  the compensation expense so recorded
              is deferred  and  amortized  as a charge to income over the period
              that such rights vest to the recipient.

              In 1995, the Financial Accounting Standards Board issued Statement
              of  Financial   Accounting  Standards  No.  123  ("SFAS  No.123"),
              "Accounting  for Stock Based  Compensation".  SFAS No.123  permits
              companies to choose to follow the  accounting  prescribed  by SFAS
              No. 123 for  securities  issued to  employees,  or to  continue to
              follow  the   accounting   treatment   prescribed   by  Accounting
              Principles  Board  Opinion  No.25  ("APB  No.25")  along  with the
              additional  disclosure  required  under SFAS No.123 if the Company
              elects to  continue  to follow APB No.25.  The Company has adopted
              the disclosure only option of SFAS No.123.

         i.   NET INCOME (LOSS) PER SHARE - Net Income (Loss) Per Share is based
              on the weighted average number of common shares outstanding during
              each  period.   Potential   common  shares  are  included  in  the
              computation of diluted per share amounts  outstanding  during each
              period that income is reported.

         j.   ADVERTISING EXPENSES  -  The Company expenses advertising costs at
              the time that the advertising begins to run.


         k.   SLOTTING FEES - Slotting fees are paid to individual  supermarkets
              and  supermarket  chains to  obtain  initial  shelf  space for new
              products.  Fees vary from store to store.  The payment of slotting
              fees does not guarantee  that a company's  product will be carried
              for any definite period of time. The Company pays for such fees in
              cash,  providing free goods or issuing credits for previously sold
              goods.  The cost of the  slotting  fees is valued at the amount of
              cash paid,  or the cost to the  Company of the goods  provided  in
              exchange.  The Company expenses  slotting fees when the obligation
              is incurred.

                                      F-8
<PAGE>

         l.   CUSTOMER DEPOSITS - Customers receiving home or office delivery of
              water  pay a  deposit  for the water  bottle  on  receipt  that is
              refunded when it is returned.  The Company uses an estimate (based
              on  historical  experience)  of the  deposits it expects to return
              over the next 12 months to  determine  the current  portion of the
              liability and classifies the balance as long term.

         m.   INCOME  TAXES  - The  Company  accounts  for  income  taxes  under
              Statement of Financial  Accounting  Standards No.109,  "Accounting
              for Income  Taxes" (SFAS  No.109).  Pursuant to SFAS  No.109,  the
              Company  accounts  for income  taxes under the  liability  method.
              Under the liability  method,  a deferred tax asset or liability is
              determined  based upon the tax effect of the  differences  between
              the financial statement and tax basis of assets and liabilities as
              measured  by the  enacted  rates that will be in effect when these
              differences reverse.

         n.   USE OF  ESTIMATES - The  preparation  of financial  statements  in
              conformity with generally accepted accounting  principals requires
              management  to make  estimates  and  assumptions  that  affect the
              reported  amounts  of assets and  liabilities  and  disclosure  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.

         o.   FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS  -  The  carrying  amounts
              reported  in  the  balance  sheet  for  cash,  trade  receivables,
              accounts payable and accrued expenses approximate fair value based
              on the  short-term  maturity of these  instruments.  The  carrying
              amount of the Company's borrowings approximate fair value.

         p.   ACCOUNTING FOR LONG-LIVED ASSETS - The Company reviews  long-lived
              assets,  certain  identifiable  assets and any goodwill related to
              those assets for impairment whenever  circumstances and situations
              change such that there is an indication that the carrying  amounts
              may not be recovered.  At October 31, 2000,  the Company  believes
              that there has been no impairment of its long-lived assets.

         q.   NEW ACCOUNTING STANDARDS

              1.    In June  1999,  the  Financial  Accounting  Standards  Board
                    (FASB) issued  Statement of Financial  Accounting  Standards
                    (SFAS) No. 137,  "Accounting for Derivative  Instruments and
                    Hedging  Activities-Deferral  of the Effective  Date of FASB
                    Statement  No.  133."  SFAS No.  137  amends  SFAS No.  133,
                    "Accounting   for   Derivative   Instruments   and   Hedging
                    Activities,"  which was issued in June 1998. SFAS defers the
                    effective date of SFAS No. 133 to all fiscal years beginning
                    after June 15, 2000. Accordingly, the Company will adopt the
                    provisions  of SFAS No. 133 for the  fiscal  year 2001 which
                    commences  on November 1, 2000.  This  statement  should not
                    have  a   material   effect  on  the   Company's   financial
                    statements.

              2.    In December, 1999, the United States Securities and Exchange
                    Commission  released Staff Accounting Bulletin No. 101 ("SAB
                    No.101"),  "Revenue  Recognition  in Financial  Statements".
                    (The  implementation  date of SAB No.101,  was  subsequently
                    amended by SAB  No.101A and SAB  No.101B.)  Under SAB No.101
                    additional  guidance  on revenue  recognition  criteria  and
                    related disclosure requirements are required. Implementation
                    of SAB No.101 is  required no later than the than the fourth
                    fiscal quarter of fiscal years  beginning after December 15,
                    1999,  but is effective  retroactively  to the  beginning of
                    that fiscal period (per SAB No.101B). Company management has
                    evaluated  the  standard  and  the  reporting   implications
                    thereof,  and  has  determined  that  there  will  not  be a
                    significant impact on the Company's operating results.


                                      F-9
<PAGE>

3.       MERGERS AND ACQUISITIONS

         a)   On May 5,  2000  Vermont  Pure  Holdings,  Ltd.  entered  into  an
              Agreement and Plan of Merger and  Contribution  ("the  Agreement")
              with Crystal Rock Spring Water  Company,  a privately held company
              based in Watertown,  CT. The agreement  provided for the formation
              of a new  publicly  held  holding  company,  also to be  known  as
              Vermont Pure Holdings, Ltd., to own Crystal Rock and VPS, Inc. The
              merger and contribution pursuant to the agreement, was consummated
              on October 5, 2000. Existing shareholders of Vermont Pure received
              stock of the new holding company on a 1-for-1 basis.

              The purchase price paid to the  shareholders of Crystal Rock is as
              follows:

                  Cash                                              $ 10,241,063
                  Issuance of common stock                            31,100,000
                  Note payable                                        23,106,795
                                                                    ------------
                  Total                                             $ 64,447,858
                                                                    ============

              The stock  price of Vermont  Pure for  purposes  of the merger was
              $3.15 per share. As a result,  the number of Vermont Pure Holdings
              common shares issued was 9,873,016.

              The transaction was approved by the stockholders of the Company at
              a special  meeting on October 5,  2000.  In  conjunction  with the
              merger  agreement,   the  Company  closed  a  loan  agreement  and
              associated  documents with Webster Bank of Waterbury,  Connecticut
              that  provided  financing  for  the  transaction  and  post-merger
              working  capital and gave a note  payable to the sellers (see note
              8).

                                      F-10
<PAGE>

              Goodwill from the acquisition has been calculated as follows:

                  Purchase Price                                    $64,447,858
                  Fair Value of Assets Acquired                     (12,419,789)
                  Fair Value of Liabilities Assumed                   5,161,829
                  Acquisition Costs                                     980,687
                                                                ----------------
                  Goodwill                                          $58,170,585
                                                                ================

         b)   The Company  completed  other smaller  acquisitions  to add to its
              existing  home  and  office   delivery   system  in   Connecticut,
              Massachusetts,  New Hampshire, New York, and Vermont during fiscal
              years 2000 and 1999.

              The following table gives an aggregate summary of the acquisitions
              when combined with the Crystal Rock merger detailed above:

                                                        2000            1999
                                                        ----            ----
                  Purchase Price                    $ 65,500,558    $ 2,446,282
                  Fair Value of Assets Acquired      (12,930,697)    (1,195,022)
                  Fair Value of Liabilities Assumed    5,173,229         49,623
                  Acquisition Costs                      989,995         26,062
                                                    ------------      ----------
                  Goodwill                          $ 58,733,085     $1,326,945
                                                    ============      ==========

                  The detailed components consist of the following:

                                                         2000           1999
                                                         ----           ----
                  Cash to Sellers                   $ 11,160,763     $1,997,548
                  Notes to Sellers                    23,239,795        418,734
                  Common Stock to Sellers (9,873,016
                    shares in 2000 and 8,571 in 1999) 31,100,000         30,000
                                                    ------------    ------------
                  Purchase Price                    $ 65,500,558     $2,446,282
                                                    ============    ============

                                                         2000            1999
                                                         ----            ----
                  FAIR VALUE OF ASSETS ACQUIRED
                  -----------------------------
                  Accounts Receivable                 $3,398,928      $ 205,063
                  Inventory                              626,650        147,257
                  Property, Plant and Equipment        6,295,783        662,448
                  Intangible Assets                      215,125        178,840
                  Other                                2,394,211          1,414
                                                    ------------    ------------
                                                    $ 12,930,697     $1,195,022
                                                    ============    ============

                  LIABILITIES ASSUMED
                  -----------------------------
                  Accounts Payable                   $ 1,852,052              -
                  Customer Deposits                    1,697,841          2,900
                  Assumed Notes                        1,623,336         37,910
                  Other                                        -          8,813
                                                    ------------    ------------
                                                     $ 5,173,229      $  49,623
                                                    ============    ============


                                      F-11
<PAGE>


         The following table  summarizes the pro forma  consolidated  results of
         operations   (unaudited)   of  the   Company  and  the  2000  and  1999
         acquisitions as though the acquisitions had been consummated at October
         31,  1998.  The  pro  forma  amounts  give  effect  to the  appropriate
         adjustments for the fair value of assets  acquired and  amortization of
         goodwill,  depreciation  and the debt incurred and  resulting  interest
         expense.

                                                           Years Ended
                                                           -----------
                                                  OCTOBER 31,        OCTOBER 30,
                                                     2000               1999
                                                     ----               ----
         Total Revenue                           $59,658,061        $57,452,633
         Net Income (Loss)                       $(3,648,946)       $ 2,656,890
         Net  Income (Loss) Per Share              $   (0.18)         $    0.13
         Weighted Average Number of Shares        20,163,051         20,152,392
                                                  ==========         ===========

         INVESTMENT

         The Company  maintains a money  market  account for  undisbursed  funds
         relating to the Vermont  Economic  Development  Authority bond issuance
         (see note 8). The funds have been invested in First  Union's  Evergreen
         Money Market account and administered by First Union, the Bond Trustee.
         The funds of $ 3,301,000 as of October 31, 2000 are  restricted for the
         expenditures  related to purchase of building  and  equipment  and were
         disbursed to pay off the bonds on November 1, 2000.

         PROPERTY AND EQUIPMENT

                                               LIFE      OCTOBER 31, OCTOBER 30,
                                                           2000       1999
                                              ----         ----       ----
         Land, buildings, and improvements  10 - 40 yrs $ 5,631,785 $ 3,624,258
         Machinery and equipment             3 -10 yrs   21,964,103  11,741,545
         Equipment held under capital leases 3 -10 yrs       30,067     786,776
                                                         27,625,955  16,152,579
         Less accumulated depreciation                    6,573,442   5,030,321
                                                        -----------  ----------
                                                       $ 21,052,513 $11,122,258
                                                        ===========  ===========

         INTANGIBLE ASSETS

                                            LIFE        OCTOBER 31,  OCTOBER 30,
                                                           2000         1999
                                            ----           ----         ----
         Goodwill                          30 yrs.     $ 69,654,383 $10,933,826
         Covenants not to compete           5 yrs.          405,599     498,412
         Customer lists                     3 yrs.        1,146,661     946,535
         Other                            Various           105,755     103,717
                                                       ------------  -----------
                                                         71,312,398  12,482,490
         Less accumulated amortization                    2,843,016   2,039,283
                                                       ------------- -----------
                                                       $ 68,469,382 $10,443,207
                                                       ============= ===========

                                      F-12
<PAGE>

 7.      ACCRUED EXPENSES

                                                         October 31, October 30,
                                                            2000         1999
                                                            ----         ----
         Advertising and promotion                     $   153,627   $  130,000
         Payroll and vacation                              974,792      206,018
         Income taxes                                      345,899            -
         Capital expenses                                  307,428            -
         Interest                                          386,307            -
         Miscellaneous                                     570,877      515,353
                                                       -----------   -----------
                                                       $ 2,738,930   $  851,371
                                                       ===========   ===========
8.       DEBT

         a)   SENIOR DEBT - The Company  entered into a five year revolving line
              with First Union National Bank, formerly CoreStates Banks N.A., on
              April  18,  1998.  The  purpose  of the  loan  was  for  permitted
              acquisitions  and  capital  expenditures,  working  capital and to
              refinance  existing term debt.  The Company was entitled to borrow
              up to $15 million under the terms and conditions of the agreement.
              Of this  amount,  $3 million was allowed for working  capital with
              the balance available for acquisitions.

              On  January  28,  2000,  the  Company  amended  and  restated  its
              five-year  revolving  credit  agreement  with First Union National
              Bank and KeyBank National Association.  The facility was increased
              to $25 million from $15 million under the terms and  conditions of
              the  agreement.  The  interest  rate on funds  borrowed  under the
              agreement  was LIBOR plus 2.5%.  The Company  also  entered into a
              Letter of Credit with First Union for  $4,300,000  to secure bonds
              issued for the same  amount by the  Vermont  Economic  Development
              Authority.  The  Company  paid a 2%  annual  fee of the  Letter of
              Credit amount.  The Bonds were issued as two series  designated as
              Variable  Rate  Demand/Fixed  Rate  Revenue  Bonds  (Vermont  Pure
              Springs,  Inc.  Project)  1999 Series A 20 year bonds and Variable
              Rate Demand/Fixed  Rate Revenue Bonds (Vermont Pure Springs,  Inc.
              Project)  1999 Series A-T 10 year  bonds.  The Series A Bonds were
              issued  for  $3,195,000  and  maturing  on January 1, 2020 and the
              Series  A-T Bonds were  issued  for  $1,105,000  and  maturing  on
              January  1  2011.  The  "Floating  Rate"  was a  variable  rate of
              interest equal to the minimum rate of interest  necessary,  in the
              sole judgment of the  Remarketing  Agent (First Union  Securities,
              Inc.),  to sell the Bonds on any  Business Day at a price equal to
              the principal amount thereof,  exclusive of accrued  interest,  if
              any,  thereon.  Interest was  determined on a weekly basis and was
              payable on the first of every month.  The bank facility and series
              A-T bonds were paid off in conjunction with Crystal Rock merger on
              October 6, 2000 while the series A bonds were paid off on November
              1, 2000 for the same reason. No prepayment penalties were incurred
              as a result of the retirement of this debt.


                                      F-13
<PAGE>

              In order to finance  the merger  with  Crystal  Rock,  the Company
              entered into a loan agreement with Webster Bank and  Manufacturers
              and  Traders  Trust  Company,   effective  October  5,  2000.  The
              financing  provides for a $31,000,000  term loan,  the proceeds of
              which were used as follows:

              Cash to Crystal Rock Shareholders                    $  8,041,063
              Repay Existing Crystal Rock Debt                        1,623,336
              Repay Vermont Pure Loans, Bonds, and Leases            20,451,899
              Expenses Related to the Transaction                       679,475
              Operating Cash                                            204,227
                                                                  --------------
                  TOTAL                                             $31,000,000
                                                                  ==============

              The commitment also provides for a $5,000,000 working capital line
              of  credit  for  operating  capital,  capital  expenditures,   and
              acquisitions.   The  Company  had  borrowed  $460,000  under  this
              facility as of October 31, 2000.  There is a separate limit within
              the line for letters of credit.

              The  term  loan is for a term of  seven  years  and has  scheduled
              monthly  payments of principal and interest  ranging from $417,000
              in the first year to $610,000 in the last year.

              The line of  credit is for two  years.  Both  loans are  initially
              priced at the  current 30 day LIBOR  interest  rate plus 175 basis
              points  (9.5% at  October  31,  2000)  and are  secured  by a lien
              against  all of the  assets  of  Vermont  Pure  Holdings  and  its
              subsidiaries. The interest rate is subject to periodic adjustments
              based on evaluation of the Company's  senior funded debt to EBITDA
              ratio. In addition,  there are other customary  covenants that the
              Company must achieve to comply with the agreement.

         b)   SUBORDINATED  DEBT - As  part of the  merger  agreement  with  the
              shareholders of Crystal Rock, the Company gave notes in the amount
              of  $22,600,000,  effective  October 5, 2000. The interest rate is
              12% for the seven year term of the note.  Scheduled repayments are
              made  quarterly  and are interest  only for the first three years.
              Quarterly  payment of principal  and interest  range from $678,000
              the first year to $2,062,000  the last year.  There is a principal
              payment of $6,600,000 due at maturity.

              The  notes  are  secured  by all of the  assets  of  Vermont  Pure
              Holdings and its subsidiaries but specifically subordinated,  with
              a separate agreement between the debt holders,  to the senior debt
              described above.


                                      F-14
<PAGE>
<TABLE>
<CAPTION>

         c)   OTHER LONG TERM DEBT   -  The Company's other long term debt is as
              follows:
                                                                                           October 31,        October 30,
                                                                                              2000                1999
                                                                                              ----                ----
        <S>                                                                                <C>                 <C>
          Mortgage on property  purchased in June 1999,  interest at .5% over prime,
             as of October 31, 2000 the rate is 8.25% to be revised annually,
             principal  and interest payable monthly through 2014, secured by property.... $       *              $  198,182
             Mortgage on property  acquired in October 1993,  interest at 4.5%,  with
             interest  only due through  July 1996,  principal  and  interest  due
             through 2000 secured (subordinated) by the property..........................   287,250                 318,341
          Promissory note,  principal and interest at 8.5% payable monthly through
             May 2002 with a final  payment of  $140,099  due June  2002.  Note is
             unsecured....................................................................         *                 235,011
          Promissory note,  principal and interest at 8.5% payable monthly through
             August 2002, with a final payment of $308,474 due September 2002.
             Note is unsecured............................................................         *                 430,782
          Promissory  note,  principal and interest at 8% payable  monthly through
             August 2004.  Note is unsecured..............................................         *                 295,473
          Bonds,  principal  payable on  November  1,  2000.  Bond is secured by a
             Money Market account......................................................... 3,195,000                       -
          Promissory  note, to be paid by  conversion to equity by October,  2002.
             Note is secured by a  six-month  certificate  of deposit  maturing on
             December 7, 2000.............................................................   975,000                 975,000
          Various  secured/unsecured  notes  ranging  in  amounts  of  $14,000  to
             $58,000  with  interest  rates  of  8.5%  to  10%.  These  notes  are
             Unsecured....................................................................   201,745               1,601,068
                                                                                           ---------              -----------
                                                                                          $4,633,183             $ 3,078,823
          Less current portion............................................................ 4,321,673               1,414,930
                                                                                           ---------             -----------
                                                                                           $ 311,510             $ 1,663,893
                                                                                           =========             ===========
</TABLE>

       * repaid during the year ended October 31, 2000

d)       Annual maturities of long term debt are summarized as follows:
<TABLE>
<CAPTION>
<S>                                          <C>               <C>            <C>              <C>

                                                 Senior           Subordinated     Other             Total
                                                 ------           ------------     -----             -----
         CURRENT PORTION                       $ 2,500,000          $      -     $4,321,673       $ 6,821,673
                                               -----------          --------     ----------       -----------
         Long Term Portion
         Year Ending October 31,

         2002                                    3,500,000                 -         60,136         3,560,136
         2003                                    4,000,000                 -         41,817         4,041,817
         2004                                    4,000,000         2,000,000         44,105         6,044,105
         2005                                    4,500,000         3,000,000              -         7,500,000
         2006                                    4,500,000         4,000,000              -         9,500,000
         THEREAFTER                              5,500,000         13,600000        165,452        20,765,452
                                               -----------      ------------     ----------       -----------
         LONG TERM PORTION                       7,000,000        22,600,000        311,510        51,411,510
                                               -----------      ------------     -----------      -----------
         TOTAL DEBT                           $ 31,000,000      $ 22,600,000     $4,633,183       $58,233,183
                                              ============      ============     ==========       ===========
</TABLE>


                                      F-15
<PAGE>

9.       STOCK OPTION PLANS

         In November  1993,  the Company's  Board of Directors  adopted the 1993
         Performance  Equity Plan (the "1993  Plan").  The plan  authorizes  the
         granting of awards for up to  1,000,000  shares of common  stock to key
         employees,  officers,  directors and  consultants.  Grants can take the
         form of stock options (both  qualified and  non-qualified),  restricted
         stock awards,  deferred  stock awards,  stock  appreciation  rights and
         other stock based awards.  During  fiscal 1999 and 2000,  there were no
         options issued under this plan.

         On April 2, 1998 the Company's shareholders approved the 1998 Incentive
         and Non Statutory  Stock Option Plan (the "1998  Plan").  The 1998 plan
         was  amended by  shareholder  approval  on  October 5, 2000.  This plan
         provides  for  issuance  of up to  1,500,000  options to  purchase  the
         Company's  common stock under the  administration  of the  compensation
         committee  of the  Board of  Directors.  The  intent  of the plan is to
         reward options to officers, employees, directors, and other individuals
         providing services to the Company. During fiscal 2000 and 1999, 870,000
         and 48,200 options were issued under this plan, respectively.

         The following  table  illustrates  the Company's  stock option  warrant
         issuances and balances outstanding during the last three fiscal years:

                                                          Option/      Weighted
                                                          Warrant       Average
                                                         (Shares) Exercise Price
                                                      -----------  -------------

           Balance at October 25, 1997                  2,202,187         $3.39
                Granted                                   227,831          3.58
                Retired                                   (10,000)         2.50
                Exercised                                  (5,000)         2.50
                                                     -------------   -----------
           Balance at October 31, 1998                  2,415,018          3.41
                Granted                                    48,200          3.13
                Retired                                  (540,000)         5.87
                Exercised                                 (36,000)         2.44
                                                     -------------   -----------
           Balance at October 30, 1999
                                                        1,887,218          2.71
                Granted                                   870,000          3.23
                Exercised                                  (5,000)         2.25
                Expired                                   (63,000)         3.27
                                                     -------------   -----------
           BALANCE AT OCTOBER 31, 2000                  2,689,218         $2.79
                                                     =============   ===========

         The  following  is  additional  information  related  to the  Company's
options and warrants as of October 31, 2000:
<TABLE>
<CAPTION>

                                                                 Weighted                       Weighted
                Exercise       Outstanding       Remaining         Ave.        Exercisable        Ave.
                 Price         Options and      Contractual      Exercise      Options and      Exercise
                 Range          Warrants         Ave. Life        Price         Warrants         Price
                -----           --------         ---------        -----         --------         -----
       <S>                   <C>                <C>             <C>             <C>            <C>

         $1.81 - $2.50         1,501,000           4.63           $2.43            1,363,000     $2.42
         $2.81 - $3.38         1,138,218           9.10           $3.22              169,728     $3.10
         $3.50 - $4.25            50,000           6.40           $3.95               39,800     $3.87
                               ---------         ---------        -----         ------------    ------
                               2,689,218           6.56           $2.79            1,572,528     $2.53
                               =========                                        ============
</TABLE>

                                      F-17
<PAGE>


         Outstanding  options and warrants include options issued under the 1993
         Plan,  the 1998 Plan and  non-plan  options  and  warrants.  There were
         1,381,897,  1,485,000, and 1,742,000 options exercisable at October 31,
         2000, October 30, 1999, and October 31, 1998, respectively.

10.      ACCOUNTING FOR STOCK-BASED COMPENSATION

         The Company has elected to follow  Accounting Principles Board  Opinion
         No. 25, "Accounting for Stock Issued to Employees".   Accordingly,   no
         compensation  expense  related to stock  option  grants was recorded in
         1999 and 1998 as the  exercise  price of such  options  was equal to or
         greater than the  underlying  stock on the date of grant.  During 2000,
         the Board of Directors  voted to extend the exercise period for options
         to the  estate  of a  deceased  employee  and two  directors  that were
         leaving the Board.  Consequently,  compensation expense of $118,670 was
         recorded,  representing the aggregate difference in the market price on
         the date of the extension over the option's exercise price.

         Pro-forma  information regarding net income and net income per share is
         presented  below as if the Company had accounted for its employee stock
         options under the fair value method; such pro-forma  information is not
         necessarily  representative  of the effects on reported  net income for
         future years due  primarily to the options  vesting  periods and to the
         fair value of additional options' in future years.

         Had  compensation  cost for the option plans been determined  using the
         methodology  prescribed under the  Black-Scholes  option pricing model,
         the Company's income (loss) would have been ($2,806,851) and ($.26) per
         share in 2000;  $3,307,489  and $.32 per share in 1999;  and $2,509,134
         and $.24 per share in 1998.  The  weighted  average  fair  value of the
         options granted were $3.03,  $2.11,  and $3.42 in 2000, 1999, and 1998,
         respectively.  Assumptions used for 2000 were:  expected dividend yield
         of 0%;  expected  volatility  of 51%;  risk free  interest  of 5.7% and
         expected  life of 5 years.  Assumptions  used for 1999  were:  expected
         dividend yield of 0%; expected volatility of 79%; risk free interest of
         5.7% and  expected  life of 5 years.  Assumptions  used for 1998  were:
         expected  dividend yield of 0%;  expected  volatility of 50%; risk free
         interest of 5.7% and expected life of 5 years.

11.      OPERATING LEASES

         In conjunction  with the merger with Crystal Rock, the Company  entered
         into lease  agreements  to continue  to operate  out of Crystal  Rock's
         existing  facilities.  The  agreements  run to  October,  2010  and are
         described  in more  detail in note 15. The Company  also leases  office
         space  on  a  month-to-month  basis  and  is  obligated  under  several
         building,  equipment and vehicle leases expiring  variously through May
         2008. Future minimum rental payments over the terms of these leases are
         approximately as follows:


                                      F-18
<PAGE>

                                            2000              $1,328,538
                                            2001               1,233,113
                                            2002               1,142,446
                                            2003                 963,812
                                            Thereafter         4,192,954

         Rent expense under all operating  leases was  $533,974,  $413,217,  and
         $321,116 for fiscal years  ending  October 31, 2000,  October 30, 1999,
         and October 31, 1998.

12.      OBLIGATIONS UNDER CAPITAL LEASES

         The Company leases equipment under capital lease  arrangements.  Assets
         held under capital leases are included with property and equipment. The
         present  value of  minimum  lease  payments  at  October  31,  2000 was
         $25,811. Due to the financial restructuring associated with the Crystal
         Rock  merger,  the Company  repaid  substantially  all its  outstanding
         capital lease obligations.

13.      LEGAL PROCEEDINGS

         a)   PRISTINE MOUNTAIN SPRINGS

              In connection  with  litigation  with its largest  outside  spring
              water source,  Pristine  Mountain  Springs,  the Company reached a
              settlement  on December 1, 1999.  As part of the  settlement,  the
              owner of the  spring  and its  affiliate  paid  $1,270,000  to the
              Company and  acknowledged  the Company's  rights under the amended
              water supply  contract and right of first  refusal to purchase the
              spring site. In order to obtain the rights to the supply contract,
              the Company had previously issued a $975,000  non-interest bearing
              convertible debenture to the original creditor of the owner of the
              spring and its affiliate.  Settlement of the transaction  resulted
              in miscellaneous income being recorded for the period.

                           Cash Settlement                          $ 1,270,000
                           Less: Debt Assumed                          (975,000)
                           Less: Legal Fees                             (22,113)
                                                                  --------------
                           Total                                   $    272,887
                                                                  ==============

         b)   DESCARTES/ENDGAME SYSTEMS

              On July 27,  2000 the Company  filed a lawsuit in Vermont  Federal
              Court   against    Descartes    Systems/Endgame    Solutions   for
              non-performance of the professional services agreement between the
              two  companies.  In the suit  Vermont Pure alleges that vendor did
              not adequately  perform the services  rendered in connection  with
              approximately  $500,000 of unpaid billings.  Descartes has filed a
              motion  to  dismiss  the case  based on the  premise  the  Vermont
              Federal  Court is not the  proper  jurisdiction  and that the case
              should be arbitrated in Ontario, Canada.

                                      F-19
<PAGE>


14.      RELATED PARTY TRANSACTIONS

         a)   DIRECTORS AND OFFICERS

              Three of the Company's  major  shareholders  (former  Crystal Rock
              shareholders)  have employment  contracts with the Company through
              October 5, 2005. Two are also directors. One contract entitles the
              shareholder to annual  compensation of $25,000 as well as a leased
              Company  vehicle.  The other two contracts  entitle the respective
              shareholders to annual  compensation of $250,000 and other bonuses
              and prerequisites.  The trustee of the Baker family trusts,  which
              is a major  shareholder of the Company,  is also a director.  Such
              individual is also a principal in a law firm, to which the Company
              accrued  approximately  $10,000 in legal fees  during  fiscal year
              2000.

              In  addition,  the Company paid  consulting  fees to a director of
              $22,000 in both 2000 and 1999. This director  resigned in October,
              2000

              The Company leases a 72,000 square foot facility in Watertown,  CT
              and a 22,000  square foot  facility in  Stamford,  CT from a Baker
              trust.  Annual  rent  payments  for the  ten  year  leases  are as
              follows:

                                                   First 5 Yrs.      Next 5 Yrs.
                                                   -----------       -----------
              Stamford                                $216,000          $248,400
              Watertown                               $360,000          $414,000

         b)   INVESTMENT IN VOYAGEUR

              The Company has an equity  position  in a software  company  named
              Computer Design Systems, Inc. (CDS), d/b/a Voyageur Software.  One
              of the  Company's  directors is a member of the board of directors
              of CDS. The Company uses software  designed,  sold and serviced by
              CDS in its home and  office  delivery  system to  manage  customer
              service,  deliveries,  inventory, billing and accounts receivable.
              The Company paid service fees to CDS during  October 2000 totaling
              $2,031.  As of October 31, 2000, the Company holds a note from CDS
              entered into August 1, 1998 for the  principal  amount of $120,000
              with accrued interest of $22,950.  The note is scheduled to mature
              August 15, 2003. The Company is under contract through  September,
              2001 to pay a monthly maintenance fee of $4,552.


                                      F-20
<PAGE>

15.       INCOME TAXES

         The  Company  has   approximated   $15   million  of   available   loss
         carryforwards at October 31, 2000 expiring from 2005 through 2018.

         The major deferred tax asset  (liability) items at October 31, 2000 and
         October 30, 1999 are as follows:

                                                    October 31,      October 30,
                                                      2000               1999
                                                      ----               ----
         Accounts receivable allowance...........$   209,000         $  139,000
         Amortization............................    353,000            225,000
         Depreciation............................ (1,228,000)          (919,000)
         Slotting fees...........................      8,000             10,000
         Other...................................    178,000             95,000
         Net operating loss carryforwards........  6,007,000          5,067,000
                                                  -----------        -----------
                                                   5,527,000          4,617,000
         Valuation allowance.....................    973,000            832,000
                                                  -----------        -----------
         Deferred tax asset recorded.............$ 4,554,000        $ 3,785,000
                                                  ===========        ===========


         The  benefit  for income  taxes  differs  from the amount  computed  by
         applying the statutory tax rate to net income before income tax benefit
         as follows:

                                                      Year Ended
                                       -----------------------------------------
                                            October 31,  October 30, October 31,
                                              2000          1999        1998
                                              ----          ----        ----
        Income tax benefit (expense) computed
        at statutory rate................... $1,072,000   $(546,000)  $(480,000)
        Effect of permanent differences.....    (22,000)     (7,000)    (74,000)
        Effect of temporary differences.....      5,000     115,000    (101,000)
        Tax benefit of net operating losses.          -     438,000     655,000
        Losses for which no benefit recorded (1,055,000)         -            -
        Decrease in valuation allowance.....    769,000   1,793,000   1,447,000
                                            -----------  ---------- ------------
        Income tax benefit..................  $ 769,000  $1,793,000  $1,447,000
                                            ===========  ========== ============


16.      MAJOR CUSTOMER AND CUSTOMER COMMITMENTS

         The Company's  sales to a single  customer were 16%, 30% and 31% of the
         total sales for 1999, 1998 and 1997, respectively. However, the Company
         terminated  its  distribution  agreement  with this customer  effective
         April,  1999. The Company has entered into contracts with  distributors
         to  market  Vermont  Pure  spring  water  in the  territory  previously
         serviced by the former customer.


                                      F-21
<PAGE>

         In March 1999,  Vermont Pure Holdings,  Ltd. entered into  distribution
         agreements with several other  distributors in order to replace a major
         customer.   Effective   March  1,  2000,   the  Company   modified  its
         distribution   agreements   with  three  of  these   distributors   and
         consequently  became the exclusive  spring water brand carried by them.
         The  distribution  area  served  by  these  businesses  is the  greater
         metropolitan New York City area.

17.      CONCENTRATION OF CREDIT RISK

         The  Company   maintains  their  cash  accounts  at  various  financial
         institutions.  The  balances  at times  may  exceed  federally  insured
         limits. At October 31, 2000, the Company had cash in deposits exceeding
         the insured limit by approximately $1,000,000.

18.      SUBSEQUENT EVENTS - FINANCING

         On  November  3, 2000 the  Company  entered  into a three  year  "swap"
         agreement  with Webster Bank to fix $8,000,000 its senior debt with the
         bank.  The agreement  fixes the variable LIBOR rate portion of the debt
         at 6.57%  resulting  in a total fixed rate of 8.32% on that  portion of
         the debt.

                                       23
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The  information  required by this Item is  incorporated by reference from
the Proxy Statement for the Company's  Annual Meeting of Stockholders  scheduled
to be held March 27, 2001.

ITEM 11. EXECUTIVE COMPENSATION.

      The  information  required by this Item is  incorporated by reference from
the Proxy Statement for the Company's  Annual Meeting of Stockholders  scheduled
to be held March 27, 2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

      The  information  required by this Item is  incorporated by reference from
the Proxy Statement for the Company's  Annual Meeting of Stockholders  scheduled
to be held March 27, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The  information  required by this Item is  incorporated by reference from
the Proxy Statement for the Company's  Annual Meeting of Stockholders  scheduled
to be held March 27, 2001.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

a)       Reports on Form 8-K:

         The Company filed a Current Report on Form 8-K, filed October 19, 2000,
         to provide further information about the consummation of the merger and
         contribution  pursuant  to which  the  Company  acquired  the  stock of
         Crystal Rock Spring Water Company (the "Merger 8-K").

b)       The following documents are filed as part of this report:

         Financial Statements and Financial Statement Schedules.

                  Reference  is  made  to  the  Index  to  Financial  Statements
                  included in Item 7 of Part II hereof, where such documents are
                  listed.

         EXHIBITS AS REQUIRED BY ITEM 601 OF REGULATION S-K:

                                       24
<PAGE>

       Exhibit
       Number             Description


       2.1     Agreement  and  Plan of  Merger  and  Contribution  by and  among
               Vermont Pure Holdings,  Ltd.,  Crystal Rock Spring Water Company,
               VP Merger Parent,  Inc. VP Acquisition Corp. and the stockholders
               named  therein,  dated  as  of  May  5,  2000.  (Incorporated  by
               reference  to Appendix A to the Form S-4  Registration  Statement
               filed by Vermont Pure  Holdings,  Ltd.,  f/k/a VP Merger  Parent,
               Inc.,  File  No.  333-45226,  on  September  6,  2000  (the  "S-4
               Registration Statement").


       2.2     Amendment to Agreement and Plan of Merger and Contribution by and
               among  Vermont  Pure  Holdings,  Ltd.,  Crystal Rock Spring Water
               Company,  VP Merger Parent,  Inc., VP Acquisition  Corp., and the
               stockholders  named  therein,   dated  as  of  August  28,  2000.
               (Incorporated by reference to Exhibit 2.1 of the S-4 Registration
               Statement.)

       2.3     Amendment to Agreement and Plan of Merger and Contribution by and
               among  Vermont  Pure  Holdings,  Ltd.,  Crystal Rock Spring Water
               Company,  VP Merger Parent,  Inc., VP  Acquisition  Corp. and the
               stockholders  named  therein,  dated as of  September  20,  2000.
               (Incorporated by reference to Exhibit 2.2 of the Merger 8-K.)

       3.1     Certificate of  Incorporation  of the Company.  (Incorporated  by
               reference  to  Exhibit B to  Appendix  A to the  Proxy  Statement
               included in the S-4 Registration Statement.)

       3.2     Certificate of Amendment of Certificate of  Incorporation  of the
               Company filed October 5, 3.2 2000.  (Incorporated by reference to
               Exhibit 4.2 of the Merger 8-K.)

       3.3     By-laws of the Company.  (Incorporated  by reference to Exhibit C
               of  Appendix  A to  the  Proxy  Statement  included  in  the  S-4
               Registration Statement.)



       4.1     Form of Lockup Agreement among the Company, Peter K. Baker, Henry
               E.  Baker,  and John B.  Baker.  (Incorporated  by  reference  to
               Exhibit N to  Appendix A to the Proxy  Statement  included in the
               S-4 Registration Statement.)


       4.2     Registration  Rights Agreement among the Company,  Peter K Baker,
               Henry E. Baker,  John B. Baker, and Ross Rapaport.  (Incorporated
               by reference to Exhibit 4.6 of the Merger 8-K.)




     10.1*     1993  Performance  Equity Plan.  (Incorporated  by reference from
               Exhibit 10.9 of Registration Statement 33-72940.)

     10.2*     1998 Incentive and  Non-Statutory  Stock Option Plan, as amended.
               (Incorporated  by reference to Appendix C to the Proxy  Statement
               included in the S-4 registration statement.)


                                       25
<PAGE>

     10.3*     1999 Employee Stock Purchase Plan.  (Incorporated by reference to
               Exhibit A of the 1999 Proxy  Statement of Vermont Pure  Holdings,
               Ltd. f/k/a Platinum Acquisition Corp.)

     10.4      Amended and Restated  Spring Water Licenses and Supply  Agreement
               between Vermont Pure Holdings, Ltd. and Pristine Mountain Springs
               of  Vermont,  Inc  and  Amsource,   LLC  dated  April  13,  1999.
               (Incorporated  by reference  from Exhibit  10.25 of Form 10-K for
               the Year Ended October 30, 1999.)



     10.5      Convertible  Debenture Agreement dated September 30, 1999 between
               Vermont Pure Holdings, Ltd. and Middlebury Venture Partners, Inc.
               (f/k/a  Marcon  Capital  Corporation)  in the amount of $975,000.
               (Incorporated  by reference  from Exhibit  10.27 of Form 10-K for
               the Year Ended October 30, 1999.)


     10.6*     Employment  Agreement  between the Company and Timothy G. Fallon.
               (Incorporated   by  reference   to  Exhibit   10.13  of  the  S-4
               Registration Statement.)

     10.7*     Employment  Agreement between the Company and Bruce S. MacDonald.
               (Incorporated   by  reference   to  Exhibit   10.14  of  the  S-4
               Registration Statement.)

     10.8*     Employment  Agreement  between  the  Company  and Peter K. Baker.
               (Incorporated   by  reference   to  Exhibit   10.15  of  the  S-4
               Registration Statement.)

     10.9*     Employment  Agreement  between  the  Company  and John B.  Baker.
               (Incorporated   by  reference   to  Exhibit   10.16  of  the  S-4
               Registration Statement.)

     10.10*    Employment  Agreement  between  the  Company  and Henry E. Baker.
               (Incorporated   by  reference   to  Exhibit   10.17  of  the  S-4
               Registration Statement.)



     10.11     Lease of Buildings and Grounds in Watertown, Connecticut from the
               Baker's  Grandchildren  Trust.   (Incorporated  by  reference  to
               Exhibit 10.22 of the S-4 Registration Statement.)


     10.12     Lease of Grounds in Stamford, Connecticut from the Henry E. Baker
               (Incorporated   by  reference   to  Exhibit   10.24  of  the  S-4
               Registration     Statement.)

     10.13     Lease of Building in Stamford,  Connecticut  from Henry E. Baker.
               (Incorporated   by  reference   to  Exhibit   10.23  of  the  S-4
               Registration Statement.)

                                       26
<PAGE>


     10.14     Loan and Security  Agreement between the Company and Webster Bank
               dated October 5, 2000.

     10.15     Term Note from the Company to Webster Bank dated October 5, 2000

     10.16     Subordinated  Note  from  the  Company  to  Henry E. Baker  dated
               October 5, 2000.

     10.17     Subordinated Note from the Company to Joan Baker dated October 5,
               2000.

     10.18     Subordinated Note from the Company to John B. Baker dated October
               5, 2000.

     10.19     Subordinated  Note  from the  Company  to Peter  K.  Baker  dated
               October 5, 2000.

     10.20     Subordinated Note from the Company to Ross S. Rapaport,  Trustee,
               dated October 5, 2000.

     10.21     Subordination and Pledge Agreement from Henry E. Baker to Webster
               Bank dated October 5,2000.

     10.22     Subordination  and  Pledge  Agreement  from Joan Baker to Webster
               Bank dated October 5,2000.

     10.23     Subordination  and Pledge Agreement from John B. Baker to Webster
               Bank dated October 5,2000.

     10.24     Subordination and Pledge Agreement from Peter K. Baker to Webster
               Bank dated October 5,2000.

     10.25     Subordination   and  Pledge  Agreement  from  Ross  S.  Rapaport,
               Trustee, to Webster Bank dated October 5,2000.

     10.26     Agreement    between    Vermont    Pure    Springs,    Inc.   and
               Zuckerman-Honickman Inc. dated October 15, 1998. (Incorporated by
               reference to the S-4 Registration Statement.

      23.1     Consent of Independent Auditors

      27       Financial Data Schedule

         *  Relates to compensation

                                       27
<PAGE>



                                   SIGNATURES

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

                               VERMONT PURE HOLDINGS, LTD.

                               BY:   /S/ TIMOTHY G. FALLON
                               Timothy G. Fallon, Chief Executive Officer,
                               President, and Chairman of the Board of Directors
Dated: January 29, 2001


         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                               TITLE                             DATE

/S/ TIMOTHY G. FALLON
---------------------
Timothy G. Fallon    Chief Executive Officer and Chairman       January 29, 2001
                     of the Board of Directors


/S/ HENRY E. BAKER   Director, Chairman Emeritis                January 29, 2001
---------------------
Henry E. Baker


/S/ PETER K. BAKER   President and Director                     January 29, 2001
-------------
Peter K. Baker


/S/ PHILLIP DAVIDOWITZ  Director                                January 29, 2001
----------------------
Phillip Davidowitz


/S/ ROBERT C. GETCHELL  Director                                January 29, 2001
----------------------
David R. Preston


/S/ DAVID R. PRESTON    Director                                January 29, 2001
--------------------
Norman E. Rickard


/S/ ROSS S. RAPAPORT   Director                                 January 29, 2001
--------------------
Ross S. Rapaport


/S/ NORMAN E. RICKARD  Director                                 January 29, 2001
---------------------
Norman E. Rickard


/S/ BEAT SCHLAGENHAUF  Director                                 January 29,2001
---------------------
Beat Schlagenhauf


/S/ BRUCE S. MACDONALD Chief Financial Officer and Secretary    January 29,2001
----------------------
Bruce S. MacDonald

                                       28
<PAGE>




                     EXHIBITS TO VERMONT PURE HOLDINGS, LTD.
                           ANNUAL REPORT ON FORM 10-K

                   FOR THE FISCAL YEAR ENDED OCTOBER 30, 1999


          Exhibit
          Number             Description

          10.14     Loan and Security  Agreement between the Company and Webster
                    Bank dated October 5, 2000.

          10.15     Term Note from the Company to Webster Bank dated  October 5,
                    2000.
          10.16     Subordinated Note from the Company to Henry E. Baker
                    dated October 5, 2000.


          10.17     Subordinated  Note  from the  Company  to Joan  Baker  dated
                    October 5, 2000.


          10.18     Subordinated  Note from the  Company to John B. Baker  dated
                    October 5, 2000.

          10.19     Subordinated  Note from the  Company to Peter K. Baker dated
                    October 5, 2000.

          10.20     Subordinated  Note  from the  Company  to Ross S.  Rapaport,
                    Trustee dated October 5, 2000.

          10.21     Subordination  and Pledge  Agreement  from Henry E. Baker to
                    Webster Bank dated October 5,2000.

          10.22     Subordination  and  Pledge  Agreement  from  Joan  Baker  to
                    Webster Bank dated October 5,2000.

          10.23     Subordination  and  Pledge  Agreement  from John B. Baker to
                    Webster Bank dated October 5,2000.

          10.24     Subordination  and Pledge  Agreement  from Peter K. Baker to
                    Webster Bank dated October 5,2000.

          10.25     Subordination  and Pledge  Agreement  from Ross S. Rapaport,
                    Trustee to Webster Bank dated October 5,2000.

          23.1      Consent of Independent Auditors


          27        Financial Data Schedule