<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                December 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 December 28, 1997, the registrant had 14,163,230 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

                    Condensed Consolidated Balance Sheets -
                    December 28, 1997 and June 29, 1997                    2

                    Condensed Consolidated Statements of Operations -      3
                    Thirteen Weeks Ended
                    December 28, 1997 and December 29, 1996

                    Condensed Consolidated Statements of Operations -      4
                    Twenty-Six Weeks Ended
                    December 28, 1997 and December 29, 1996

                    Condensed Consolidated Statements of Cash Flows -      5
                    Twenty-Six Weeks Ended
                    December 28, 1997 and December 29, 1996

                    Notes to Condensed Consolidated Financial Statements   6

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


PART II. OTHER INFORMATION                                                11

         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>
                                                      DECEMBER 28, 1997      JUNE 29, 1997
                                                      -----------------     ---------------
<S>                                                    <C>                  <C>            
               ASSETS

Current assets:
   Cash and cash equivalents                           $        62,773      $       263,542
   Accounts receivable, trade                                  181,572              540,406
   Accounts receivable from affiliates                         230,079              299,518
   Inventories                                                 374,245              483,302
   Prepaid expenses and other current assets                   640,214               73,217
                                                       ---------------      ---------------

      Total current assets                                   1,488,883            1,659,985

Property and equipment, net                                  5,333,528            6,050,631
Note receivable                                                279,148                 --
Notes and other receivables from affiliate                   1,398,583            1,679,374
Intangible assets, net                                       6,927,286            7,213,457
Other assets                                                   453,343              111,381
                                                       ---------------      ---------------
                                                       $    15,880,771      $    16,714,828
                                                       ===============      ===============

       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable, trade                             $     3,838,549      $     4,780,931
   Accrued liabilities                                       3,227,275            2,263,821
   Current portion of long-term debt                         1,398,586            2,787,814
                                                       ---------------      ---------------

     Total current liabilities                               8,464,410            9,832,566

Long-term debt, less current portion                         5,962,563            4,484,539
Notes payable to stockholder                                   500,000              500,000
Deferred rent                                                  577,976              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                                     (31,256,963)         (30,313,085)
                                                       ---------------      ---------------
                                                               525,822            1,469,747
     Less treasury stock, cost method                         (150,000)            (150,000)
                                                       ---------------      ---------------
     Total stockholders' equity                                375,822            1,319,747

                                                       $    15,880,771      $    16,714,828
                                                       ===============      ===============
</TABLE>


      See notes to condensed consolidated financial statements (unaudited)


                                       2




<PAGE>   4
                 WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                    13 WEEKS ENDED
                                                        DECEMBER 28, 1997     DECEMBER 29, 1996
                                                        -----------------     -----------------
<S>                                                        <C>                   <C>
Revenues                                                   $9,450,564            $10,464,021  
                                                           ----------            -----------
Costs and expenses:
  Costs of revenues                                         2,884,301              3,133,297
  Other restaurant operations                               5,709,677              6,220,543
  Selling, marketing and distribution                         230,182                431,876
  General and administrative                                  482,337                650,146
  Depreciation and amortization                               459,804                634,591
                                                           ----------            -----------
        
    Total costs and expenses                                9,766,301             11,070,453
                                                           ----------            -----------

Income (loss) from operations                                (315,737)              (606,432)

Non-operating income (expense):
  Interest income                                              30,037                 27,601
  Interest expense                                           (152,835)              (294,142)
  Other, net                                                   10,994                 98,969
                                                           ----------            -----------

    Total non-operating income (expense)                     (111,804)              (167,572)
                                                           ----------            -----------

Income (loss) before income taxes                            (427,541)              (774,004)

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

Net income (loss)                                            (427,541)              (774,004)

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

Net income (loss) less preferred stock dividends            ($427,541)             ($848,153)
                                                           ==========            ===========
                              
Net income (loss) per common share                             ($0.03)                ($0.06)
                                                           ==========            ===========

Weighted average common and common equivalent
  shares outstanding                                       14,233,560             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 OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                    26 WEEKS ENDED
                                                        DECEMBER 28, 1997     DECEMBER 29, 1996
                                                        -----------------     -----------------
<S>                                                        <C>                   <C>
Revenues                                                  $20,318,635            $21,947,071
                                                          -----------            -----------
Costs and expenses:
  Costs of revenues                                         6,333,833              6,588,984
  Other restaurant operations                              12,747,992             12,335,172
  Selling, marketing and distribution                         434,834                872,640
  General and administrative                                1,079,332              1,356,770
  Depreciation and amortization                             1,021,588              1,279,505
                                                          -----------            -----------

        
    Total costs and expenses                               21,617,579             22,433,071
                                                          -----------            -----------

Income (loss) from operations                              (1,298,944)              (486,000)

Non-operating income (expense):
  Interest income                                              60,112                 57,456
  Interest expense                                           (334,882)              (617,909)
  Other, net                                                  629,836                291,147
                                                          -----------            -----------

    Total non-operating income (expense)                      355,066               (269,306)
                                                          -----------            -----------

Income (loss) before income taxes                            (943,878)              (755,306)

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

Net income (loss)                                            (943,878)              (755,306)

Preferred stock dividends                                          47                148,298
                                                          -----------            -----------

Net income (loss) less preferred stock dividends            ($943,925)             ($903,604)
                                                          ===========            ===========
                              
Net income (loss) per common share                             ($0.07)                ($0.07)
                                                          ===========            ===========

Weighted average common and common equivalent
  shares outstanding                                       14,248,395             13,433,658
                                                           ==========            ===========

</TABLE>
See notes to condensed consolidated financial statements (unaudited).



                                       4
<PAGE>   6
                 WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                    26 WEEKS ENDED
                                                        DECEMBER 28, 1997     DECEMBER 29, 1996
                                                        -----------------     -----------------
<S>                                                        <C>                   <C>
Operating activities:
  Net income (loss) for the period                          ($943,878)             ($755,306)
  Adjustments to reconcile net income (loss) to
           net cash used in operating activities:
    Depreciation and amortization                           1,021,588              1,279,505
  Changes in assets and liabilities:          
    Accounts receivable, trade                                358,834               (160,836)
    Accounts receivable from affiliates                        69,439               (294,488)
    Inventories                                               109,057                198,503
    Prepaid expenses and other current assets                (335,811)              (541,338)
    Accounts payable and accrued liabilities                 (512,531)               463,512
    Other assets                                             (341,962)                10,982
                                                           ----------            -----------

  Net cash provided by (used in) operating activities        (575,264)               200,534 

Investing activities:
  Purchase of property and equipment                         (365,287)              (662,030)
  Proceeds from sale of assets                                470,663                750,000
  Collection of bad debt                                      453,864                     --
  Investment in note receivable                              (279,148)                    --
  Repayment of notes receivable                                 5,653                     --
                                                           ----------            -----------

  Net cash provided by (used in) investing activities         285,745                 87,970
                                                           ----------            -----------

Financing activities:
  Net proceeds from borrowings                              2,255,047                     --
  Cash dividends on preferred stock                               (46)                  (696)
  Payments on borrowings                                   (2,166,251)              (718,753)
                                                           ----------            -----------
 
  Net cash provided by (used in) financing activities          88,750               (719,449)
                                                           ----------            -----------

Net decrease in cash and cash equivalents                    (200,769)              (430,945)

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

Cash and cash equivalents, end of period                      $62,773                $32,221
                                                           ==========            ===========
 
</TABLE>

See notes to condensed consolidated financial statements (unaudited).




                                       5
<PAGE>   7
                 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."); 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 includes the results of
     operations of the Company for the thirteen week and twenty-six week periods
     ended December 28, 1997 and December 29, 1996. 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 $6,975,527 at December 28, 1997
     and a net loss of $943,878 for the twenty-six weeks ended December 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:

     o    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.

     o    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.

     o    Maintaining cost controls while increasing revenues.

     o    Obtaining additional equity capital or debt financing.



                                       6
<PAGE>   8






     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.



                     (This space 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 second quarter of fiscal years 1998
     and 1997 are to the thirteen week periods ended December 28, 1997 and
     December 29, 1996 respectively. References to the first half of fiscal year
     1998 and 1997 are to the twenty-six week periods ending on those same
     dates.



RESULTS OF OPERATIONS

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

     REVENUES. Revenues decreased $1,013,457 or 9.7% to $9,450,564 for the
     second quarter of fiscal 1998 as compared to $10,464,021 for the second
     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
     and the sale of the Longhorn Cafe Downtown in the first quarter of fiscal
     1998.

     To counteract any decline in comparable revenues, management is currently
     taking action in an attempt to increase sales, including a new training
     program, an intense concentration on increasing customer satisfaction and
     the implementation of a marketing program concentrating on local store
     marketing and coupon targeting. 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
     any sales decline on the Company's bottom line.

     COSTS AND EXPENSES. Total cost of revenues increased to 30.5% of revenues
     in 1998 as compared to 29.9% 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 59.4% of revenues in fiscal 1997 to
     60.4% 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 $201,694
     primarily due to a reduction in marketing activities during the quarter.

     General and administrative expenses decreased by $167,809.

     Depreciation and amortization decreased by $174,787 primarily due to the
     sale of Pete's Hospitality Co., Inc., the Longhorn Cafe Downtown and one
     Marco's Mexican Restaurant location.




                                       8
<PAGE>   10





     NON-OPERATING INCOME (EXPENSE). Interest expense decreased by $141,307 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 $427,541 for the second quarter of fiscal 1998 compared to net loss
     of $774,004 for the second quarter of fiscal 1997. The fiscal 1998 loss is
     generally due to an increase in restaurant operating costs. If such trends
     continue, the Company will incur substantial losses in the future which
     would have a material impact upon its cash flow.


TWENTY-SIX WEEKS ENDED DECEMBER 29, 1996 COMPARED TO THE
     TWENTY-SIX WEEKS ENDED DECEMBER 28, 1997.

     REVENUES. Revenues decreased $1,628,436 or 7.4% to $20,318,635 for the
     first half of fiscal 1998 as compared to $21,947,071 for the first half 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
     and the sale of the Longhorn Cafe Downtown in the first quarter of fiscal
     1998.

     COSTS AND EXPENSES. Total cost of revenues increased to 31.2% of revenues
     in 1998 as compared to 30% 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 56.2% of revenues in fiscal 1997 to
     62.7% of revenues in fiscal 1998 primarily due to the decline in sales,
     since a number of these expenses are fixed or indirectly variable. Labor
     expense also increased due to an increase in the federal minimum wage rate
     in September 1997.

     Selling, marketing and distribution expenses decreased by $437,806
     primarily due to the reduction in marketing activities.

     General and administrative expenses decreased by $277,438 primarily due to
     the reorganization of corporate and management personnel.

     Depreciation and amortization decreased by $257,917 primarily due to the
     sale of Pete's Hospitality Co., Inc., the Longhorn Cafe Downtown and one
     Marco's Mexican Restaurant location.

     NON-OPERATING INCOME (EXPENSE). Interest expense decreased by $283,027 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 reported net
     loss of $943,878 for the first half of fiscal 1998 compared to net loss of
     $755,306 for the first half of fiscal 1997.


LIQUIDITY AND CAPITAL RESOURCES

     OPERATING ACTIVITIES. The Company continues to experience losses from
     operations and as of December 28, 1997 has an accumulated deficit of
     $31,256,963.

     During the twenty-six weeks ended December 28, 1997, net cash flow used in
     operating activities equaled $575,264 which resulted from reductions in
     accounts payable and increases in current assets, partially offset by
     depreciation and amortization added back to net income. Investing
     activities generated $285,745 in cash due to the sale of fixed assets and
     collection of bad debt, partially offset by purchases of property and



                                       9
 


<PAGE>   11

     equipment. Financing activities contributed $88,750 in cash created by
     borrowing from banks and a stockholder.

     For the twenty-six weeks ended December 29, 1996 net cash flow provided by
     operating activities was $200,534 which resulted from depreciation and
     amortization less a net loss for the period. Investing activities generated
     $87,970 in cash due to the sale of fixed assets partially offset by
     purchases of property and equipment. Financing activities utilized $719,449
     in cash due to payments on borrowings.

     As of December 28, 1997, the Company had negative working capital of
     $6,975,527, as compared to negative working capital of approximately
     $8,172,581 at June 29, 1997. The decrease is due primarily to the
     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:

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

          o    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.

          o    Remodeling Marco's Restaurants.


     Management's plans include the following:

          o    Decreasing food and labor cost while increasing revenues.

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

          o    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.

          o    Obtaining additional equity capital or debt financing.


     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. The Company
     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.




                                       10

<PAGE>   12

     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.

     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 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.  None.




                                       11


<PAGE>   13






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: 2-16-98              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.




                                       12
<PAGE>   14



                          WATERMARC FOOD MANAGEMENT CO.

                                INDEX TO EXHIBITS





<TABLE>
<CAPTION>
         EXHIBIT
         NUMBER               DESCRIPTION
           <S>             <C>
           11.1            Watermarc Food Management Co. and Subsidiaries -
                           Computation of Earnings (Loss) Per Common and Common
                           Equivalent Shares

           27              Financial Data Schedule
</TABLE>