<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

For the quarterly period ended September 28, 1997

                                       or

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

For the transition period from             to
                               -----------    -----------

Commission File Number: 0-20143


                          Watermarc Food Management Co.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Texas                                        74-2605598
-------------------------------               ---------------------------------
(State or other jurisdiction of               (IRS Employer Identification No.)
 incorporation or organization)


11111 Wilcrest Green, Suite 350          Houston, Texas                77042
-------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)


                                 (713) 783-0500
                         -------------------------------
                         (Registrant's telephone number)


                                     N/A
                      ----------------------------------
             (Former name, former address and former fiscal year,
                        if changed since last report)




  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                                              Yes  X    No
                                                                  ---      ---

As of September 28, 1997, the registrant had 14,263,230 shares of its common
stock and 329,540 shares of its preferred stock outstanding, respectively.


<PAGE>   2
                          WATERMARC FOOD MANAGEMENT CO.

                                      INDEX




<TABLE>
<CAPTION>
PART I.         FINANCIAL INFORMATION                                   PAGE NO.
                                                                        --------
<S>                   <C>                                               <C>
     ITEM 1.          FINANCIAL STATEMENTS

                       Balance Sheets -
                       September 28, 1997 and June 29, 1997                  2

                       Statements of Operations - Thirteen Weeks Ended
                       September 28, 1997 and September 29, 1996             3 

                       Statements of Cash Flows - Thirteen Weeks Ended
                       September 28, 1997 and September 29, 1996             4

                       Notes to Consolidated Financial Statements            5

     ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS                  8
                       OF FINANCIAL CONDITION AND RESULTS OF
                       OPERATIONS

    
PART II.        OTHER INFORMATION                                           11

     ITEM 2.           Changes in Securities and 
                       Use of Proceeds                                      

     ITEM 6.           Exhibits and Reports on Form 8-K                 
</TABLE>

                                       1

<PAGE>   3

                 WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)



<TABLE>
<CAPTION>
                                                                     SEPTEMBER 28, 1997     JUNE 29, 1997
                                                                     ------------------     -------------
<S>                                                                   <C>                  <C>            
               ASSETS

Current assets:
     Cash and cash equivalents                                        $        77,453      $       263,542
     Accounts receivable, trade                                               227,132              540,406
     Accounts receivable from affiliates                                      338,702              299,518
     Inventories                                                              438,034              483,302
     Prepaid expenses and other current assets                                770,768               73,217
                                                                      ---------------      ---------------

          Total current assets                                              1,852,089            1,659,985

Property and equipment, net                                                 5,592,657            6,050,631
Notes and other receivables from affiliate                                  1,398,583            1,679,374
Intangible assets, net                                                      7,031,831            7,213,457
Other assets                                                                  718,415              111,381
                                                                      ---------------      ---------------

                                                                      $    16,593,575      $    16,714,828
                                                                      ===============      ===============

               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Accounts payable, trade                                        $     4,469,243      $     4,780,931
       Accrued liabilities                                                  1,936,473            2,263,821
       Current portion of long-term debt                                    1,589,208            2,787,814
                                                                      ---------------      ---------------
          Total current liabilities                                         7,994,924            9,832,566

Long-term debt, less current portion                                        6,267,903            4,484,539
Notes payable to stockholder                                                  950,994              500,000
Deferred rent                                                                 576,391              577,976

Commitments and contingencies

Stockholders' equity:
       Preferred stock                                                        329,540              329,540
       Common stock                                                           713,161              713,161
       Additional paid-in capital                                          30,740,084           30,740,131
       Accumulated deficit                                                (30,829,422)         (30,313,085)
                                                                      ---------------      ---------------
                                                                              953,363            1,469,747
          Less treasury stock, cost method                                   (150,000)            (150,000)
                                                                      ---------------      ---------------
          Total stockholders' equity                                          803,363            1,319,747
                                                                      ---------------      ---------------

                                                                      $    16,593,575      $    16,714,828
                                                                      ===============      ===============
</TABLE>

                                       2

<PAGE>   4


                 WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 13 WEEKS ENDED
                                                                     SEPTEMBER 28, 1997   SEPTEMBER 29, 1996
                                                                      -----------------   ------------------
<S>                                                                   <C>                  <C>            
Revenues                                                              $    10,868,076      $    11,483,050
                                                                      ---------------      ---------------

Costs and expenses:
     Costs of revenues                                                      3,448,816            3,455,687
     Other restaurant operations                                            6,903,597            6,114,629
     Selling, marketing and distribution                                      209,250              440,764
     General and administrative                                               724,583              706,624
     Depreciation and amortization                                            561,788              644,914
                                                                      ---------------      ---------------

          Total costs and expenses                                         11,848,034           11,362,618
                                                                      ---------------      ---------------

Income (loss) from operations                                                (979,958)             120,432

Non-operating income (expense):
     Interest income                                                           30,075               29,855
     Interest expense                                                        (185,299)            (323,767)
     Other, net                                                               618,845              192,178
                                                                      ---------------      ---------------

          Total non-operating income (expense)                                463,621             (101,734)
                                                                      ---------------      ---------------

Income (loss) before income taxes                                            (516,337)              18,698

Income taxes                                                                       --                   --
                                                                      ---------------      ---------------

Net income (loss)                                                     $      (516,337)     $        18,698

Preferred stock dividends                                                          47               74,149
                                                                      ---------------      ---------------

Net income (loss) less preferred stock dividends                      $      (516,384)     $       (55,451)
                                                                      ===============      ===============



Net income (loss) per common share                                    $         (0.04)     $          0.00
                                                                      ===============      ===============


Weighted average common and common equivalent
     shares outstanding                                                    14,263,230           13,433,658
                                                                      ===============      ===============
</TABLE>


See notes to condensed consolidated financial statements (unaudited).

                                       3

<PAGE>   5


                 WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                13 WEEKS ENDED
                                                                     SEPTEMBER 28, 1997   SEPTEMBER 29, 1996
                                                                      -----------------   ------------------
<S>                                                                   <C>                  <C>            
Operating activities:
     Net income (loss) for the period                                 $      (516,337)     $        18,698
     Adjustments to reconcile net income (loss) to
          net cash provided by (used in) operating activities:
          Depreciation and amortization                                       561,788              644,914
     Changes in assets and liabilities:
          Accounts receivable, trade                                          313,274             (130,017)
          Accounts receivable from affiliates                                 241,607             (217,553)
          Inventories                                                          45,268              105,719
          Prepaid expenses and other current assets                          (697,551)            (179,452)
          Accounts payable and accrued liabilities                           (639,036)            (339,118)
          Other assets                                                       (336,371)              20,038
                                                                      ---------------      ---------------

     Net cash provided by (used in) operating activities                   (1,027,358)             (76,771)

Investing activities:
     Purchase of property and equipment                                      (266,307)            (203,424)
     Proceeds from sale of assets                                             470,663              350,000
     Collection of Bad Debt                                                   453,864                   --
     Investment in note receivable                                           (270,663)                  --
     Repayment of notes receivable                                              5,653                   --
                                                                      ---------------      ---------------

     Net cash provided by (used in) investing activities                      393,210              146,576
                                                                      ---------------      ---------------

Financing activities:
     Net proceeds from borrowings                                           2,255,047                   --
     Cash dividends                                                               (46)                (695)
     Payments on borrowings                                                (1,806,942)            (471,631)
                                                                      ---------------      ---------------

     Net cash provided by (used in) financing activities                      448,059             (472,326)
                                                                      ---------------      ---------------

Net increase (decrease) in cash and cash equivalents                         (186,089)            (402,521)

Cash and cash equivalents, beginning of period                                263,542              463,166
                                                                      ---------------      ---------------

Cash and cash equivalents, end of period                              $        77,453      $        60,645
                                                                      ===============      ===============
</TABLE>


See notes to condensed consolidated financial statements (unaudited).

                                       4

<PAGE>   6


                 WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:

     ORGANIZATION

     Watermarc Food Management Co. (the "Company"), owns and operates 41
     restaurants, primarily in the Houston Metropolitan area, under the names
     "Marco's Mexican Restaurants" ("Marco's Restaurants"); "The Original Pasta
     Co." ("Pasta Co."); and Billy Blues Barbecue Bar & Grill ("Billy Blues").
     The Company also produces and markets two brands of barbecue sauce and a
     spice rub, "Billy Blues Barbecue Sauce", "Chris' & Pitt's Bar-B-Que Sauce"
     and "Chris' & Pitt's Spice Rub". They are marketed to supermarkets, other
     retail stores and food service outlets.

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
     and its wholly-owned subsidiaries. All significant intercompany accounts
     and transactions have been eliminated.

     BASIS OF PRESENTATION

     The accompanying unaudited financial information for the quarters ended
     September 28, 1997 and September 29, 1996 includes the results of
     operations of the Company. In the opinion of management, the information
     reflects all adjustments (consisting only of normal recurring adjustments)
     which are necessary for a fair presentation of the results of operations
     for such periods but should not be considered as indicative of results for
     a full year.

     The June 29, 1997 condensed consolidated balance sheet data was derived
     from the audited financial statements, but does not include all disclosures
     required by generally accepted accounting principles. Accordingly, the
     condensed consolidated financial statements should be read in conjunction
     with the audited consolidated financial statements.

     The accompanying financial statements have been prepared assuming the
     Company will be able to continue as a going concern. The Company has a
     working capital deficit of approximately $6,142,835 at September 28, 1997
     and a net loss of $516,337 for the thirteen weeks ended September 28, 1997
     and experienced significant losses in fiscal 1997 which raise doubts about
     the Company's ability to continue as a going concern. The Company's
     continuation as a going concern in both the short-term and the long-term is
     dependent upon its ability to generate sufficient cash flow to meet its
     obligations on a timely basis, to obtain additional financing or capital
     and to refinance its debt and ultimately attain profitable operations.

     For a further discussion of the Company's liquidity and capital resources,
     see pages 9 and 10 hereof.

     Management's plans include the following:

     -    Increasing revenues in existing restaurants by remodeling certain
          Marco's Restaurants and by improving marketing programs and customer
          service at Marco's and Pasta Co.

     -    Increasing revenues from the sale of food products by reinforcing
          existing markets, expanding distribution to new market areas,
          introducing more aggressive marketing programs, adding methods of
          distribution and developing new products.

     -    Franchising new restaurants.

     -    Maintaining cost controls while increasing revenues.

     -    Obtaining additional equity capital or debt financing.

                                       5

<PAGE>   7


     IMPACT OF NEW ACCOUNTING STANDARDS

     In May 1997, the FASB issued SFAS No. 128 "Earnings Per Share" which
     changes the manner in which earnings per share are calculated and
     presented. The pronouncement is effective for annual and interim periods
     ending after December 15, 1997.


     MANAGEMENT'S ESTIMATES

     The preparation of financial statements in conformity with generally
     accepted accounting principles 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 dates of the
     financial statements and the reported amounts of income and expenses during
     the reporting periods. Actual results could differ from those estimated.



2.   CONTINGENCIES:

     The Company is involved in various lawsuits arising in the ordinary course
     of its business, but believes that the resolution of these matters will not
     have a material adverse impact on its financial position, results of
     operations or cash flows.



3.   RELATED PARTY TRANSACTIONS:

     In the fourth quarter of fiscal 1997 (June 1997) the Company offered a
     private placement of $4 Million of 11% Convertible Subordinated Notes due
     June 30, 2002 (the "Convertible Subordinated Notes") pursuant to exemptions
     from registration under the Securities Act of 1933, as amended (the "Act")
     and the rules and regulations promulgated thereunder, including, without
     limitation, Section 4(2) and Regulation D. The Convertible Subordinated
     Notes are being offered directly by the Company to qualified accredited
     investors.

     The Company has not retained a broker or underwriter to assist with the
     offering although it may elect to do so in the future on terms to be
     negotiated. Holders of the Convertible Subordinated Notes received warrants
     (the "Convertible Subordinated Note Warrants") to purchase shares of Common
     Stock at a purchase price of $1.50 per share until June 30, 2002. Interest
     on the Convertible Subordinated Notes is payable quarterly beginning
     September 30, 1997. The Convertible Subordinated Notes are currently
     unsecured and may be subordinated to certain defined senior indebtedness.
     As of September 30, 1997, $700,000 principal amount of the Convertible
     Subordinated Notes had been subscribed. The proceeds of the offering were
     used to repay a portion of the $3 million principal amount of 12%
     Subordinated Notes originally due July 31, 1997. The balance of the
     Subordinated Notes was extended to July 10, 1998. Ghulam M. Bombaywala,
     Chairman of the Board, Chief Executive Officer and a director of the
     Company, converted the $500,000 principal amount of 12% Subordinated Notes
     owed to him into the 11% Convertible Subordinated Notes, pursuant to a
     Subordinated Note Conversion Agreement dated June 1, 1997 (the "Conversion
     Agreement"). Pursuant to the Conversion Agreement, Mr. Bombaywala canceled
     the $500,000 principal amount of 12% Subordinated Notes owed him by the
     Company and received an 11% Convertible Subordinated Note of equal
     principal amount with the same terms and conditions as the Convertible
     Subordinated Notes being offered by the Company to prospective investors.
     Additionally, in September 1997, the Company guaranteed a promissory note
     with United Central Bank for $850,000 due September 2002. The proceeds of
     the note were used to repay a portion of the $3 million principal amount of
     12% Subordinated Notes originally due July 31, 1997.

     The Company acquired 240,000 shares (the "CluckCorp Shares") of the
     outstanding common stock, $0.1 par value of CluckCorp International, Inc.,
     a Texas corporation ("CluckCorp") on June 30, 1994 upon the conversion of,
     and as partial payment for, a promissory note of CluckCorp owed to the
     Company in the principal amount of $800,000 (the "CluckCorp Note") issued
     in June 1993 and in exchange for certain other advances owed to the
     Company.

                                       6
<PAGE>   8

The CluckCorp Note has a maturity date of June 30, 1998, and was payable, at
the option of CluckCorp, in whole or in part, in cash or with Common Stock of
CluckCorp. During 1994 CluckCorp repaid a portion of the CluckCorp Note in cash
and the remaining portion of the CluckCorp Note and certain advances were paid  
with the CluckCorp Shares. The Company subsequently sold the CluckCorp Shares
to JEB Investment Corporation, a Texas corporation ("JEB") in exchange for a
$1,800,000 promissory note executed by JEB as maker (the "JEB Note") bearing
interest at 9% per annum, payable annually, with a final maturity date of June
30, 1996. The JEB Note was secured by the CluckCorp Shares pursuant to a Pledge
Agreement. JEB defaulted on the payments required under the JEB Note. In May
1997, JEB and the Company executed an agreement whereby JEB relinquished all
right, title and interest in the CluckCorp Shares to the Company pursuant to
the Company's foreclosure rights in consideration for the Company relinquishing
all of its rights under the JEB Note. The Company sold the CluckCorp Shares in
the first and second quarters of fiscal 1998. The Company realized income
during the first quarter in the amount of $453,864.




             THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

                                       7

<PAGE>   9


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.


INTRODUCTION

     The Company utilizes a 52-53 week fiscal year which ends on the Sunday
     closest to June 30. References to the first quarter of fiscal years 1998
     and 1997 are to the thirteen week periods ended September 28, 1997 and
     September 29, 1996, respectively.



RESULTS OF OPERATIONS

THIRTEEN WEEKS ENDED SEPTEMBER 29, 1996 COMPARED TO THE
     THIRTEEN WEEKS ENDED SEPTEMBER 28, 1997.

     REVENUES. Revenues decreased $614,974 or 5.4% to $10,868,076 for the 
     first quarter of fiscal 1998 as compared to $11,483,050 for the first 
     quarter of fiscal 1997. The decrease is due primarily to the sale of 
     Pete's Hospitality Co., Inc. and one Marco's Mexican Restaurant during 
     fiscal 1997.

     To counteract the decline in comparable revenues, management is currently
     taking action in an attempt to increase sales, including a new training
     program and an intense concentration on increasing customer satisfaction.
     However, there can be no assurance that such actions will result in the
     desired sales increases. Management is also implementing cost reduction
     strategies in order to decrease the impact of the sales decline on the
     Company's bottom line.

     COSTS AND EXPENSES. Total cost of revenues increased to 31.7% of revenues
     in 1998 as compared to 30.1% of revenues in 1997. The increase is due to
     increases in prices of certain high volume products used in menu item
     preparation.

     Restaurant operations include all other unit-level operating expenses,
     comprised principally of labor, supplies, rent, utilities, repairs and
     maintenance, and other direct expenses. As a percentage of restaurant
     revenues, these costs increased from 53.2% of revenues in fiscal 1997 to
     63.5% of revenues in fiscal 1998 primarily due to the decline in comparable
     sales and increases in minimum wage requirements.

     Selling, marketing and distribution expenses decreased by $231,514
     primarily due to a reduction of marketing activities during the quarter.

     General and administrative expenses increased by $17,959.

     Depreciation and amortization decreased by $83,126 primarily due to the
     sale of Pete's Hospitality Co., Inc. and one Marco's Mexican Restaurant
     location.

                                       8

<PAGE>   10


     NON-OPERATING INCOME (EXPENSE). Interest expense decreased by $138,468 due
     to the partial payment of the 12% Subordinated Notes.

     NET INCOME (LOSS). As a result of the changes in the relationship between
     revenues and costs and expenses discussed above, the Company showed net
     loss of $516,337 for the first quarter of fiscal 1998 compared to net
     income of $18,698 for the first quarter of fiscal 1997. The fiscal 1998
     loss is generally due to increase in restaurant operating cost. If such
     trends continue, the Company will incur substantial losses in the future
     which would have a material impact upon its cash flow.



LIQUIDITY AND CAPITAL RESOURCES

     OPERATING ACTIVITIES. The Company continues to experience losses from
     operations and, as of September 28, 1997, has an accumulated deficit of
     $30,829,422.

     During the thirteen weeks ended September 28, 1997, net cash flow used in
     operating activities equaled $1,027,358 which resulted from reductions in
     accrued liabilities and increases in current assets, partially offset by
     depreciation and amortization added back to net income. Investing
     activities generated $393,210 in cash due to the sale of fixed assets and
     collection of bad debt, partially offset by purchases of property and
     equipment. Financing activities contributed $448,059 in cash created by
     borrowing from banks and a stockholder.

     For the thirteen weeks ended September 29, 1996 net cash flow used in
     operating activities equaled $76,771 which resulted from reductions in
     accrued liabilities and increases in current assets, partially offset by
     depreciation and amortization added back to net income. Investing
     activities generated $146,576 in cash due to the sale of fixed assets
     partially offset by purchases of property and equipment. Financing
     activities utilized $472,326 in cash due to payments on borrowings.

     As of September 28, 1997, the Company had negative working capital of
     $6,142,835, as compared to negative working capital of $8,172,581 at June
     29, 1997. The decrease is due primarily to payment of $1,250,000 on the 12%
     Subordinated Notes.


     CAPITAL REQUIREMENTS. The Company's continuation as a going concern is
     dependent upon its ability to generate sufficient cash flow to meet its
     obligations on a timely basis, to obtain additional financing or capital,
     refinance its debt and to ultimately attain profitable operations.

     The material capital commitments of the Company for fiscal 1998 are as
     follows:

          -    Reduction of the Company's working capital deficit, including
               payments on notes, accounts payable and accrued liabilities.

          -    Accumulation of funds for the payment of the principal balance of
               $1.25 million owed on the $3 Million 12% Subordinated Notes
               originally due July 31, 1997 but extended to July 10, 1998.

          -    Remodeling Marco's Restaurants.


     Management's plans include the following:

          -    Decreasing food and labor cost while increasing revenues.

          -    Increasing revenues in existing restaurants by remodeling certain
               Marco's Mexican Restaurants and by improving marketing programs
               and customer service.

                                       9

<PAGE>   11


          -    Increasing revenues from the sale of food products by reinforcing
               existing markets, expanding distribution to new market areas,
               introducing more aggressive marketing programs, adding methods of
               distribution and developing new products.

          -    Franchising new restaurants.

          -    Obtaining additional equity capital or debt financing.


     In the first quarter of fiscal 1998, the Company opened one new Pasta Co.
     Restaurant. Pasta Co. Restaurants require an initial capital investment of
     approximately $400,000. Of this amount, the Company financed approximately
     half of the investment using the acquired assets as collateral. The Company
     financed the balance through cash flow from operations. There are no
     further plans to open new restaurants during fiscal 1998.

     The Company currently does not have positive cash flow from operations
     with respect to its Marco's and Pasta Co. Restaurants. The Company can
     only achieve positive cash flow from operations if it can increase its 
     restaurant sales and reduce its labor and operating costs. During the 
     first quarter of fiscal 1998, the Company sold its Longhorn Cafe 
     Restaurant. The Company also plans to supplement cash flow from operations
     by selling its last barbecue restaurant, Billy Blues, and three Marco's
     Mexican Restaurant locations. However, cash generated from operations may
     not be sufficient to meet all of the Company's fiscal 1998 capital
     commitments set forth above. Without debt refinancing or additional debt or
     equity financing in the short-term, the Company will not be able to (i)
     reduce its current working capital deficit, (ii) repay the $1.25 million
     balance of the Subordinated Notes due July 10, 1998, or (iii) continue its
     remodeling efforts on the Marco's restaurants. There is no assurance that
     the Company will be able to refinance its debt or obtain additional debt or
     equity financing in the short term or long-term.

     The Company may experience further losses or negative cash flow from
     operations during the remainder of fiscal 1998. Continued losses raise
     doubt about the Company's ability to continue as a going concern. The
     financial statements do not reflect any adjustments that might result from
     the outcome of this uncertainty. If the substantial losses continue, the
     value of the Company's long-lived assets may become impaired resulting in
     write-downs to such assets to their estimated fair value.

     The inability of the Company to obtain substantial additional financing and
     achieve profitable operations has resulted in the curtailment of the
     Company's expansion activities which may continue indefinitely. Cash
     generated from operations will not be sufficient to allow the Company to
     timely meet its obligations and continue remodeling the Marco's Restaurants
     and continue restaurant expansion. Without obtaining profitable operations
     and positive cash flow from operations the Company may have to curtail its
     operations, sell core assets or seek further financings on terms which may
     prove unfavorable to the Company and its shareholders.


FORWARD-LOOKING INFORMATION.

     Information contained in this report on Form 10-Q which are not historical
     facts, contains forward-looking statements and information relating to the
     Company that are based on the beliefs of the Company's management, as well
     as assumptions made by, and information currently available to the
     Company's management. When used in this Form 10-Q, words such as
     "anticipate," "believe," "estimate," "expect," "intend," and similar
     expressions, as they relate to the Company or the Company's management,
     identify forward-looking statements. Such statements reflect the current
     views of the Company with respect to future events, and are subject to
     certain risks, uncertainties, and assumptions relating to the operations
     and results of operations of the Company, competitive factors and pricing
     pressures, shifts in consumer demand, the costs of products and services,
     general economic conditions, and the acts of third parties, as well as
     other factors described in this Form 10-Q, and, from time to time, in the
     Company's periodic earnings releases and reports filed with the Securities
     and Exchange Commission. Should one or more of these risks or uncertainties
     materialize, or should underlying assumptions prove incorrect, actual
     results or outcomes may vary materially from those described herein as
     anticipated, believed, estimated, expected, or intended, or the like.

                                       10
<PAGE>   12

     The Company does not undertake, and specifically disclaims any obligation,
     to publicly release the results of any revisions which may be made to any
     forward-looking statements to reflect events or circumstances after the
     date of such statements or to reflect the occurrence of anticipated or
     unanticipated events.



PART  II - OTHER INFORMATION

     ITEM 2.      Changes in Securities and Use of Proceeds.

     (c)  With respect to the information required by this Item 2(c) with
          respect to the recent sale of unregistered securities, reference 
          is made to Part I, Item 1, Note 3 to the Interim Consolidated 
          Financial Statements.

     ITEM 6.      Exhibits and Reports on Form 8-K.

     (a)  Exhibit 11.1 and Exhibit 27 required by Item 601 of Regulation S-K are
          filed as part of this report.

     (b)  Reports on Form 8-K. During the first quarter of fiscal 1998, the
          Company filed Form 8-K and Amendment No. 1 to Form 8-K reporting Item
          4. Changes in Registrant's Certifying Accountant, dated August 20,
          1997. No financial statement was filed with the reports.




  SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
  registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.


  WATERMARC FOOD MANAGEMENT CO.


  Date:  11/17/97                      By: /s/ Ghulam Bombaywala
       ---------------------------         ---------------------------
                                           Ghulam Bombaywala, Chairman of the
                                           Board, Chief Executive Officer and
                                           Director (Duly Authorized Signatory
                                           and Principal Executive Officer and
                                           acting as Principal Financial and
                                           Accounting Officer) (1)


     (1)  The principal financial and accounting officer resigned in July 1997
          and has not been replaced as of the date of this filing. Mr.
          Bombaywala is signing as these positions.




                                       11

<PAGE>   13

                               INDEX TO EXHIBITS

EXHIBIT
NUMBER              DESCRIPTION
------              -----------

11.1           Computation of Per Share Earnings

27             Financial Data Schedule