UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB


[x] Annual report pursuant to section 13 or 15(d) of The Securities Exchange Act
of 1934 ("Exchange Act") [Fee Required]

For the fiscal year ended October 31, 1997

[ ] 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 0-17872

                          ECHO SPRINGS WATER CO., INC.
                  (formerly known as Grudge Music Group, Inc.)
                 (Name of small business issuer in its charter)

     New York                                16-1433379
(State or other jurisdiction        (I.R.S. Employer Identification No.)
of incorporation or organization)

Building 100A, Hackensack Avenue, Kearny, NJ  07032
(Address of principal executive offices)        (Zip Code)

Issuer's telephone number: (973) 465-5151

Securities Registered under Section 12(b) of the Exchange Act:
     None

Securities Registered under Section 12(g) of the Exchange Act:
     Title of Each Class:  Common Stock, Par Value $.0001

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the issuer 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 disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of  issuer's  knowledge,  in  definitive  proxy or  information  statements
incorporated  by reference in Part III of this Form 10- KSB or any  amendment to
this Form 10-KSB. [ ]

The issuer's net revenues for its most recent fiscal were $1,917,444.


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The aggregate  market value of the issuer's voting stock held as of December 31,
1997 by non-affiliates of the issuer,  based upon the average of the closing bid
and asked prices on that date was approximately $3,520,100.

As at December 31, 1997 3,822,149  shares of the issuer's  Common Stock,  $.0001
par value, were outstanding.

Transitional Small Business Disclosure Format (Check one):
Yes       .  No  X  .




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                                                      PART I

           This Form  10-KSB  contains  forward-looking  statements.  Additional
written and oral forward-looking statements may be made by the Company from time
to time in Securities and Exchange Commission ("SEC") filings and otherwise. The
Company cautions readers that results predicted by  forward-looking  statements,
including,  without limitation,  those relating to the Company's future business
prospects,  revenues, working capital,  liquidity,  capital needs and income are
subject to certain risks and  uncertainties  that could cause actual  results to
differ materially from those indicated in the forward-looking  statements due to
risks and factors  identified in this Form 10-KSB and as may be identified  from
time to time in the Company's future filings with the SEC.


Item 1. Description of Business

Introduction

           Echo Springs Water Co., Inc. and its  wholly-owned  subsidiaries,  RG
Water  Company,  Inc. and  Berkshire  Acquisition  Company,  Inc.  (collectively
referred to as the  "Company"),  is engaged in  bottling  and  distributing  its
non-sparkling  100%  natural  spring  water  through its  established  sales and
distribution  network to its  existing  base of  approximately  4,000  customers
located in the New York City  Metropolitan  area, New Jersey,  upstate New York,
eastern  Pennsylvania  (including  the Greater  Philadelphia  area) and northern
Delaware. The Company markets its 100% natural spring water under its brand name
"Echo   Springs"  and  also  under  certain   private  labels  for  third  party
distribution.  The Company  bottles its drinking water at its NSF  International
("NSF") "Certified Bottling Facility" from naturally free-flowing springs at the
source on the  Company's  property in  Burlington,  New York.  The Company  also
leases water  coolers to its  commercial  and  residential  customers  and sells
allied  products such as coffee,  tea and a wide  assortment of paper  products,
primarily to its commercial accounts.

           The  Company's  products  are  marketed  and  sold  primarily  by its
in-house  staff.  The Company  also  provides  installation  and service for its
leased coolers and other equipment, such as brewers and refrigerators.

           The  Company  is  highly  dependent  upon  the  Aramark   Corporation
("Aramark"),  one of the world's largest  privately-held food service companies,
for the Company's sales of five-gallon  bottled water. For the fiscal year ended
October  31,  1997,  approximately  $714,828 or 34.7% of gross sales was derived
from  Aramark.  Although  orders for sales have been  received,  there can be no
assurance that commitments for any additional years will be awarded. The Company
will continue to be dependent upon revenues from this source in the

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immediate future.  The loss of this revenue source would have a material adverse
impact upon the Company.


History of the Company

           The Company,  formerly Grudge Music Group,  Inc., was incorporated in
New York in 1985 for the purpose of engaging  in the music  recording  business.
Due to continuing  losses from  operations,  the Company  discontinued its music
business in 1990.

           In 1991 and 1992,  the Company  commenced its bottled water  business
through  the  acquisition  of two  companies.  In  December,  1991,  the Company
completed  the  acquisition  of the assets of Echo Springs  Water Co., Inc. (now
known as ESWC,  Inc.),  consisting  of its  present  spring  water  source and a
fully-automated  natural spring water bottling  facility  located in Burlington,
New York.

           In July, 1992, the Company  acquired the assets of Berkshire  Springs
of New Jersey,  Inc., a distribution  company that leased water coolers and sold
water and other allied products to both commercial and residential  customers in
the State of New Jersey.


The Bottled Water Market

           The bottled water market comprises three major segments: non-
sparkling, sparkling and imported water.

           *               Non-sparkling, or still, water contains no
                           carbonation and is consumed as an
                           "alternative to tap water."  Non-sparkling
                           water is generally distributed directly to
                           homes and offices, through retail outlets
                           and through vending machines.
                           Distinctions are often made among brands
                           of non-sparkling water based on their
                           source, level of mineral content and the
                           method of purification (ozonation,
                           distillation, deionization or reverse
                           osmosis).

           *               Sparkling water contains either natural or
                           artificial carbonation and is positioned
                           to compete in the broad "refreshment
                           beverage" field.  Sparkling water includes
                           domestic sparkling water, club soda and
                           seltzer, and is typically sold through
                           normal food and beverage retail channels.

           *               Imported water, which includes both
                           sparkling and non-sparkling water produced

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                           and  bottled   outside  the  U.S.,   is  targeted  to
                           "image-conscious  consumers."  Imported water is sold
                           through  normal food and  beverage  retail  channels,
                           typically at  significantly  higher prices than other
                           bottled water alternatives.

           The Company  participates only in the non-sparkling,  or still, water
market.  Non-sparkling bottled water is currently distributed through office and
home  delivery,  retail stores and vending  machines.  Within the  non-sparkling
segment,  retail  pricing  generally  reflects  the  costs  associated  with the
maintenance of each distribution  channel. As a result,  bottled water delivered
to the home or office  has the  highest  per-gallon  price,  with  off-the-shelf
bottled water sold through retail  channels  having the next highest  per-gallon
price and, finally, vended water, which has the lowest per-gallon price.

           Natural  spring  waters  are  not  always  free  from   contamination
problems.  Springs can be  contaminated  with coliform  (bacteria in the water).
Natural  springs need to be monitored and tested on a regular basis to make sure
they are without  contamination.  To date, the Company has had no  contamination
problems  with its  three  active  springs.  The  Company's  water  has not been
determined to be better or less  contaminated  than municipal water. The Company
believes, however, that natural spring water has advantages over municipal water
because,  unlike  municipal  water,  natural  spring  water is not treated  with
chlorine and other chemicals.

Products

           The  Company's  natural  spring  water is sold in two  bottle  sizes:
one-gallon  high-density  polyethylene  bottles  and  five-gallon  polycarbonate
recyclable containers.  Water sold under the "Echo Springs" brand is packaged in
both  one-gallon and  five-gallon  bottles,  as is private label water.  Private
label sales have not been significant to date.

           In  addition,  the  Company  leases  water  coolers  and sells a wide
variety of allied products,  including regular and decaffeinated  coffee, coffee
creamers,  sugar,  soups and a wide assortment of paper products such as hot and
cold cups, and plastic  utensils.  To date,  revenues from such allied  products
have not been significant.

Suppliers

           The Company purchases all of its coolers and bottle and
plastic cap requirements from major vendors, including Elkay
Manufacturing Company, Package Material Corp. and Portola
Packaging, Inc.  In the past, the Company has experienced delays
from time to time in obtaining an adequate supply of these

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materials due to its vendors'  inability to meet demand.  While such delays have
become  less  frequent,  there can be no  assurance  that the  Company  will not
experience  similar  delays in the future.  To date,  such delays have not had a
material adverse effect on operations.

           Substantially  all of the Company's  water coolers are purchased from
the Cordley Temprite Division of Elkay Manufacturing  Company. This supplier was
selected based on its reputation in the cooler  industry and its ability to meet
delivery  deadlines on a cost-efficient  basis. Since there are only a few large
cooler manufacturers in the United States, the inability to obtain water coolers
on  satisfactory  terms could have a material  adverse  effect on the  Company's
business.  The Company has not experienced  any such problems.  The Company also
purchases  certain allied  products,  such as coffee,  tea and a wide variety of
paper products from numerous vendors.  The Company believes there are sufficient
vendors from which to obtain these products on competitive terms.

Marketing and Distribution

           The Company  markets its "Echo  Springs" brand as a 100% pure natural
spring water. The Company believes that this  distinguishes  its water from many
of its  competitors'  water,  many of which sell either  filtered  municipal tap
water or purified  water.  To date,  the Company has focused its  marketing  and
sales efforts in the New York City  Metropolitan  area, New Jersey,  upstate New
York,  eastern  Pennsylvania  (including  the  Greater  Philadelphia  area)  and
northern Delaware,  which it believes offers a substantial market for growth. If
the Company is successful in further penetrating this market, of which there can
be no  assurance,  it  intends to expand its  marketing  and sales  focus to the
northeastern  United States.  The Company sells all of its products  through its
own in-house staff. The Company sells its products to offices,  other commercial
establishments,  residential customers and third party distributors. The Company
distributes  its bottled water and allied  products from its Kearny,  New Jersey
warehouse by means of its fleet of ten leased  trucks.  The Company  distributes
its bottled  water from its Cherry  Hill,  New Jersey  warehouse by means of two
leased trucks. The Company also leases a tractor and three trailers for delivery
to  its  Kearny  and  Cherry  Hill   warehouses   and  to  certain  third  party
distributors.

Seasonality

           In the beverage industry,  sales typically increase in the second and
third calendar quarters.  In order to help minimize the impact of seasonality on
sales in the future,  the Company will seek to expand its distribution of allied
products by  increasing  its  marketing  of such  products to its bottled  water
customers.



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Competition

           The bottled water market is highly competitive.  The Company competes
in the  non-sparkling  segment of the bottled  water market  directly with other
office delivery water companies and indirectly with companies that provide water
vending machines and with off-the-shelf  marketers. The Company's water products
compete not only with other bottled water  products but also with other types of
beverages,  including  soft drinks,  coffee,  beer,  wine and fruit juices.  The
Company competes with vended water and  off-the-shelf  marketers on the basis of
(1) quality,  (2) taste,  (3) the convenience of on-site  delivery,  and (4) the
features  offered by the water  dispenser  (i.e.  the  ability  to have  heated,
chilled or room temperature  water,  depending on the type of dispenser rented).
Such competition  includes bottlers and distributors of water products,  several
of which  are  more  experienced  and  have  greater  financial  and  management
resources  than  the  Company  and  have  established   proprietary  trademarks,
distribution facilities and bottling facilities.

           Many  bottled  water  companies  in the  United  States  are owned by
European or Japanese  companies.  Nestle  (Swiss) owns the Perrier,  Great Bear,
Poland Springs, Ozarka, Oasis, Zephyrhills,  Arrowhead,  Calistoga, Ice Mountain
and Volvic brands.  BSN Group (French) owns the Evian Brand. Anjou (French) owns
the Sierra Springs and Hinckley & Schmitt  brands.  Suntory  (Japanese) owns the
Belmont Springs, Crystal, Kentwood, Polar, Willow and Talwonda Springs brands.

Employees

           As of December 31, 1997, the Company employed thirty-one people, five
in   production,   sixteen  in   distribution,   and  ten  in   management   and
administration.  None of the  Company's  employees  is subject  to a  collective
bargaining  agreement  and the  Company  believes  that its  relations  with its
employees are satisfactory.

Government Regulation

           The United  States  Food and Drug  Administration  ("FDA")  regulates
bottled water as a food. Accordingly,  the Company's bottled water must meet FDA
standards  for  manufacturing  practices  and  chemical and  biological  purity.
Furthermore,  these  standards  undergo a continuous  process of  revision.  The
labels  affixed to the bottles and other  packaging  of the water are subject to
FDA restrictions on health and nutritional claims for foods.

           In addition, all drinking water must meet United States Environmental
Protection  Agency  standards  established  under  the Safe  Drinking  Water Act
("SDWA") for mineral and chemical concentration. The 1986 amendments to the SDWA
mandated the

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establishment of new drinking water quality and treatment
regulations.

           Bottled water must originate from an "approved  source" in accordance
with standards  prescribed by the state health  department in each of the states
in which the Company's  products are sold.  The source must be inspected and the
water sampled, analyzed and found to be of safe and wholesome quality. There are
annual  "compliance  monitoring tests" of both the source and the bottled water.
The health  departments  of the  individual  states also govern water purity and
safety,  labeling of bottled  water  products  and  manufacturing  practices  of
producers.

           The Company's water supply is located in the State of New York, which
requires a bottled  water  manufacturer  to be  certified  by the New York State
Department   of  Health   ("Department   of   Health").   In  order  to  receive
certification,  a prospective manufacturer must submit an application,  together
with a  detailed  report  prepared  by a  licensed  professional  engineer.  The
application  includes the manner of  development  of the source,  the sanitation
methods to be used in the bottling operation,  the water treatment proposed, the
laboratory control of water quality which will be provided, detailed engineering
plans of the bottling facility and water source,  and a flow diagram from source
through bottling operation.

           The application,  report and proposed labels and caps are reviewed by
the Department of Health.  In addition,  samples of the water are tested.  After
this  review and  testing,  arrangements  are made for the local  county  public
health unit to inspect the water bottling facilities.

           The cost to the Company to comply with government regulation consists
primarily of permits and water testing and amounted to approximately $25,000 for
the fiscal year ended October 31, 1997.

           The Company  currently  has all required  approvals and believes that
its  bottling  facilities  are in  substantial  compliance  with all  applicable
government regulations.

Item 2. Description of Properties

           The Company owns its principal  facility  which consists of 150 acres
of land located in Burlington,  New York, on which there is located a processing
facility  consisting of 7,200 square feet and seven springs,  of which three are
completed  and in operation.  The  Burlington  facility was built,  and bottling
equipment installed,  in 1990. The Company also leases property in Edmeston, New
York.  Although the Company has no present plans to develop the four uncompleted
springs,  in order to do so it would be necessary to landscape the area, cap the
springs,  run an underground pipe from the springs to the bottling  facility and
obtain  approval  from the New York  State  Department  of Health.  The  Company
estimates that

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this  process  would take three to four  months to  complete.  Until  developed,
management  is not able to estimate the  additional  capacity that these springs
would provide.

           The  current  production   capacity  of  the  bottling  facility  per
eight-hour shift is 1,400,000 four-pack crates per year of one-gallon bottles or
1,100,000  five-gallon  bottles per year, which exceeds the Company's  projected
needs for the foreseeable  future.  The plant  currently  operates one shift per
day, five days per week, representing approximately 25% of capacity.

           The Company draws its water from three  developed  natural springs at
Burlington and from its two rented springs at Edmeston. The Company's Burlington
water  sources  flow at an average  rate of 26 gallons per minute.  The Edmeston
springs  (described  below)  have  average  flow rates of 50 and 60 gallons  per
minute.  The Company  believes that its water is clean,  refreshing  and lightly
mineralized.

           As the Company  controls its natural spring water sources,  it is not
vulnerable  to  unanticipated  factors  which might  otherwise  arise if its was
dependent upon outside-owned  sources.  However,  natural occurrences beyond the
control of the Company,  including,  but not limited to, drought, which prevents
the natural springs from recharging themselves,  and other occurrences,  such as
contamination  of the springs or failure of the water  supply to comply with all
applicable  governmental  requirements  for mineral and chemical  concentration,
could have a material adverse effect on the business of the Company.

           The  Company  entered  into a  20-year  lease  with  an  unaffiliated
landlord on  September  14, 1994 for 41.686 acres of land located in the town of
Edmeston,  State of New York, on which are located two developed springs.  These
two springs have a combined average capacity of approximately 58,000,000 gallons
of water per year.  The  Company  applied  for and  received  approval  from the
Department  of Health to operate  the springs on August 10,  1995.  Based on the
amended agreement of July 19, 1995, rent for the property is $.005 per gallon of
water  extracted  for the first five years (with  minimum rent of $300 per week)
and $.01 per gallon for the  following  fifteen years (with minimum rent of $600
per week).  The Company has paid an additional  rent of $21,000 during the first
year.  The Company has the right to build and operate a processing  plant (which
will become the  property of the  landlord) on the  property,  in which case the
rent will increase to $.015 per gallon extracted. The Company also has the right
to  terminate  the lease  without  penalty  after  payment  of rent  aggregating
$100,000 plus the additional  $21,000  first-year rent, and, in the event it has
constructed a processing  plant,  the right to renew the lease for an additional
20-year term on terms to be agreed upon by the parties.  The Company intends, as
its needs require, to utilize the water from these springs in its business.  The
water can be utilized

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without  construction of a plant and the Company has no immediate plans to build
a plant on this property.  Rent expense under this lease was $19,661 and $33,426
for the years ended October 31, 1997 and 1996, respectively.

           The Company's  principal  offices are in Kearny,  New Jersey where it
leases  20,290  square feet of office and  warehouse  space  pursuant to a lease
expiring in March,  1998 and currently  being  renegotiated.  The Company pays a
monthly rent of $5,495. The Company also rents the use of shared warehouse space
in Cherry  Hill,  New Jersey for a monthly  rent of $1,200,  pursuant to a lease
whose term expired in March,  1997 and continues  thereafter on a month-to-month
basis.  The Company  believes that its current  facilities  are adequate for its
foreseeable needs.


Item 3. Legal Proceedings

           Kenneth T. Williams  commenced two actions in March and April,  1994,
and a third action in June,  1996 in the Supreme Court of the State of New York,
County of Otsego, against certain parties,  including the Company and certain of
its  subsidiaries and affiliates,  seeking a one-half  interest in the Company's
land and facility located in Burlington, New York and $17,000,000 in damages.

           All three suits have been dismissed in their entirety except a claim,
for an unspecified  amount,  that the Company and the other defendants have been
unjustly  enriched at Mr. Williams'  expense.  Due to Mr.  Williams'  failure to
timely  take  proceedings  for  judgment  against the  Company,  it is not clear
whether this case will come to trial on the merits.

           Management  is of the opinion  that there is no material  exposure to
the Company and  therefore,  no provision has been made for any possible loss in
the Company's consolidated financial statements.


Item 4.  Submission or Matters to a Vote of Security Holders

           None.




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                                                      PART II

Item 5.                    Market for Company's Common Equity and Related
                           Stockholder Matters


           The  following  table sets forth the high and low  closing bid prices
for the periods indicated as reported by the National  Association of Securities
Dealers  Automated  Quotation System (NASDAQ) between dealers and do not include
retail  mark-ups,  mark-downs,  or commissions and do not necessarily  represent
actual
transactions.

                                                     Low               High


Calendar Year 1995*:

First Quarter                                        $ .50             $2.00
Second Quarter                                        1.50              1.56
Third Quarter                                         1.25              1.50
Fourth Quarter                                         .75              1.25


Calendar Year 1996:

First Quarter*                                         .63               1.25
Second Quarter*                                       1.00               2.25
Third Quarter*                                        1.25               3.00
Fourth Quarter                                        1.25               2.75


Calendar Year 1997:

First Quarter                                         1.25               2.63
Second Quarter                                         .75               1.25
Third Quarter                                          .75               1.50
Fourth Quarter                                         .81               1.25

-----------
*recalculated after reverse split

           At December  31,  1997,  the Company had 292 holders of record of its
Common Stock.

           The Company has paid no cash  dividends  on its Common  Stock to date
and it does  not  anticipate  declaring  or  paying  any cash  dividends  in the
foreseeable future.




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Item 6.                    Management's Discussion and Analysis
                           of Financial Condition and Results of Operations


For the Fiscal Year Ended October 31, 1997 Compared with the Fiscal
Year Ended October 31, 1996

           Gross sales  decreased  $194,901  (8.7%) to $2,058,067 for the fiscal
year ended October 31, 1997 ("Fiscal  1997") from $2,252,968 for the fiscal year
ended October 31, 1996 ("Fiscal 1996"). Five-gallon sales to Aramark Corporation
increased by  approximately  $274,000,  due to increased sales of  approximately
$52,000  to  their  continuing  New  York  and New  Jersey  operations  plus the
Company's expansion into this customer's Pennsylvania locations, which accounted
for the  remaining  approximately  $222,000.  However,  five-gallon  and  allied
product sales to and rental income from the Company's regular customer base fell
by approximately $111,000, $63,000 and $62,000,  respectively,  largely due to a
deliberate  discontinuance of service to marginal  customers and a lack of sales
and marketing staff as the Company  concentrated  its efforts toward the Aramark
business  as this  business  requires  no capital  investment  outlay for cooler
equipment and provides its own sales and marketing at no additional  cost to the
Company. The 2.5-gallon sales fell by approximately  $17,000 as this low-margin,
low-volume product line was discontinued in July, 1996. Sales of one gallons and
one quarts, other low-margin products,  decreased by approximately  $207,000 and
$9,000,  respectively,  largely  due  to a  discontinuance  of  service  to  one
supermarket  customer and the loss of one of the  Company's  distributors  which
completed its own bottling  facility in July, 1997. A $7,000 decrease in regular
customer  credits  and  allowances  was  offset  by  approximately  $118,000  in
discounts  attributable  to a half-price  discount  offered to Aramark for three
months  (March 10 through June 8, 1997) and a $0.15  discount per bottle for the
nine months  thereafter as an incentive to obtain their  Pennsylvania  business.
Other income in Fiscal 1996 included  approximately  $32,000 of discounts earned
upon the  renegotiation  and settlement of five older payables,  which event did
not recur in Fiscal  1997.  The  remaining  decrease  in other  income  resulted
primarily  from a lower gain on unclaimed or lost customer  deposits as a result
of a more accurate method of estimation.

           Cost of sales for Fiscal 1997 was $745,711  (36.2% of gross sales) as
compared to $865,255 (38.4% of gross sales) for Fiscal 1996. This 2.2 percentage
point  improvement is comprised of a 3.4 percentage  point gain due primarily to
the above-noted reductions in the sales of low-margin product lines, offset by a
1.2  percentage  point  increase  caused  by  the  above-noted  decrease  in the
equipment rental portion of gross sales.

           Selling, general and administrative expenses were $1,844,299
in Fiscal 1997 as compared to $1,483,147 in Fiscal 1996. Delivery

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and warehouse costs increased approximately $93,000. The Pennsylvania operations
amounted to  approximately  $120,000.  The disposal of the  Company's  remaining
owned  vehicles  resulted in an increase in truck rental costs of  approximately
$39,000 which was offset by a similar  reduction in maintenance  and repairs and
insurance  expenses.  Also, while Kearny staff levels remained similar, a change
in the staff mix  resulted  in reduced  labor  costs of  approximately  $28,000.
Advertising  and promotion  costs  increased  approximately  $27,000 and related
primarily to the Company's Aramark business. Further, general and administrative
expenses rose by approximately $240,000.  Increased clerical costs accounted for
approximately  $30,000.  The market  value of common  stock issued to an officer
under  agreement  was  $166,250.  Professional  fees  increased  $60,000.  These
increases  were  offset  by  reduced  travel  and   entertainment   expenses  of
approximately $12,000.

           Interest expense decreased from $189,782 in Fiscal 1996 to $52,063 in
Fiscal  1997,  primarily  as  a  result  of  the  October,  1996  debt-to-equity
conversion.  Amortization  of other  assets of $4,876 in Fiscal  1997 and Fiscal
1996 related to the  amortization  of water  rights.  Other income of $87,447 in
Fiscal 1997 and $78,400 in Fiscal 1996 related to non-recurring operating items.

           The loss on disposal of assets in Fiscal 1997  related  primarily  to
the writing down of certain water coolers, bottles and brewers and furniture and
fixtures  to  realizable  value  based  upon a  detailed  review of these  asset
categories.

           The net loss before  extraordinary  gain for Fiscal 1997 increased by
$511,049 from $228,571 in Fiscal 1996 to $739,620 in Fiscal 1997.


For the Fiscal Year Ended October 31, 1996 Compared with the Fiscal
Year Ended October 31, 1995

            Net revenues decreased $302,507 (11.8%) to $2,264,702 for the fiscal
year ended October 31, 1996 ("Fiscal  1996")from  $2,567,209 for the fiscal year
ended October 31, 1995 ("Fiscal 1995"). The $353,520 decrease in gross sales was
due  primarily  to four  factors.  The  2.5-gallon  sales fell by  approximately
$17,000 as this  low-margin,  low-volume  product line was discontinued in July,
1996.  Sales  of  one  gallons,   another  low-margin   product,   decreased  by
approximately  $139,000,  largely  due to a  discontinuance  of service to three
customers,  including  one  bankruptcy.  The  third  contributing  factor  was a
deliberate  discontinuance of service to marginal customers as determined from a
customer-by-customer review in setting up the new corporate computer system. The
fourth factor was a much cooler  summer in 1996 compared to 1995.  The remaining
increase in net revenues was accounted  for primarily by three items.  Discounts
earned upon the renegotiation and settlement of a few

                                                         13

<PAGE>



older  payables  increased by  approximately  $24,000 and credits and allowances
were reduced by approximately  $55,000.  These gains were offset by a lower gain
on unclaimed or lost customer deposits of approximately $30,000.

            Cost of sales for Fiscal 1996 was $865,255 (38.4% of gross sales) as
compared  to  $978,901  (37.6% of gross  sales)  for  Fiscal  1995.  This  small
percentage increase was caused primarily by an approximately $24,000 increase in
rental expense relating to the Wheeler springs resulting from twelve months rent
in Fiscal 1996 versus three months in Fiscal 1995.

            Selling,  general and administrative expenses were $1,483,147 (65.5%
of net  revenues)  in  Fiscal  1996 as  compared  to  $1,542,160  (60.1%  of net
revenues)  in Fiscal 1995. A  significant  reduction in the sales and  marketing
staff in an effort to better  concentrate on the current  customer base resulted
in an  overall  savings  of  approximately  $158,000.  However,  delivery  costs
increased  approximately $49,000 primarily as a result of increased truck rental
costs due to a larger number of rental vehicles in the corporate fleet, in order
to improve  the  timeliness  of product  deliveries,  combined  with a 50% truck
rental  price  increase  in  May,  1996.  Further,   warehouse  costs  increased
approximately  $21,000 due largely to increased  cooler  repair costs  resulting
from contracting such repairs to a third party professional. Lastly, general and
administrative expenses rose by approximately $29,000,  primarily as a result of
approximately $26,000 of additional compensation to the President in the form of
common shares issued in consideration of prior services.

            Interest expense  decreased from $247,694 in Fiscal 1995 to $189,782
in Fiscal 1996  primarily as a result of the  $200,000 8% mortgage  note payable
under litigation being eliminated at October 31, 1995 and the effect of the debt
conversion  described  in  Note  14 to the  consolidated  financial  statements.
Amortization of other assets of $4,876 in Fiscal 1996 and Fiscal 1995 related to
the  amortization  of water  rights.  Other income of $78,400 in Fiscal 1996 and
$3,705 in Fiscal 1995 related to non-recurring operating items.

            The net  operating  loss for Fiscal 1996  increased  by $14,303 from
$214,268 in Fiscal 1995 to  $228,571 in Fiscal  1996.  The net income for Fiscal
1996 was $100,379 after an extraordinary gain on debt restructuring of $328,950.

Liquidity and Capital Resources

            The Company's  primary sources of liquidity have been cash generated
from sales,  issuance of common stock,  debentures  and  installment  debt,  and
borrowings from its officers.


                                                         14

<PAGE>



            During the fiscal years ended October 31, 1997 and 1996, the Company
had negative  cash flows from  operating  activities  of $359,586 and  $270,514,
respectively.  Investing  activities  used cash of  $240,746  in Fiscal 1997 and
$44,695 in Fiscal 1996, primarily for the acquisition of property and equipment.
The Company has financed its  operating and  investing  activities  during these
periods primarily through the issuance of common stock and installment debt.

            In 1996,  the Company  completed a conversion  of debt of $1,700,022
and accrued  interest  thereon of $492,984 for 877,201  (post  1-for-25  reverse
split) shares of its Common Stock in conversion of $2,193,006 of indebtedness to
thirteen (13)  investors,  each an "accredited  investor"  within the meaning of
Regulation  D  of  the  Securities  Act  of  1933,  as  amended,   realizing  an
extraordinary  gain of  $328,950  as  indicated  in Note 14 to the  Consolidated
Financial Statements.

            At October 31, 1997, the Company had a working capital deficiency of
$1,883,659.  Short-term  credit sources are limited to trade credit on purchases
and services.  The report issued by the Company's  accountants  that accompanies
the Company's  Consolidated  Financial Statements for the year ended October 31,
1997 states that there is a  substantial  doubt about the  Company's  ability to
continue as a going concern.

            Considerations  which tend to mitigate the question of going concern
include  management's  successful  efforts  in  raising  funds  through  private
placements,  the ability to renegotiate and restructure long-term financing with
major  creditors,  past and  present  efforts to convert  debt to equity and the
ability to acquire,  restructure and develop the bottled water business which it
believes will be able to achieve profitable operations.

            In June, 1996, the Company entered into negotiations to consummate a
public offering with minimum gross proceeds of approximately  $4,000,000.  While
the  doubling of its asset and equity  listing  requirements  during 1997 by the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
caused a delay in the Company's  plans,  such offering is expected to take place
during Fiscal 1998. The Company  intends to use a portion of the proceeds of the
proposed public offering to seek and consummate acquisitions of companies in the
bottled water and allied products  business.  No assurance can be given that the
Company will be successful in identifying  potential  acquisitions  or, if made,
that such acquisitions will have a beneficial effect on the Company. The Company
has no current  agreement  to acquire  any  business or  property,  or intent to
acquire any specific business or property.

            The Company believes that these factors provide meaningful  evidence
as to the  Company's  ability to continue in operation  for the next fiscal year
and support the going concern presentation in

                                                        15

<PAGE>



the accompanying  Consolidated  Financial Statements in favor of the liquidation
basis. There can be no assurance,  however,  that management will continue to be
able to raise  sufficient  capital  or  convert  existing  debt to  equity or to
achieve profitable operations going forward.

            The Company  has no plans or  commitments  for capital  expenditures
during the next twelve months other than the ordinary equipment  purchases which
are expected to be funded with additional installment debt. The Company is close
to settling its prior years' unpaid payroll taxes and, upon  agreement,  intends
to pay such amounts from additional borrowings.

            The  Company's  business  is subject to seasonal  fluctuation,  with
summer being the busiest season and winter the slowest. To date, seasonality has
not had any material effect on the Company's  financial  condition or results of
operations.

New Accounting Standards

            Recently, the Financial Accounting Standards Board issued Statements
(SFAS  No.  128,  130  and  131)  related  to  Earnings  per  Share,   Reporting
Comprehensive Income and Segment  Disclosures.  The Earnings per Share Statement
will be adopted in fiscal 1998 and is not expected to have a material  change in
the  Company's  per share  calculation.  The  Comprehensive  Income and  Segment
Disclosures  Statements,  which have  effective  dates in fiscal  1999,  are not
expected to have an impact on the Company.



                                                        16

<PAGE>



Item 7.                     Financial Statements.


                                           INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders
Echo Springs Water Co., Inc.

         We have audited the  accompanying  consolidated  balance sheets of Echo
Springs Water Co., Inc. and subsidiaries as at October 31, 1997 and 1996 and the
related consolidated statements of operations, shareholders' equity (deficiency)
and cash flows for the years then  ended.  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 aforementioned  consolidated  financial statements
present fairly, in all material respects, the financial position of Echo Springs
Water Co.,  Inc.  and  subsidiaries  as at October  31,  1997 and 1996,  and the
results  of their  operations  and their  cash flows for the years then ended in
conformity with generally accepted accounting principles.

         The accompanying  consolidated  financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
12 to the consolidated financial statements,  the Company has suffered recurring
losses from  operations and has a working  capital  deficiency and a net capital
deficiency that raise substantial doubt about its ability to continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note 12. The  consolidated  financial  statements do not include any adjustments
that might result from the outcome of this uncertainty.




                                CITRIN COOPERMAN & COMPANY, LLP


January 21, 1998
New York, New York

                                                        17

<PAGE>


                          ECHO SPRINGS WATER CO., INC.

                           CONSOLIDATED BALANCE SHEETS

                            OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                        1997                       1996
                                                                                        ----                       ----

                                     ASSETS
Current assets:
 Cash                                                                            $  170,288               $   44,631
 Accounts receivable - net of
  allowance for doubtful accounts
  of $9,000 in 1997 and $14,000 in 1996                                             255,675                  257,212
 Notes receivable, current portion                                                   29,842                   26,010
 Inventories                                                                         25,753                   34,221
 Prepaid expenses                                                                    22,620                   30,178
                                                                                   ---------                ---------
         Total current assets                                                       504,178                  392,252

Notes receivable, net of current portion                                            132,254                  159,868

Property, plant and equipment - net                                               1,187,029                1,278,230

Other assets                                                                        353,970                  220,026
                                                                                  ---------                ---------

         TOTAL ASSETS                                                            $2,177,431               $2,050,376
                                                                                  =========                =========

                LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
 Installment debt                                                                $  624,000               $  552,153
 Debentures                                                                          25,000                   50,000
 Accounts payable and accrued expenses                                            1,419,074                1,513,582
 Customer deposits                                                                  304,800                  213,000
 Unearned revenues                                                                   14,963                   17,677
                                                                                  ---------                ---------
         Total current liabilities                                                2,387,837                2,346,412
                                                                                  ---------                ---------

Shareholders' equity (deficiency):
 Common stock, $.0001 par value,
  75,000,000 shares authorized; issued
  and outstanding 3,822,149 shares in
  1997 and 2,907,149 shares in 1996                                                     382                     291
 Additional paid-in capital                                                       8,792,884               7,967,725
 Accumulated deficit                                                             (9,003,672)             (8,264,052)
                                                                                  ---------               ---------
     Total shareholders' equity
      (deficiency)                                                                 (210,406)               (296,036)
                                                                                  ---------               ---------

         TOTAL LIABILITIES AND SHARE-
          HOLDERS' EQUITY (DEFICIENCY)                                           $2,177,431              $2,050,376
                                                                                  =========               =========







</TABLE>



  See accompanying notes to consolidated financial statements.


                                                               18

<PAGE>


                          ECHO SPRINGS WATER CO., INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  FOR THE YEARS ENDED OCTOBER 31, 1997 AND 1996


                                           1997           1996
                                           ----           ----

Revenues:
 Gross sales                            $2,058,067      $2,252,968
 Credits and allowances                   (123,979)        (12,734)
 Freight out                               (45,863)        (43,154)
 Other income                               29,219          67,622
                                         ---------        ---------
                                         1,917,444       2,264,702
                                         ---------       ---------

Costs and expenses:
 Cost of sales                             745,711         865,255
 Selling, general and
  administrative                         1,844,299       1,483,147
 Interest                                   52,063         189,782
 Amortization of other
  assets                                     4,876           4,876
 Other expenses (income) - net             (87,447)        (78,400)
 Loss on disposal of assets                 97,562          28,613
                                           ---------      ---------
     Total costs and
      expenses                           2,657,064       2,493,273
                                         ---------       ---------

Loss before extraordinary gain           (739,620)        (228,571)
Gain on debt restructuring                                 328,950
                                        ---------        ---------

Net income (loss)                      $ (739,620)      $  100,379
                                        =========         =========

Loss per share before
 extraordinary gain                    $     (.22)      $     (.12)
Extraordinary gain per share                                   .17
                                         ---------         ---------

Net income (loss) per share            $     (.22)      $      .05
                                         =========        =========

Weighted average shares
 outstanding                            3,412,566         1,913,925
                                        =========         =========
















 See accompanying notes to consolidated financial statements.

                                                               19

<PAGE>


                          ECHO SPRINGS WATER CO., INC.


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  FOR THE YEARS ENDED OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                          1997                     1996
                                                                                          ----                     ----

Operating activities:
 Net income (loss)                                                                   $ (739,620)              $  100,379
 Adjustments to reconcile
  net income (loss) to net cash used
  by operating activities -
  Extraordinary gain                                                                                             (328,950)
  Depreciation and amortization                                                          169,803                  156,096
  Loss on disposal of assets                                                              97,562                   28,814
  Provision for doubtful accounts                                                         (5,000)                 (21,000)
  Stock issued for compensation                                                          166,250                   26,250
  Debt reduction for expense recovery                                                    (45,000)
  Changes in assets and liabilities -
   Accounts receivable                                                                     6,537                   20,166
   Inventories                                                                             8,468                    5,688
   Prepaid expenses                                                                        7,558                   (2,772)
   Other assets                                                                          (31,722)                  11,450
   Accounts payable and accrued expenses                                                 (83,508)                (236,012)
   Customer deposits                                                                      91,800                    1,100
   Unearned revenues                                                                      (2,714)                 (31,723)
                                                                                       ---------                ---------
         Net cash used by operating
          activities                                                                    (359,586)                (270,514)
                                                                                       ---------                ---------

Investing activities:
 Capital expenditures                                                                   (185,110)                 (68,409)
 Deposits on equipment                                                                   (93,240)
 Collections on notes receivable                                                          23,782                   18,479
 Proceeds from disposal of assets                                                         13,822                    5,235
                                                                                       ---------                ---------
         Net cash used by investing
          activities                                                                    (240,746)                 (44,695)
                                                                                       ---------                ---------

Financing activities:
 Proceeds from issuance of common stock                                                  584,000                  180,000
 Purchase of common stock                                                                                            (420)
 Increase in installment debt                                                            732,000                  312,153
 Repayment of installment debt                                                          (576,153)                (171,099)
 Deferred public offering costs                                                          (13,858)                 (18,018)
                                                                                       ---------                ---------
     Net cash provided
          by financing activities                                                        725,989                  302,616
                                                                                       ---------                ---------

Net increase (decrease) in cash                                                          125,657                  (12,593)

Cash - beginning                                                                          44,631                   57,224
                                                                                       ---------                ---------

CASH - ENDING                                                                         $  170,288               $   44,631
                                                                                       =========                =========

Supplemental Cash Flow Information:
 Interest paid                                                                        $   41,714               $   45,292
 Conversion of accounts
  receivable to notes receivable                                                                                   22,750
 Conversion of other assets to
  notes receivable                                                                                                  1,370
 Conversion of debt and interest
  to common stock, net of extraordinary
  gain of $328,950 in 1996                                                                75,000                1,864,056

 See   accompanying   notes  to  consolidated financial statements.
</TABLE>

                                                                 20

<PAGE>


                          ECHO SPRINGS WATER CO., INC.

    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)

                 FOR THE YEARS ENDED OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>



                                                                                                                       Total
                                                         Common Stock                                               Shareholders'
                                                                                Paid-in         Accumulated           Equity
                                                      Shares       Amount       Capital           Deficit           (Deficiency)




Balance at October 31,
 1995                                               1,659,996        $166         $5,897,964      $(8,364,431)      $(2,466,301)

Shares issued upon
 conversion of debt
 and interest                                         877,201          88          1,863,968                          1,864,056
Shares purchased                                          (48)                          (420)                              (420)
Shares issued to
 officer under
 agreement                                             10,000           1             26,249                             26,250
Shares sold                                           360,000          36            179,964                            180,000
Net income                                                                                               100,379        100,379
                                                    ---------         ---          ---------          ----------      ----------

Balance at
 October 31, 1996                                   2,907,149         291          7,967,725         (8,264,052)       (296,036)

Shares issued to
 officer under
 agreement                                            190,000          19            166,231                            166,250
Shares issued upon
 conversion of debt                                    75,000           7             74,993                             75,000
Shares sold                                           650,000          65            583,935                            584,000
Net loss                                                                                                  (739,620)    (739,620)
                                                    ---------         ---          ---------            ----------     ----------

Balance at
 October 31, 1997                                   3,822,149        $382         $8,792,884           $(9,003,672)   $ (210,406)
                                                    =========         ===          =========            ==========     ==========


See  accompanying   notes  to  consolidated financial statements.
</TABLE>

                                                                  21

<PAGE>


                          ECHO SPRINGS WATER CO., INC.

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -        BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

                Business
                Echo  Springs  Water Co.,  Inc.  ("the  Company"),  through  its
                subsidiaries,  is engaged  principally  in the  distribution  of
                bottled  water and allied  products.  The Company  bottles water
                from  its own  natural  springs  in  Burlington,  NY for  direct
                distribution  and sale to business and residential  customers as
                well as for other bottled water distributors.

                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.

                Use of Estimates
                The  preparation  of financial  statements  in  conformity  with
                generally accepted accounting  principles requires management to
                make estimates and assumptions  that affect the amounts reported
                in the  financial  statements  and  accompanying  notes.  Actual
                results could differ from those estimates.

                Revenue Recognition
                Revenue from equipment  rental is recognized based on the period
                in which it is earned and  unearned  revenue is recorded for the
                portion  billed in  advance.  Revenues  from  product  sales are
                recognized  upon  shipment to the  wholesaler or delivery to the
                customer, as applicable.

                Inventories
                Inventories  consist  principally of items held for sale,  which
                are  valued  at the  lower of cost or  market  with  cost  being
                determined on the basis of the first-in, first-out method.

                Property, Plant and Equipment
                Property,  plant and equipment are recorded at cost.  Additions,
                renewals and improvements are capitalized. Asset and accumulated
                depreciation  accounts are relieved  for  dispositions  with any
                resulting  gain or loss reflected in earnings.  Maintenance  and
                repairs  are  charged to expense as  incurred.  Maintenance  and
                repairs expense amounted to $42,245 in 1997 and $61,730 in 1996.
                Depreciation   of  plant  and   equipment  is  provided  by  the
                straight-line method over the estimated economic useful lives of
                the various asset groups ranging from 5 to 40 years.

                Impairment of Long-Lived Assets
                The  Company  adopted   provisions  of  Statement  of  Financial
                Accounting  Standards No. 121  (Accounting for the Impairment of
                Long-Lived  Assets and for Long-Lived  Assets to Be Disposed Of)
                during  1997.  The  effect of  adopting  this  standard  was not
                material. The Company periodically reviews its long-lived assets
                to assess  recoverability and to ensure that the carrying values
                of such long-lived assets have not been impaired.


                                                            22

<PAGE>


                          ECHO SPRINGS WATER CO., INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -        BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                Other Assets
                The allocated  cost of the  acquisition  of water rights in 1991
                was  capitalized  and is being  amortized  by the  straight-line
                method over 40 years.  Costs associated with the proposed public
                offering  (Note  14)are  being  deferred at October 31, 1997 and
                will be  offset  against  the  proceeds  of such  offering  upon
                completion  or charged to expense  should such  offering  not be
                completed.

                Income Taxes
                All  deferred tax benefits  from the use of net  operating  loss
                carryforwards   are  offset  by  valuation   allowances  in  the
                accompanying consolidated financial statements.

                Loss Per Common Share
                Loss per  share is based  upon the  weighted  average  number of
                shares  outstanding  during each period. All share and per share
                amounts  give  effect  to a  1-for-25  reverse  stock  split  in
                October, 1996.

                Statements of Cash Flows
                For  purposes  of the  statements  of cash  flows,  the  Company
                considers all highly liquid debt  instruments  purchased  with a
                maturity of three months or less to be cash  equivalents.  There
                were no cash equivalents at October 31, 1997 or 1996.

                Financial  Instruments and Credit Risks The carrying  amounts of
                cash,  accounts  receivable,  and  accounts  payable and accrued
                expenses approximate fair value. However, it was not practicable
                to  estimate  the fair value of other  financial  instruments  -
                principally,  installment  debt and  debentures - because quoted
                market  prices do not exist  and an  estimate  could not be made
                through other means without incurring excessive costs.

                Concentrations  of credit risk with respect to  receivables  are
                limited due to the large number of customers.  As of October 31,
                1997,  the Company  had  uncollateralized  receivables  with one
                distributor  approximating $100,000, which represents 39% of the
                Company's trade accounts balance. During the years ended October
                31,  1997  and  1996,   sales  to  this  customer   amounted  to
                approximately 35% and 20%, respectively,  of the Company's gross
                sales.  No other  customer  accounted for more than 10% of gross
                sales.

NOTE 2 -        NOTES RECEIVABLE

                In efforts to  consolidate  operations,  in January,  1994,  the
                Company sold its commercial and residential  water  distribution
                business  in Utica  and  related  assets,  with a book  value of
                $120,467, to an unrelated party for $225,000 and realized a gain
                on the sale of $104,533. As part of the sales agreement, the new
                operation will purchase bottled water from the Company for three
                years.  The purchase  price was  satisfied  with two notes.  The
                first  note  is for  $50,000  without  interest,  which  will be
                converted to a three-year, 6% term loan upon repayment



                                                            23

<PAGE>


                          ECHO SPRINGS WATER CO., INC.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 -        NOTES RECEIVABLE (CONTINUED)

                of the second note  unless  repaid  sooner.  The second note was
                renegotiated in 1996 with the inclusion of approximately $24,000
                of accounts  receivable and other assets owed to the Company and
                is now  payable at $2,788 per month,  including  interest at 6%,
                through June, 2001. Note payments continue to be received by the
                Company in  accordance  with payment  terms and no provision for
                uncollectible amounts is required at this time. Sales of bottled
                water to the new  company in 1997 and 1996  amounted  to $52,337
                and $49,233, respectively.

NOTE 3 -        INVENTORIES

                Inventories consist of the following:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                                     October 31,
                                                                                             1997              1996
                           Bottles                                                        $                 $ 1,722
                           Product held for sale                                           16,585            16,415
                           Supplies                                                         9,168            16,084
                                                                                           ------            ------
                                                                                          $25,753           $34,221
                                                                                           ======            ======
NOTE 4 -        PROPERTY, PLANT AND EQUIPMENT

                Property, plant and equipment are summarized as follows:

                                                                                                   October 31,
                                                                                        1997                 1996
                           Land                                                     $  150,000           $  150,000
                           Buildings and improvements                                  362,298              362,298
                           Water coolers, bottles and
                            brewers                                                    754,084              918,730
                           Machinery and equipment                                     397,345              335,069
                           Vehicles                                                     10,500               60,850
                           Furniture and fixtures                                       77,874              127,128
                                                                                     ---------            ---------

                                                                                     1,752,101            1,954,075
                           Less: accumulated
                            depreciation and
                     amortization                                                      565,072              675,845
                                                                                     ---------            ---------
                                                                                    $1,187,029           $1,278,230
                                                                                     =========            =========
NOTE 5 -        OTHER ASSETS

                Other assets are comprised of the following:

                                                                                                     October 31,
                                                                                         1997                 1996
                Water rights                                                          $205,000             $205,000
                Accumulated amortization                                                38,405               33,529
                                                                                       -------              -------
                     Net water rights                                                  166,595              171,471
                Deposits                                                               155,499               30,537
                Deferred public offering costs                                          31,876               18,018
                                                                                       -------              -------
                                                                                      $353,970             $220,026
                                                                                       =======              =======

                Included in deposits at October 31, 1997 is $93,240 representing
                deposits  on  machinery  for a new bottle  line which is to cost
                $99,100.

                                                            24
</TABLE>

<PAGE>


                          ECHO SPRINGS WATER CO., INC.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 -        CAPITAL AND OPERATING LEASES

                Operating Leases
                The Company  leases  office and  warehouse  facilities  under an
                operating lease expiring March 31, 1998 and a second facility on
                a month to month basis.  Rental expense for office and warehouse
                facilities amounted to $76,743 in 1997 and $65,943 in 1996.

                In addition,  the Company  leases  vehicles  and various  office
                equipment  under  operating  leases that extend until  February,
                2000.   Rental  expenses  under  equipment  leases  amounted  to
                $281,089 in 1997 and $214,265 in 1996.

                The Company  entered into a 20-year  lease with an  unaffiliated
                landlord on September  14, 1994 for 41.686 acres of land located
                in the town of Edmeston, State of New York, on which are located
                two developed springs. These two springs have a combined average
                capacity of approximately  58,000,000 gallons of water per year.
                The Company applied for and received  approval from the New York
                State  Department of Health to operate the springs on August 10,
                1995. Based on the amended  agreement of July 19, 1995, rent for
                the  property  is $.005 per  gallon of water  extracted  for the
                first five years (with  minimum  rent of $300 per week) and $.01
                per gallon for the following fifteen years (with minimum rent of
                $600 per  week).  The  Company  has paid an  additional  rent of
                $21,000  during the first  year.  The  Company  has the right to
                build and  operate a  processing  plant  (which  will become the
                property of the  landlord)  on the  property,  in which case the
                rent will  increase to $.015 per gallon  extracted.  The Company
                also has the right to terminate the lease without  penalty after
                payment of rent aggregating $100,000 plus the additional $21,000
                first-year  rent,  and,  in  the  event  it  has  constructed  a
                processing plant, the right to renew the lease for an additional
                20-year  term on terms to be  agreed  upon by the  parties.  The
                Company intends, as its needs require, to utilize the water from
                these springs in its business. The water can be utilized without
                construction  of a plant and the Company has no immediate  plans
                to build a plant on this property. Rent expense under this lease
                was $19,661 and $33,426 for the years ended October 31, 1997 and
                1996, respectively.

                Minimum future lease payments are:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                             Operating Leases

                Fiscal year ending October 31,                                     Office        Equipment            Land

                1998                                                              $27,476         $ 72,340        $ 15,600
                1999                                                                                24,720          15,600
                2000                                                                                 6,180          19,500
                2001                                                                                                31,200
                2002                                                                                                31,200
                2003 and thereafter                                                                                397,800
                                                                                   ------          -------         -------
                Total minimum payments                                            $27,476         $103,240        $510,900
                                                                                   ======          =======         =======

                                                            25
</TABLE>

<PAGE>


                          ECHO SPRINGS WATER CO., INC.


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

NOTE 7 -        INDEBTEDNESS
                                                                                                  1997               1996
                                                                                                  ----               ----
                Installment Debt

                Note payable September, 1998
                 with interest at prime plus 2%,
                 secured by all assets of the Company                                          $500,000           $

                Advance payable to shareholder
                 with interest at 12% (b)                                                                          282,153

                Notes payable with interest at 18%
                 due December 31, 1995 (*)                                                      100,000            150,000

                Unsecured term loan due in monthly
                 installments of $3,000 including
                 interest through June, 1998                                                     24,000

                Mortgage note payable, with 8.0%
                 interest payable quarterly,
                 principal due December, 1995 (a)                                                                  120,000
                                                                                                -------            -------

                           TOTAL DEBT                                                           624,000            552,153

                           CURRENT PORTION                                                      624,000            552,153
                                                                                                -------            -------

                           NET LONG-TERM PORTION                                                $  -0-              $  -0-
                                                                                                =======               =====

                (a) During October, 1997, the mortgage was reduced by $45,000 to
                recover legal  expenses  incurred by the Company and expensed in
                prior  years.  Such  recovery  is  reflected  in other  expenses
                (income)  for the year  ended  October  31,  1997.  The  $75,000
                balance of the mortgage was  satisfied by the issuance of 75,000
                shares of  common  stock  valued  at $1.00  per share  (the then
                current market value).

                (b) Michael S. Rakusin, the President,  a Director and principal
                shareholder  of the Company,  advances  funds to the Company for
                working capital purposes. Such advances increase and decrease as
                funds are needed and available.  Interest  expense on such loans
                for the fiscal years ended October 31, 1997 and 1996 amounted to
                $16,847 and $18,428, respectively.

                                                                                              1997                  1996
                                                                                              ----                  ----
                Debentures
                8%  Series  D  convertible   ($12.50  of  principal  per  share)
                 subordinated debentures maturing December 31,
                 1995 (*)                                                                   $25,000               $50,000
                                                                                             ======                ======

                *Obligations  in default as to principal and interest.  Portions
                 of the debt and interest  were  converted  into common stock of
                 the Company (Note 14).


                                                            26
</TABLE>

<PAGE>


                          ECHO SPRINGS WATER CO., INC.


                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 8 -        ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                              October 31,
                                                                                       1997                 1996

                Accounts payable                                                  $  529,212           $  564,385
                Accrued expenses                                                     272,643              294,947
                Wages payable                                                         14,300               40,527
                Interest payable                                                      82,635              100,130
                Payroll taxes payable                                                450,526              461,751
                Sales taxes payable                                                   69,758               51,842
                                                                                   ---------            ---------

                                                                                  $1,419,074           $1,513,582
                                                                                   =========            =========

</TABLE>

                The Company is presently  negotiating  for  settlement  of prior
                years' unpaid payroll taxes.  No provision has been made for any
                possible interest and penalties thereon, as management is of the
                opinion that such amounts, if any, will not be material.


NOTE 9 -        COMMON STOCK

                On October 1, 1996, the stockholders approved a 1-for-25 reverse
                stock  split of the  outstanding  shares of common  stock of the
                Company.   The  par  value,   $.0001,   and  authorized  shares,
                75,000,000,  were not changed. The then outstanding common stock
                of  50,499,910  shares were  converted  to  2,019,996  shares of
                common  stock.  All  references  in the  accompanying  financial
                statements  to the number of common shares and per share amounts
                give effect to the reverse stock split.

                In partial  settlement  of prior debts,  the Company  granted an
                officer  warrants to purchase 27,759 shares of common stock at a
                price of $12.50 per share, which warrants were to expire October
                31, 1993 and were extended an additional  year in 1993. In 1994,
                the  warrants  were  extended  an  additional  two years and the
                exercise  price  reduced  to $6.25 per share and,  in 1996,  the
                warrants  were  again  extended  for two years and the  exercise
                price reduced to $4.20 per share.

                Other warrants for 20,120 shares at an excise price of $6.25 per
                share  expired as at October 31, 1996 and for 4,000 shares at an
                exercise price of $20.25 per share expired in March, 1997.










                                                            27

<PAGE>


                          ECHO SPRINGS WATER CO., INC.


                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10-        INCOME TAXES

                At  October  31,  1997,  the  estimated  maximum  amount  of net
                operating loss  carryforward  available to reduce future taxable
                income is approximately  $8,925,000,  expiring from 2004 through
                2012.  Deferred tax benefits from the use of net operating  loss
                carryforwards  of  approximately  $3,000,000  are  offset  by  a
                corresponding  amount of  valuation  allowance  since it is more
                likely  than not that all or some  portion of the  deferred  tax
                asset will not be realized.

                Tax benefits  that would have been  provided for the years ended
                October 31, 1997 and 1996 on the loss before  extraordinary gain
                of  $250,000  and  $77,800,  respectively,  and the taxes on the
                extraordinary  gain  for the  year  ended  October  31,  1996 of
                approximately   $111,800,  have  been  offset  by  corresponding
                changes in the valuation allowance.

                The approximate  amounts of net operating loss  carryforward and
                the year of expiration are as follows:

                                             Amount         Year of Expiration

                                           $  460,000             2004
                                            1,160,000             2005
                                            1,600,000             2006
                                            2,000,000             2007
                                            1,050,000             2008
                                            1,730,000             2009
                                              200,000             2010
                                              725,000             2012


NOTE 11-        LITIGATION

                The  Company  and  its  affiliates  are  defendants  in  actions
                involving a dispute  concerning  title to the Company's land and
                facility located in Burlington,  New York  ("Property") in which
                the  plaintiff  seeks a one-half  interest in the  Property  and
                $17,000,000  in damages.  All three suits have been dismissed in
                their entirety except a claim, for an unspecified  amount,  that
                the Company and the other defendants have been unjustly enriched
                at Mr. Williams' expense. Due to Mr. Williams' failure to timely
                take  proceedings  for judgment  against the Company,  it is not
                clear  whether  this  case  will  come to trial  on the  merits.
                Management is of the opinion that there is no material  exposure
                to the Company and therefore, no provision has been made for any
                possible  loss  in  the  accompanying   consolidated   financial
                statements.


NOTE 12-        GOING CONCERN

                For the year ended  October 31,  1997,  the Company  sustained a
                loss before  extraordinary  gain of $739,620  and at October 31,
                1997  had  a  working  capital  deficiency  of  $1,883,659,   an
                accumulated  deficit  of  $9,003,672  and  deficit  net worth of
                $210,406.  In addition,  the Company was in default on principal
                and  interest  payments on a portion of its debt (Note 7). These
                facts raise  substantial  doubt about the  Company's  ability to
                continue as a going concern.

                                                            28

<PAGE>


                          ECHO SPRINGS WATER CO., INC.


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 12-        GOING CONCERN (CONTINUED)

                Considerations  which tend to  mitigate  the  question  of going
                concern include management's successful efforts in raising funds
                through  private  placements,  the  ability to  renegotiate  and
                restructure  long-term financing with major creditors,  past and
                present  efforts  to convert  debt to equity and the  ability to
                acquire,  restructure  and develop the  bottled  water  business
                which it believes will be able to achieve profitable operations.
                The  Company  intends  to use a portion of the  proceeds  of the
                proposed  public  offering  (Note  14) to  seek  and  consummate
                acquisitions  of  companies  in the  bottled  water  and  allied
                products  business.  No assurance  can be given that the Company
                will be successful in identifying potential  acquisitions or, if
                made, that such  acquisitions  will have a beneficial  effect on
                the Company. The Company has no current agreement to acquire any
                business or property, or intent to acquire any specific business
                or property.  The Company  believes that these  factors  provide
                meaningful  evidence as to the Company's  ability to continue in
                operation for the next fiscal year and support the going concern
                presentation   in  the   accompanying   consolidated   financial
                statements in favor of the  liquidation  basis.  There can be no
                assurance,  however, that management will continue to be able to
                raise  sufficient  capital or convert existing debt to equity or
                to achieve profitable operations going forward.


NOTE 13-        EMPLOYMENT AGREEMENT

                In October,  1996, Michael S. Rakusin, the President, a Director
                and  principal  shareholder  of  the  Company,  entered  into  a
                three-year employment agreement with the Company, effective upon
                completion of the proposed  public  offering (Note 14). There is
                no renewal  option.  The  agreement  provides  for,  among other
                things,  an annual  salary  of  $120,000  and a  non-competition
                clause during the term of his  employment by the Company and for
                one year following the termination of such employment.

                On September 30, 1996,  the Company  issued 10,000 shares of its
                common stock at a value of $26,250  ($2.625 per share,  the then
                current market value) and on October 1, 1997, the Company issued
                190,000 shares of its common stock at a value of $166,250 ($.875
                per share,  the then  current  market  value) to Mr.  Rakusin in
                consideration  for prior services rendered by Mr. Rakusin to the
                Company.












                                                            29

<PAGE>


                          ECHO SPRINGS WATER CO., INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 14-        PROPOSED PUBLIC OFFERING

                In  June,  1996,  the  Company  entered  into   negotiations  to
                consummate  a public  offering  with minimum  gross  proceeds of
                approximately $4,000,000.  As part of the negotiations,  on June
                4, 1996, the Company asked their lenders to convert  outstanding
                debt and unpaid interest  thereon into shares of common stock of
                the  Company  at a  conversion  ratio of $2.50  per  share.  The
                lenders converted $1,700,022 of outstanding principal and unpaid
                interest of $492,984,  which was converted to 877,201  shares of
                common stock. The market value of the shares at $2.125 per share
                resulted in an  extraordinary  gain on the  restructuring of the
                debt of  $328,950.  While the  doubling  of its asset and equity
                listing  requirements during 1997 by the National Association of
                Securities Dealers Automated  Quotation System caused a delay in
                the Company's plans,  the proposed  offering is expected to take
                place during Fiscal 1998.











                                                            30

<PAGE>



Item 8.                     Changes In and Disagreements With Accountants on
                            Accounting and Financial Disclosure.

            None.
                                                     PART III

Item 9.         Directors, Executive Officers, Promoters and Control
                Persons; Compliance with Section 16(a) of the Exchange
                Act.

Directors and Executive Officers

          The  following  individuals  are the present  directors  and executive
officers of the Company.  Each  director  will hold office until the next annual
meeting of the  shareholders  and until his successor is elected and  qualified.
Officers are elected by, and serve at the pleasure of the Board of Directors.

Name                              Age             Position


Michael S. Rakusin...........      41     President, Treasurer,
                                           and Director

Edward J. Metzger............      40     Vice President-
                                          Operations, Secretary,
                                          and Director

Frank A. LaSala.............       74     Director


          Michael S. Rakusin is a founder of the Company and has been
President and a Director since inception, and Treasurer since 1987.
He was appointed Secretary in June, 1987; Executive Vice President
in November, 1988; and President in April, 1991.  From 1984 to
March, 1987, Mr. Rakusin was self-employed, rendering financial and
accounting services.  From 1976 to 1984, he was employed as an
accountant by J.M. Stern & Co., Certified Public Accountants.  Mr.
Rakusin is a Certified Public Accountant in the State of New York.
He earned a Bachelor of Business Administration Degree from the
City University of New York in 1976.

          Edward J. Metzger joined the Company in July, 1992 as Vice President -
Operations. He was elected a Director in October, 1996. From 1988 to July, 1992,
he was Senior Vice President of Berkshire  Springs of N.J.,  Inc.  ("Berkshire")
(doing  business  as Stony  Brook  Spring  Water) in  charge of all  operations,
including routes, customer service, cooler repair and warehouse activities.  The
assets of Berkshire were acquired by the Company in July, 1992.

          Frank A. LaSala has been a Director of the Company since
October, 1996.  Mr. LaSala has been a principal of his own
business, Sal-Ma Instruments Corporation, a company engaged in

                                                        31

<PAGE>



manufacturing sophisticated machinery for the aerospace industry,
for the past 45 years.



Item 10.                  Executive Compensation

          The following table provides  certain summary  information  concerning
the  compensation  paid or accrued  by the  Company to or on behalf of its Chief
Executive  Officer  and the other  named  executive  officer of the  Company for
services  rendered in all capacities to the Company and its subsidiaries for the
fiscal years ended October 31, 1997, 1996 and 1995.

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Summary Compensation Table


Name and Principal                                                             Long-Term Compensation
Position                                       Annual Compensation                 Awards Payouts
                                      Other
                                                                 Annual      Restricted                                   All Other
                                                                Compen-         Stock          Options/        LTIP        Compen-
                                 Year         Salary   Bonus     sation       Award(s)           SARs        Payouts        sation
                                 ----         ------   -----     ------       --------           ----        -------        ------
Michael S. Rakusin               1997         $90,400    -         -              -               -             -        $166,250(1)
  President
                                 1996         $80,200    -         -              -               -             -         $26,250(2)
                                 1995         $81,288    -         -              -               -             -             -

Edward J. Metzger                1997         $83,200    -         -              -               -             -             -
  Vice President
                                 1996         $80,200    -         -              -               -             -             -
                                 1995         $83,000    -         -              -               -             -             -




</TABLE>

(1)       On October 1, 1997,  the Company  issued  190,000 shares of its Common
          Stock,  valued at  $166,250  ($0.875  per  share),  to Mr.  Michael S.
          Rakusin,  the President,  a Director and principal  shareholder of the
          Company in consideration for prior services rendered by Mr. Rakusin to
          the Company.

(2)       On September 30, 1996,  the Company issued 10,000 shares of its Common
          Stock, valued at $26,250 ($2.625 per share), to Mr.Michael  S.Rakusin,
          the President,  a Director and principal shareholder of the Company in
          consideration  for  prior  services  rendered  by Mr.  Rakusin  to the
          Company.



                                                        32

<PAGE>



          For the fiscal  years ended  October  31,  1997 and 1996,  none of the
directors of the Company have received or were accrued  compensation of any kind
for their services  rendered in such  capacities to the Company.  As of December
31, 1997,  there are no  outstanding  options or warrants held by any officer or
director of the Company  except for  warrants  held by Michael S.  Rakusin,  the
President,  a Director and  principal  shareholder  of the Company,  to purchase
27,759 shares of Common Stock at $4.20 per share.  These warrants were issued in
October, 1990 and expire on October 31, 1998.
          Michael  S.  Rakusin,   the   President,   a  Director  and  principal
shareholder of the Company,  has entered into a three-year  employment agreement
with the  Company in  October,  1996 which will  commence  on the closing of the
proposed public  offering.  There is no renewal option.  The agreement  provides
for,  among other  things,  an annual  salary of $120,000 and a  non-competition
clause  during the term of his  employment  by the  Company and for one (1) year
following the termination of such employment.

          The  Company  has  no  standard  arrangement  pursuant  to  which  its
directors are  compensated in their capacity as directors.  The Company does not
have a compensation or audit committee of the Board.

Item 11.                       Security Ownership of Certain Beneficial Owners
                               and  Management.

           The following table sets forth as of December 31, 1997, the number of
shares of Common  Stock of the  Company and the  percentage  of that class owned
beneficially,  within the meaning of Rule 13d-3  promulgated  under the Exchange
Act,  and  the  percentage  of the  Company's  voting  power  owned  by (i)  all
shareholders  known by the Company to beneficially own more than five percent of
the  Company's  Common Stock;  (ii) each director of the Company;  and (iii) all
directors and officers as a group.  All shares set forth in the following  table
are  entitled  to one vote per share and the named  beneficial  owners have sole
voting and investment  power.  Each  percentage set forth in the following table
assumes the exercise of all stock options exercisable by the named individual or
group as of December 31, 1997 or within 60 days thereafter.

Name and Address            Number of Shares
of Beneficial Owner(1)   Owned Beneficially(2)        Percentage

Michael S. Rakusin           427,759(3)                11.1%

Edward J. Metzger              6,800                    0.2%

Frank A. LaSala                1,920                    0.1%





                                                        33

<PAGE>



ESWC, Inc.
149 Main Street
Cooperstown,
NY  11326                       210,243                      5.5%

H.T. Ardinger, Jr.
9040 Governors Row
Dallas, TX 75247                364,000                      9.5%

Robert Moody, Jr.
601 Moody National
 Bank Tower
Galveston, TX 77550            205,323                       5.4%

Robert P. Gillings
7423 Ridge Boulevard
Brooklyn, NY 11209             290,000                       7.6%

All Officers and
Directors as a
Group (three persons)         436,479(3)                     11.3%

--------------

(1)      Unless otherwise  indicated,  the address of each shareholder listed is
         c/o Echo Springs Water Co.,  Inc.,  Building 100A,  Hackensack  Avenue,
         Kearny, NJ 07032.

(2)      Pursuant to the rules and regulations of the Securities and
         Exchange Commission, shares of Common Stock that an individual
         or group has a right to acquire within 60 days pursuant to the
         exercise of warrants are deemed to be outstanding for the
         purposes of computing the percentage ownership of such
         individual or group, but are not deemed to be outstanding for
         the purposes of computing the percentage ownership of any
         other person shown in the table.

(3)      Includes  27,759 shares of common stock  issuable  pursuant to warrants
         exercisable at $4.20 per share and expiring on October 31, 1998.


Item 12.        Certain Relationships and Related Transactions

           On September 30, 1996, the Company issued 10,000 shares of its Common
Stock,  valued at $26,250  ($2.625 per share),  to Mr.  Michael S. Rakusin,  the
President,  a Director and principal shareholder of the Company in consideration
for prior services rendered by Mr. Rakusin to the Company.

           On October 1, 1996, the Company entered into a three-year
employment agreement with Mr. Rakusin.  See "Executive
Compensation."


                                                        34

<PAGE>



           On October 1, 1996, the Company  extended Mr.  Rakusin's  warrants to
purchase 27,759 shares of the Company's  Common Stock,  from October 31, 1996 to
October 31, 1998 and established an exercise price of $4.20.

           At October 31, 1996, Mr. Rakusin, had advanced a total of $282,153 to
the Company,  evidenced by the Company's 12% note payable to Mr. Rakusin,  which
funds were used by the  Company  for  working  capital.  These  funds were fully
repaid by the Company to Mr.  Rakusin  during the fiscal year ended  October 31,
1997.

           On October 1, 1997,  the Company  issued 190,000 shares of its Common
Stock,  valued at $166,250  ($0.875 per share),  to Mr. Michael S. Rakusin,  the
President,  a Director and principal shareholder of the Company in consideration
for prior services rendered by Mr.
Rakusin to the Company.


                                                      PART IV

Item 13.        Exhibits and Reports on Form 8-K.

Schedules and Reports on Form 8-K


(A)(1)            The following  financial  statements  are included in Part II,
                  Item 7:

Independent Auditors' Report

Consolidated Balance Sheets as at October 31, 1997 and 1996.

Consolidated Statements of Operations for the Years Ended October
   31, 1997 and 1996

Consolidated Statements of Shareholders' Equity (Deficiency) for
  the Years Ended October 31, 1997 and 1996

Consolidated Statements of Cash Flows for the Years Ended October
   31, 1997 and 1996

Notes to Consolidated Financial Statements

Schedules  are  omitted  for the  reason  that  they are not  required,  are not
applicable,  or the required information is shown on the financial statements or
notes thereto.

(B) Reports on Form 8-K - Not applicable.
(C)      Exhibits.  The  following  exhibits are filed as part of the  Company's
         report. Where such filing is made by incorporation by reference (I/B/R)
         to a previously filed statement or report,  such statement or report is
         identified in parenthesis.



                                                        35

<PAGE>



Official Exhibit

Number                     Description


[3](a)                     Certificate  of  Incorporation   and  all  amendments
                           thereto,   incorporated  by  reference  to  the  same
                           exhibit number to the  Registrant's  Annual Report on
                           Form 10-KSB for the year ended October 31,
                           1996

[3]                        (b)  By-Laws,  incorporated  by reference to the same
                           exhibit number to the  Registrant's  Annual Report on
                           Form 10- KSB for the year ended October 31, 1996

[4]                        Form of Common  Stock  Certificate,  incorporated  by
                           reference   to  the  same   exhibit   number  to  the
                           Registrant's  Annual  Report on Form  10-KSB  for the
                           year ended October 31, 1996

[10]                       Form of Employment Agreement with Michael S. Rakusin,
                           incorporated  by reference to the same exhibit number
                           to the Registrant's  Annual Report on Form 10-KSB for
                           the year ended October 31,
                           1996

[27]           Financial Data Schedule



                                              36

<PAGE>


                                          SIGNATURES

           Pursuant to the  requirements  of Section 13 or 15(d) of the Exchange
Act,  Echo  Springs  Water Co.,  Inc. has caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.

Dated: February 11, 1998

                           ECHO SPRINGS WATER CO., INC.


                           By:/s/   Michael S. Rakusin
                                    President


           Pursuant to the  requirements  of the Exchange  Act,  this report has
been  signed by the  following  persons on behalf of the  Registrant  and in the
capacities and on the date indicated:


Name                            Titles                     Date



/s/ Michael S. Rakusin   President and Director          February 11, 1998
Michael S. Rakusin       Principal Executive,
                         Operating and Financial
                         Officer

Edward J. Metzger      Vice President, Secretary       February 11, 1998
Edward J. Metzger        and Director


Frank A. LaSala         Director                        February 11, 1998
Frank A. LaSala











<PAGE>