SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB


            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                     For the Quarter Ended January 25, 1997
                           Commision File No. 0-25686

                           VERMONT PURE HOLDINGS, LTD

             (Exact name of registrant as specified in its charter)

              Delaware                                         06-1325376
    (State or other jurisdiction of                         (I.R.S. Employer
     incorporation or organization)                        Identification No.)

     Route 66; PO Box C; Randolph,  VT                           05060
  (Address of principal executive offices)                     (Zip Code)

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

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

                  Yes        X                                No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                                                             Outstanding at
            Class                                             March 7, 1997

Common Stock, $.001 Par Value                                   9,678,268



<PAGE>


                   VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY

                                      INDEX
<TABLE>
<CAPTION>

                                                                                        Page Number
<S>                                                                                     <C>
Part I - Financial Information

         Item 1.           Financial Statements

                           Consolidated Balance Sheet as at
                           January 25, 1997 (unaudited) and
                           October 26, 1996                                                       3

                           Consolidated Statement of Operations
                           (unaudited) for the Three Months
                           ended January 25, 1997 and January 27, 1996                            4

                           Consolidated Statement of Cash Flows
                           (unaudited) for the Three Months Months ended
                           January 25, 1997 and January 27, 1996                                  5

                           Notes to Consolidated Financial Statements
                           (unaudited)                                                         6 - 7

         Item 2.           Management's Discussion and Analysis of
                           Financial Condition and Results of
                           Operations                                                          8 - 9

Part II - Other Information                                                                       10

         Item 1.           Legal Proceedings

         Item 2.           Changes in Securities                                               10-11

         Item 3.           Defaults upon Senior Securities                                        11

         Item 4.           Submission of Matters to a Vote of Security Holders                    11

         Item 5.           Other Information                                                      11

         Item 6.           Exhibits and Reports on Form 8-K                                       11

                           Signature                                                              12


         Exhibit Index                                                                            13

         10.1              Consulting Agreement between the Company and Corporate 
                              Investors Network, Inc. dated December 1, 1996

         10.2              Warrant Agreement between the Company and Eugene F. Malone
                              dated December 1, 1996

         27                Financial Data Schedule 
</TABLE>

<PAGE>


PART I - Item 1

                                  VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY

                                          CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                      January 25,           October 26,
                                                                                        1997                   1996
                                                                                      -----------           -----------
                                                                                      (UNAUDITED)
                                                     ASSETS
<S>                                                                               <C>                  <C>

CURRENT ASSETS:
        Cash                                                                      $     706,976        $       783,081
        Accounts receivable                                                             997,384              1,159,806
        Inventory                                                                       799,202                783,156
        Other current assets                                                            201,754                159,145
                                                                                     -----------            -----------
           TOTAL CURRENT ASSETS                                                       2,705,316              2,885,188
                                                                                     -----------            -----------
PROPERTY AND EQUIPMENT - net of accumulated depreciation                              5,563,243              5,536,185
                                                                                     -----------            -----------

OTHER ASSETS:
        Intangible assets - net of accumulated amortization                           1,282,483              1,317,082
        Other assets                                                                    109,584                232,939
                                                                                     -----------            -----------
                                                                                      1,392,067              1,550,021
                                                                                     -----------            -----------
                                                                                  $   9,660,626        $     9,971,394
                                                                                     ===========            ===========
                                       LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
        Accounts payable                                                          $     719,417        $       879,669
        Customer deposits                                                               419,767                421,137
        Accrued expenses                                                                622,107                446,507
        Line of credit                                                                  797,127                441,811
        Current portion of long term debt                                               197,239                197,239
        Current portion of obligations under capital lease                              180,183                180,183
                                                                                     -----------            -----------
           TOTAL CURRENT LIABILITIES                                                  2,935,840              2,566,546

        Long term debt                                                                2,769,587              2,779,408
        Obligations under capital lease                                                  98,945                 98,945
                                                                                     -----------            -----------
           TOTAL LIABILITIES                                                          5,804,372              5,444,899
                                                                                     -----------            -----------
STOCKHOLDERS' EQUITY:
        Common stock - $.001 par value, 20,000,000                                        9,678                  9,678
          authorized shares, 9,678,268 issued and outstanding
          shares at October 26, 1996 and January 25, 1997
        Paid in capital                                                              21,399,420             21,399,420
        Accumulated deficit                                                         (17,552,844)           (16,882,603)
                                                                                    ------------           ------------
           TOTAL STOCKHOLDERS' EQUITY                                                 3,856,254              4,526,495
                                                                                    ------------           ------------
                                                                                  $   9,660,626        $     9,971,394
                                                                                    ============           ============

</TABLE>

                                       3
                       See notes to financial statements





<PAGE>



                                  VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY

                                      CONSOLIDATED STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>


                                                                                                Three months ended
                                                                                                ------------------
                                                                                    January 25,                    January 27,
                                                                                       1997                           1996
                                                                                    -----------                    -----------
                                                                                    (Unaudited)                    (Unaudited)
<S>                                                                             <C>                          <C>

SALES                                                                           $    2,315,415               $      1,270,031

COST OF GOODS SOLD                                                                   1,230,895                        791,235
                                                                                    -----------                    -----------
GROSS PROFIT                                                                         1,084,520                        478,796
                                                                                    -----------                    -----------
OPERATING EXPENSES:
          Selling, general and administrative expense                                1,237,486                        786,156
          Advertising expenses                                                         420,656                        403,844
          Amortization                                                                  34,599                         22,851
                                                                                    -----------                    -----------
TOTAL OPERATING EXPENSES                                                             1,692,741                      1,212,851
                                                                                    -----------                    -----------
PROFIT (LOSS) FROM OPERATIONS                                                         (608,221)                      (734,055)
                                                                                    -----------                    -----------
OTHER INCOME (EXPENSE):
          Interest - net                                                               (72,991)                       (22,269)
          Miscellaneous                                                                 10,971                           (835)
                                                                                    -----------                    -----------
TOTAL OTHER INCOME (EXPENSE)                                                           (62,020)                       (23,104)
                                                                                    -----------                    -----------
NET  PROFIT (LOSS)                                                              $     (670,241)               $      (757,159)
                                                                                    ===========                    ===========

NET PROFIT (LOSS) PER SHARE                                                             ($0.07)                        ($0.08)
                                                                                    ===========                    ===========

Weighted Average Shares Used in Computation                                          9,678,268                      9,678,268
                                                                                    ===========                    ===========


</TABLE>


                                       4
                       See notes to financial statements


<PAGE>

                                VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY

                                   CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                Three months ended
                                                                                                ------------------
                                                                                     January 25,                   January 27,
                                                                                        1997                          1996
                                                                                     -----------                   -----------
                                                                                     (UNAUDITED)                   (UNAUDITED)
<S>                                                                             <C>                           <C>


CASH FLOWS FROM OPERATING ACTIVITIES:
         Net loss                                                               $      (670,241)              $       (757,159)
         Adjustments to reconcile net loss to net cash from operating activities:
           Depreciation                                                                 175,734                        135,153
           Amortization                                                                  34,599                         22,851
           (Gain) loss on disposal of property and equipment                            (10,248)                             0
                                                                                     -----------                    -----------
                                                                                       (470,156)                      (599,155)

         Changes in assets and liabilities:
           (Increase) Decrease in accounts receivable                                   162,422                        112,561
           (Increase) Decrease in inventory                                             (16,046)                        79,990
           (Increase) Decrease in other current assets                                  (42,609)                        75,633
           (Increase) Decrease in other  assets                                         123,355                            545
           (Decrease) Increase in accounts payable                                     (160,252)                       (26,489)
           (Decrease) Increase in customer deposits                                      (1,370)                         1,204
           (Decrease) Increase in accrued expenses                                      175,600                       (161,774)
                                                                                     -----------                    -----------
CASH USED IN OPERATING ACTIVITIES                                                      (229,056)                      (517,485)
                                                                                     -----------                    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
         Purchase of property, plant and equipment                                     (209,180)                       (65,858)
         Proceeds from sale of fixed assets                                              16,636                          1,074
                                                                                     -----------                    -----------
CASH USED IN INVESTING ACTIVITIES                                                      (192,544)                       (64,784)
                                                                                     -----------                    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
         Proceeds from line of credit                                                   355,316                        255,858
         Proceeds from debt                                                             110,725                              0
         Principal payments of debt                                                    (120,546)                       (98,363)
                                                                                     -----------                    -----------
CASH PROVIDED BY FINANCING ACTIVITIES                                                   345,495                        157,495
                                                                                     -----------                    -----------

NET INCREASE (DECREASE) IN CASH                                                         (76,105)                      (424,774)

CASH - Beginning of period                                                              783,081                      1,543,260
                                                                                     -----------                    -----------
CASH  - End of period                                                           $       706,976               $      1,118,486
                                                                                     ===========                    ===========


Cash paid for interest                                                          $        87,410               $         16,835
                                                                                     ===========                    ===========

</TABLE>

                                       5
                       See notes to financial statements

<PAGE>


                   VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


1.       BASIS FOR PRESENTATION

         The accompanying  unaudited consolidated financial statements have been
         prepared in accordance with Form 10-QSB instructions and in the opinion
         of  management  contain  all  adjustments  (consisting  of only  normal
         recurring accruals) necessary to present fairly the financial position,
         results of operations,  and cash flows for the periods  presented.  The
         results  have  been  determined  on the  basis  of  generally  accepted
         accounting  principles and practices applied consistently with the Form
         10-KSB for the year ended October 26, 1996.

         Certain information and footnote  disclosures  normally included in the
         financial  statements  presented in accordance with generally  accepted
         accounting  principles have been condensed or omitted. The accompanying
         consolidated  financial  statements  should be read in conjunction with
         the financial  statements and notes thereto  incorporated  by reference
         from the  Company's  Form  10-KSB and Annual  Report for the year ended
         October 26, 1996.

2.       LONG TERM DEBT

         The Company  acquired  additional  manufacturing  equipment  during the
         first quarter of fiscal year 1997 with an estimated  value of $170,000.
         Approximately  $110,000 of this was  financed by CFX Bank for a term of
         three years at an annual percentage rate of 9.86%.

3.       CONTINGENCIES

         A. Former Distributor
         In August 1994, an action was brought by a former distributor  alleging
         that  the  Company  breached  an  oral   distribution   arrangement  by
         terminating  its  relationship,  refusing to continue to supply it with
         the Company's products and by allowing another  distributor to sell the
         Company's  products  within its alleged  territory.  The distributor is
         seeking monetary damages and injunctive relief. The Company has certain
         defenses  against  the claim  and  counterclaims  which it will  assert
         against the distributor at the appropriate time.

         B. Former Employees
         On March 1, 1996 the Company brought suits against two former employees
         alleging that they had breached their agreements with the Company.  The
         suits seek permanent  injunctive  relief and damages.  On April 1, 1996
         the Company was granted a preliminary  injunction  in Vermont  Superior
         Court  that  prevented  them  from pursuing ventures competitive to the

                                        6

<PAGE>



         Company.   A  future   hearing  will  address  the  permanency  of  the
         injunction.  Subsequently,  both employees filed counterclaims  against
         the Company seeking monetary damages.  The Company has certain defenses
         arising  out of its claims  against the  employees  that it will assert
         when necessary.

4.       SUBSEQUENT EVENTS

         A. Asset Purchase
         On  February  19,  1997 the  Company  entered  into an  Asset  Purchase
         Agreement to purchase  certain assets  associated with the distribution
         of water to homes and offices.  The  purchase  price of these assets is
         $580,000.  Chittenden Bank has approved financing of up to $325,000 for
         the purchase as an extension of the Company's  existing loan for a 1996
         acquisition. After the new borrowing, the principal balance of the note
         is  estimated to be  $1,520,000.  It matures on May 1, 1999 when a lump
         sum payment of approximately $1,150,000 is due. In conjunction with the
         approval of the  increase in  borrowing,  Chittenden  Bank  lowered the
         interest  rate on the note from  1.75% to 1.5% over the prime  rate and
         approved  the  existing  line of credit for a one year renewal with the
         same decrease in interest rate.

         B. Litigation Settlement
         On February 24, 1997 the Company  reached a settlement  with one of the
         two former employees  involved in ongoing  litigation with the Company.
         The settlement had no material financial impact on the Company and both
         parties agreed to release their claims against each other.






















                                        7

<PAGE>




PART I - Item 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following  discussion and analysis  should be read in  conjunction  with the
financial statements and notes thereto as filed in the Company's Form 10-KSB for
the year ended October 26, 1996.

                              Results of Operations

Sales - Sales for the first  quarter  of fiscal  year 1997 were  $2,315,415,  an
increase of $1,045,384 or 82% over the $1,270,031 reported for the corresponding
period last year.  Excluding sales attributable to the western New York division
that was  acquired  on May 1, 1996,  first  quarter  sales were  $1,834,734,  an
increase of $564,703 or 44% over the corresponding period last year. Total sales
for the new  division for the quarter  were  $480,681.  In addition to the sales
attributable to the new division,  sales of  retail-sized  products and home and
office  deliveries  in  Vermont  and  New  Hampshire   increased  53%  and  25%,
respectively.

Cost of Goods Sold - For the first  quarter,  Cost of Goods Sold  increased from
$791,235 in fiscal year 1996 to  $1,230,895  in fiscal  year 1997  resulting  in
gross profits of $478,796, or 38% of sales, and $1,084,520,  or 47% of sales for
the respective  periods.  The increase in gross profit of $605,724 was due to an
increase in sales volume and a  considerable  decrease in raw material  pricing.
During the quarter, the Company entered into a bottle supply agreement to source
all of its  PETE  bottles  for the  next  three  years.  Although  the  contract
significantly lowers the base price of the bottles,  prices are dependant on the
market  costs of resin,  and  therefore  the  stability of these costs cannot be
guaranteed.  Significant  price  fluctuations  in the  future  could  result  in
corresponding  positive  or  negative  effects  on cost of goods  sold and gross
profit.

Operating  Expenses - For the first  quarter of fiscal year 1997 compared to the
corresponding  period  in  fiscal  year  1996,  total  operating  expenses  were
$1,692,741  and  $1,212,851,  respectively,  an  increase of  $479,890,  or 40%.
Excluding  operating  expenses  attributable  to the western  New York  division
acquired  in  May,  1996,  total  operating  expenses  increased  by 15% for the
quarter.  Selling, general and administrative expenses increased by $451,330 for
the first  quarter of fiscal year 1997.  The  increase in these costs was due to
the  operation  of  the  new  division.  In  addition  to  ongoing  selling  and
administration  expenses,  there  were  startup  and  conversion  costs  for the
organization  of  the  division.  Total  selling,  general,  and  administrative
expenses  associated  with this division were  $294,166,  for the first quarter.
Exclusive  of  this  amount,  selling,   general,  and  administrative  expenses
increased 20% for the quarter as a result of increased sales volume. Advertising
expenses  increased  by  $16,812,  or  4%,  for  the  quarter  compared  to  the
corresponding  period of fiscal 1996.  Reduced event sponsorship costs accounted
for a  significant  decrease  in costs for the period  while  promotional  costs
related  to  increased  volume  were  responsible  for  increased  costs for the
quarter.

                                        8

<PAGE>



Given the competitive  nature of the industry,  the Company  anticipates that it
will continue to spend  significant  amounts in the future for  advertising  and
promotion as it  continues  to develop  brand  recognition  and increase  market
penetration.

Loss From Operations - Loss from operations for the first quarter of fiscal year
1997 was  $608,221,  as compared to  $734,055  for the same period last year,  a
decrease  of  $125,834  or 17%.  The  decrease  in the loss for the  quarter  is
attributable  to the  increase in sales  coupled  with a decrease  in  packaging
costs. The Company plans to continue to create greater consumer awareness and to
find alternate  distribution channels for its retail product and expand its home
and office  distribution which is a higher margin,  less cyclical  business.  No
assurance can be given that this plan will be successful.

Net Loss - The  Company's  net loss for the first  three  quarter of fiscal year
1997 was $670,240 compared to $757,159 for the  corresponding  period last year,
an improvement of $86,919 or 11%. Net interest expense increased to $72,991 from
$22,269 for the  corresponding  quarter of the prior  fiscal year as a result of
increased borrowing to fund operations through a bank line of credit and finance
the acquisition of assets in western New York.


                         Liquidity and Capital Resources

As of January 25, 1997,  the Company had a working  capital  deficit of $230,524
compared to positive  working  capital of $318,642 at the end of its fiscal year
on October 26,  1996.  Largely as a result of the  reduction in the net loss for
the  quarter,  cash flow from  operations  showed an  improvement  for the first
quarter as compared to the  corresponding  period in 1996.  The net cash outflow
improved to $76,105 from $424,774,  for those respective periods.  The Company's
primary   requirements  for  capital  continue  to  be  for  the  marketing  and
promotional  activities needed to effect market penetration and expand sales and
acquire operating assets needed to accommodate the growth of the business. These
requirements  will result in continued  net cash outflows  until sales  increase
sufficiently to offset the Company's operating costs.

The decrease in working capital of $549,166 reflects the use of cash to fund the
operating loss and purchase equipment as well as scheduled debt repayment. As of
January  25,  1997 the  Company  had  borrowed  $797,127  on its line of  credit
compared to $441,811 at the beginning of the fiscal year. The maximum  available
to borrow as of that date was $883,601,  based on the level of  receivables  and
inventory.  The Company pays interest on any outstanding  principal at the prime
rate as  published in the Wall Street  Journal plus 1.75%,  which was 10.00% per
annum on March 7, 1997.  The loan  facility  is  secured  by all the  inventory,
receivables  and intangible  assets of the Company.  It was renewed on April 26,
1996 under the terms of the original agreement and expires June 1, 1997.

The  Company  has  reduced  its  cash  usage  over the last  year.  The  Company
anticipates  that its working  capital  position will improve in future quarters
and is adequate to fund operations though it may become necessary for it to seek
additional  sources of working  capital  later in 1997.  If this is the case, no
assurances  can be  given  that  the  Company  will  find a  source  to  provide
additional working capital under terms acceptable to the Company.

                                        9

<PAGE>



PART II - Other Information

Item 1 - Legal Proceedings

         In  February  1996,  the Company  commenced  an action  against  Robert
         Beattie and John  Maguire,  two former  employees  of the  Company,  in
         Orange  Superior  Court in the State of Vermont  (Vermont Pure Springs,
         Inc. v. Robert Beattie and John Maguire,  Docket No. S-33- 2-96 Occv.).
         The Company alleged that the defendants  breached their contractual and
         common law obligations  concerning unfair  competition and preservation
         of Company trade  secrets.  The Company  sought  damages and injunctive
         relief.   On  April  1,  1996  the  Orange  Superior  Court  entered  a
         preliminary   injunction  against  both  defendants  prohibiting  their
         participation  in a competing  venture known as  Montpelier  Springs or
         disclosing  any  confidential  information  of the  Company  to a third
         party. The Court denied the Company's request for a writ of attachment.
         Mr. Maguire filed a counterclaim  and a third party  complaint  against
         the Company and the Company's  President seeking  compensatory  damages
         and punitive  damages of not less than $250,000 and attorneys' fees for
         alleged  breach of contract and unfair trade  competition.  Mr. Beattie
         also filed a counterclaim  seeking  unspecified  damages and attorneys'
         fees.  The  action,  with  respect  to Mr.  Maguire,  is  still  in the
         discovery  phase  and  it is unclear  when it will  proceed to trial on
         the  merits.   The  Company  does  not  believe   that  Mr.   Maguire's
         counterclaims  have any merit and intends to pursue the  litigation and
         defend itself vigorously.

         On  February  24,  1997,  the  Company  reached a  settlement  with Mr.
         Beattie. The settlement resulted in no material financial impact to the
         Company and both parties  agreed to release  their claims  against each
         other.


Item 2 - Changes in Securities

(a)      None

(b)      None

(c)      On December  1, 1996,  the Company  granted a warrant  covering  20,000
         shares of its Common Stock to the  president  of an investor  relations
         firm,  in  connection  with  consulting  services to be provided by the
         investor  relations  firm pursuant to a consulting  agreement  with the
         Company dated as of December 1, 1996.

         The warrant is  exercisable  (i) with respect to 5,000 shares of Common
         Stock,  for $2.00 per share at such time as the Company's  Common Stock
         has a last sale price, as reported by the NASDAQ Stock Market,  Inc. or
         any national exchange on which the Common Stock is traded,  equal to or
         in excess of $2.00 for five consecutive  trading days at any time prior
         to December 1, 1999, (ii) with respect to an additional 5,000 shares of
         Common Stock,  for $3.00 per share at such time as the Company's Common
         Stock  has a last  sale  price  equal to or in excess of $3.00 for five
         consecutive trading days prior to December 1, 1999 (iii) with

                                       10

<PAGE>



         respect to an additional  5,000 shares of Common  Stock,  for $4.00 per
         share at such time as the Company's  Common Stock has a last sale price
         equal to or in excess of $4.00 for five consecutive  trading days prior
         to December 1, 1999 and (iv) with respect to the remaining 5,000 shares
         of Common  Stock,  for  $5.00  per share at such time as the  Company's
         Common  Stock has a last sale price  equal to or in excess of $5.00 for
         five consecutive trading days prior to December 1, 1999. If none of the
         shares of Common Stock become  purchasable  under the warrant  prior to
         December 1, 1999, then the warrant shall terminate in full.  Otherwise,
         shares  subject to the  warrant may be  purchased  for a period of five
         years  from the date  that the  shares  of Common  Stock  first  become
         purchasable.

         The issuance was made in reliance upon the exemption from  registration
         set forth in Section 4(2) of the Securities  Act,  relating to sales by
         an issuer not involving any public offering.

Item 3 - Defaults upon Senior Securities

         None

Item 4 - Submission of Matters to a Vote of Security Holders

         None

Item 5 - Other Information

         None

Item 6 - Exhibits and Reports on Form 8-K

Exhibit No.    Description

  10.1         Consulting Agreement between the Company and Corporate  Investors
                 Network, Inc. dated December 1, 1996

  10.2         Warrant Agreement between the Company and Eugene F. Malone  dated
                 December 1, 1996

  27           Financial Data Schedule


                                       11

<PAGE>




                                    SIGNATURE


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




Dated:  March 7, 1997
        Randolph, Vermont




                                        VERMONT PURE HOLDINGS, LTD.




                                         By: \ S \ BRUCE S. MACDONALD
                                         ----------------------------
                                         Bruce S. MacDonald
                                         Vice President, Chief Financial Officer
                                         (Principal Accounting Officer and
                                             Principal Financial Officer)



                                       12
<PAGE>


                                 EXHIBIT INDEX


Exhibit No.         Description

  10.1              Consulting Agreement between the Company and Corporate 
                      Investors Network, Inc. dated December 1, 1996

  10.2              Warrant Agreement between the Company and Eugene F. Malone
                      dated December 1, 1996

  27                Financial Data Schedule