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 April 26, 1997
                           Commission File No. 1-11254

                           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                                    June 6, 1997

Common Stock, $.001 Par Value                                9,716,363



<PAGE>



                   VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY

                                      INDEX

<TABLE>
<CAPTION>


                                                                                        Page Number
Part I - Financial Information
<S>      <C>               <C>                                                               <C>
         Item 1.           Financial Statements

                           Consolidated Balance Sheets as at
                           April 26, 1997 (unaudited) and
                           October 26, 1996                                                        4

                           Consolidated Statements of Operations
                           (unaudited) for the Three Months and Six Months
                           ended April 26, 1997 and April 27, 1996                                 5

                           Consolidated Statements of Cash Flows
                           (unaudited) for the Six Months ended
                           April 26, 1997 and April 27, 1996                                       6

                           Notes to Consolidated Financial Statements
                           (unaudited)                                                         7 - 9

         Item 2.           Management's Discussion and Analysis of
                           Financial Condition and Results of
                           Operation                                                         10 - 12

Part II - Other Information                                                                  13 - 14

         Item 1.           Legal Proceedings

         Item 2.           Changes in Securities

         Item 3.           Defaults upon Senior Securities

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

         Item 5.           Other Information

         Item 6.           Exhibits and Reports on Form 8-K

                           Signature                                                              15

</TABLE>
                                        2

<PAGE>



                                                                    Page Number

Exhibit Index                                                            16

         Asset Purchase Agreement dated February 19, 1997 between
         Vermont Pure Springs, Incorporated and Greatwater Refreshment
         Services, Incorporated

                                        3

<PAGE>

                                     VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY

                                             CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                    April 26,                    October 26,
                                                                                       1997                           1996
                                                                       ------------------------------------------------------------
                                                                                   (Unaudited)

                                                                 ASSETS

CURRENT ASSETS:
<S>                                                                     <C>                            <C>

            Cash                                                         $          540,825             $         783,081
            Accounts receivable                                                   1,711,130                     1,159,806
            Inventory                                                               554,981                       783,156
            Other current assets                                                    160,201                       159,145
                                                                          -------------------           -------------------

              TOTAL CURRENT ASSETS                                                2,967,137                     2,885,188
                                                                          --------------------          -------------------

PROPERTY AND EQUIPMENT - net of accumulated depreciation                          5,649,885                     5,536,185
                                                                          ------------------           -------------------

OTHER ASSETS:
            Intangible assets - net of accumulated amortization                   1,832,708                     1,317,082
            Other assets                                                             25,589                       232,939
                                                                           -------------------           -------------------

              TOTAL OTHER ASSETS                                                  1,858,297                     1,550,021
                                                                           -------------------           -------------------

TOTAL ASSETS                                                             $       10,471,319             $       9,971,394
                                                                           ===================           ===================

                                                          LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
            Accounts payable                                             $        1,317,108             $         879,669
            Customer deposits                                                       518,664                       421,137
            Accrued expenses                                                        507,289                       446,507
            Line of credit                                                          552,616                       441,811
            Current portion of long term debt                                       313,834                       197,239
            Current portion of obligations under capital lease                       63,588                       180,183
                                                                           -------------------           -------------------

              TOTAL CURRENT LIABILITIES                                           3,273,099                     2,566,546

            Long term debt                                                        3,120,463                     2,779,408
            Obligations under capital lease                                          57,848                        98,945
                                                                           -------------------           -------------------

              TOTAL LIABILITIES                                                   6,451,410                     5,444,899
                                                                           -------------------           -------------------

STOCKHOLDERS' EQUITY:
            Common stock - $.001 par value, 20,000,000                                9,716                         9,678
              authorized shares, 9,678,268 issued and outstanding
              shares at October 26, 1996  and 9,716,363 issued and
              outstanding shares at April 26, 1997
            Paid in capital                                                      21,499,381                    21,399,420
            Accumulated deficit                                                 (17,485,188)                  (16,882,603)
                                                                           -------------------           -------------------

              TOTAL STOCKHOLDERS' EQUITY                                          4,023,909                     4,526,495
                                                                           -------------------           -------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $       10,475,319             $       9,971,394
                                                                           ===================           ===================

</TABLE>

                                       4
                       SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
                                  VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY


                                    CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>


                                              Six months ended                               Three months ended
                                 -------------------------------------------------------------------------------------------------
                                       April 26,                   April 27,            April 26,                    April 27,
                                          1997                       1996                 1997                         1996
                                 -------------------------------------------------------------------------------------------------

                                     (Unaudited)                 (Unaudited)           (Unaudited)                  (Unaudited)

<S>                          <C>                         <C>                   <C>                          <C>

SALES                         $       6,531,677           $       3,585,121     $       4,216,262            $       2,315,090

COST OF GOODS SOLD                    3,089,297                   2,117,717             1,858,402                    1,326,482
                                 ------------------          ------------------    ------------------           ------------------

GROSS PROFIT                          3,442,380                   1,467,404             2,357,860                      988,608
                                 ------------------             ---------------    ------------------           ------------------

OPERATING EXPENSES:
      Selling, general and
       administrative expense         2,547,797                   1,645,742             1,310,311                      859,586
      Advertising expenses            1,265,030                     941,301               844,374                      537,457
      Amortization                       82,403                      45,702                47,804                       22,851
                                 ------------------          ------------------    ------------------           ------------------

TOTAL OPERATING EXPENSES              3,895,230                   2,632,745             2,202,489                    1,419,894
                                 ------------------          ------------------    ------------------           ------------------

PROFIT (LOSS) FROM OPERATIONS          (452,850)                 (1,165,341)              155,371                     (431,286)
                                 ------------------          ------------------    ------------------           ------------------

OTHER INCOME (EXPENSE):
            Interest - net             (151,871)                    (53,847)              (78,880)                     (31,578)
            Miscellaneous                 2,136                       3,200                (8,835)                       4,035
                                 ------------------          ------------------    ------------------           ------------------

TOTAL OTHER INCOME (EXPENSE)           (149,735)                    (50,647)              (87,715)                     (27,543)
                                 ------------------          ------------------    ------------------           ------------------

NET  PROFIT (LOSS)           $         (602,585)          $      (1,215,988)    $          67,656            $        (458,829)
                                 ==================          ==================    ==================           ==================

NET PROFIT (LOSS) PER SHARE  $               (0.06)       $              (0.13) $               0.01         $              (0.05)
                                 ==================          ==================    ==================           ==================

Weighted Average Shares Used
 in Computation                       9,687,792                   9,678,268             9,697,316                    9,678,268
                                 ==================          ==================    ==================           ==================

</TABLE>
                                       5
                       SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>

                                          VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY
                                             CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                               Six months ended
                                                                                  -------------------------------------------------
                                                                                       April 26,               April 27,
                                                                                         1997                    1996
                                                                                  -------------------------------------------------

                                                                                      (Unaudited)          (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                            <C>                  <C>

            Net loss                                                            $       (602,585)    $    (1,215,988)
            Adjustments to reconcile net loss to net cash from operating
              activities:
              Depreciation                                                               268,327             284,204
              Amortization                                                                82,403              45,702
              (Gain) loss on disposal of property and equipment                              194              (4,205)

            Changes in assets and liabilities:
              (Increase) Decrease in accounts receivable                                (462,746)           (220,131)
              (Increase) Decrease in inventory                                           249,175              93,182
              (Increase) Decrease in other current assets                                 (1,056)             80,959
              (Increase) Decrease in other  assets                                       193,126            (12,959)
              (Decrease) Increase in accounts payable                                    437,439             217,180
              (Decrease) Increase in customer deposits                                    14,015              24,679
              (Decrease) Increase in accrued expenses                                     60,782                 257
                                                                                   -----------------    ----------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                          239,074            (707,120)
                                                                                   -----------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
            Purchase of property, plant and equipment                                   (293,720)           (210,692)
            Proceeds from sale of fixed assets                                            40,500               5,117
            Cash used in acquisition                                                    (383,295)                  0
                                                                                   -----------------    ----------------
CASH USED IN INVESTING ACTIVITIES                                                       (636,515)           (205,575)
                                                                                   -----------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
            Proceeds from line of credit                                                 110,805             577,588
            Proceeds from debt                                                           435,725             140,000
            Principal payments of debt                                                  (391,345)           (411,051)
                                                                                   -----------------    ----------------
CASH PROVIDED BY FINANCING ACTIVITIES                                                    155,185             306,537
                                                                                   -----------------    ----------------

NET INCREASE (DECREASE) IN CASH                                                         (242,256)           (606,158)

CASH - Beginning of period                                                               783,081           1,543,260
                                                                                   -----------------    ----------------

CASH  - End of period                                                           $        540,825     $       937,102
                                                                                   =================    ================



Cash paid for interest                                                          $        183,772     $       101,846
                                                                                   =================    ================
</TABLE>
                                       6
                       SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>


                   VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


1.       BASIS OF 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.       ADVERTISING EXPENSES

         The Company expenses advertising costs at the time that the advertising
         begins to run.

3.       INCOME (LOSS) PER SHARE

         Income  (loss)  per share is based on the  weighted  average  number of
         common shares and dilutive common share equivalents  outstanding during
         the period.  Common share equivalents are not included for loss periods
         as such inclusion would be anti-dilutive.

4.       ACQUISITION

         On March 10, 1997, the Company completed the purchase of certain assets
         and  the  assumption  of  selected  liabilities   associated  with  the
         distribution  of water to homes and  offices in  upstate  New York from
         Greatwater  Refreshment  Services,  Inc.  (GRS).  The purchase price of
         these assets was $580,000.  Chittenden  Bank  financed  $325,000 of the
         purchase by increasing  the amount of the Company's  existing loan that
         it initially made in connection with a 1996 acquisition. The balance of
         the purchase price was settled by the assumption of selected  operating
         liabilities of $83,512,  the issuance of a note to GRS of $75,000 which
         was without interest and discounted at the Company's  borrowing rate of
         10%, and the issuance of 38,095 shares of the Company's common stock at
         market value of $100,000, or $2.625

                                        7

<PAGE>



         per share, at the time of the purchase.

5.       INTANGIBLE ASSETS

         Goodwill  that  resulted  from the  acquisition  of GRS assets  will be
         amortized over 30 years and was calculated as follows:

 Purchase Price                                                        $580,000
 Acquisition Costs                                                       61,807
 Fair Value of Tangible and Identifiable Intangible Assets             (207,300)
                                                                       ---------
 Total                                                                 $434,507
                                                                       =========

         The purchase price includes  $83,512 of deposit  liability for acquired
         GRS  customers.  In  addition,  the  Company  purchased  $88,578 of GRS
         receivables  by  agreeing  to pay GRS that  amount in  weekly  payments
         cumulatively over the ten weeks following the aquisition. As of June 6,
         1997, the amount was paid in full.

         In conjunction  with the acquisition of assets during the quarter,  the
         Company entered into non-competition  agreements with two of the owners
         of GRS,  pursuant to which the owners will receive payments totaling an
         aggregate of $92,000 over two years.  The cost of these agreements will
         be  amortized  over  the two  year  non-competition  term.  The  assets
         acquired consisted primarily of bottles, coolers, vehicles, and mailing
         lists.

6.         LONG TERM DEBT

         After  increasing  the  amount  payable  under the  Company's  existing
         acquisition   note  with   Chittenden   Bank  in  connection  with  the
         acquisition  of GRS  assets,  the  principal  balance  of this note was
         $1,531,281  as of March 10, 1997. It matures on May 1, 1999 when a lump
         sum  payment  of  approximately   $1,160,000  is  due  and  payable  to
         Chittenden  Bank. 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.

7.       STOCK ISSUE

         As part of the  agreement  to  purchase  assets  from GRS,  the Company
         issued 38,095 shares of the Company's common stock at $2.625,  the fair
         market value at the time the agreement was signed. The shares remain in
         escrow pending performance of the acquired assets for one year from the
         anniversary date of the sale.

8.       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. The

                                        8

<PAGE>



         Company  does not  anticipate  that the outcome of the suit will have a
         material financial impact on the Company.

         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  the  former  employees  from
         pursuing  ventures  competitive  to the 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.

         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.

         The Company does not anticipate  that the outcome of the remaining suit
         will have a material financial impact on the Company.

9.       SUBSEQUENT EVENT

         On May 5, 1997 the Company received a commitment letter from Chittenden
         Bank to renew its present line of credit agreement under the same terms
         for a maximum of up to $1,500,000. Also, Chittenden Bank made available
         an additional  $2,500,000 with the same terms to finance  acquisitions.
         Under the commitment, the interest rate on these notes will be .5% over
         the prime rate.  The Company  expects to finalize this  agreement  with
         Chittenden Bank in the near future.















                                        9

<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.

                           Forward-Looking Statements

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

                              Results of Operations

Sales - Sales for the first six months of fiscal year 1997 were  $6,531,677,  an
increase of $2,946,556 or 82% over the $3,585,121 reported for the corresponding
period last year.  Sales for the quarter ending April 26, 1997 were  $4,216,262,
an increase of  $1,901,172  or 82% over the second  quarter of fiscal year 1996.
Excluding sales attributable to the western New York division, that was acquired
on May 1, 1996,  sales in the first six months and second quarter of fiscal 1997
were 52% and 56% over the  respective  corresponding  periods  last year.  Total
sales for the new division were  $1,085,604  and $604,923 for the six months and
three months ending April 26, 1997, respectively.

Sales for retail-size products increased  $1,739,944,  or 62%, for the first six
months of fiscal year 1997 and $1,256,065, or 67%, for the first three months of
fiscal year 1997,  compared to the respective  periods a year ago. This increase
was a result of volume  increases  related to the  introduction  of new sizes of
products and continued  growth of secondary  labels.  Average  selling price was
substantially  unchanged from the previous year. The total increase in sales, by
respective percentages for the six month and three month periods, was made up of
the following factors: 53% and 73% attributable to new product sizes, 22% and 6%
attributable  to traditional  Vermont Pure sizes,  15% and 14%  attributable  to
Hidden Spring, and 10% and 7% attributable to private labels.

Sales for the Vermont home and office division increased  $144,624,  or 20%, for
the first six  months  fiscal  year 1997 and  $64,630,  or 16%,  for the  second
quarter of fiscal  year 1997  compared to the  respective  periods for the prior
year.

Cost of Goods Sold - For the first six months, Cost of Goods Sold increased from
$2,117,717 in fiscal year 1996 to  $3,089,297  in fiscal year 1997  resulting in
gross  profits of  $1,467,404 or 41% of sales for the first six months of fiscal
year 1996,  and  $3,442,380,  or 53% of sales for the first six months of fiscal
year 1997.  The increase in gross profit was due to a  considerable  increase in
sales volume and a decrease in raw  material  pricing.  During the quarter,  the
Company completed installation of a new bottle receiving process and implemented
a new bottle supply  agreement  resulting in a significant  material savings per
case  for the  quarter  over the  comparable  period  last  year.  However,  the
Company's  bottle  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 six months of fiscal year 1997 compared to
the corresponding

                                       10

<PAGE>



period in  fiscal  year of fiscal  year  1996,  total  operating  expenses  were
$3,895,230 and $2,632,745,  respectively,  an increase of $1,262,485 or 48%. For
the second  quarter of fiscal year 1997  compared to the second  quarter of 1996
operating expenses were $2,202,489 and $1,419,894,  respectively, an increase of
$782,595,  or 55%. Selling,  general and  administrative  expenses  increased by
$902,055 for the first six months and $450,725 for the second  quarter of fiscal
year 1997. The increase in these costs was due to conversion and operating costs
associated with the two acquisitions made in western New York in the previous 12
months. The two businesses have been combined into one operating division. Total
selling, general, and administrative expenses associated with this division were
$672,450  for the first six  months of  fiscal  year 1997 and  $378,284  for the
second  quarter  of fiscal  year  1997.  Exclusive  of these  amounts,  selling,
general, and administrative  expenses increased 14% for the six month period and
7% for the three month period as a result of increased sales volume. Advertising
expenses  increased by $323,729,  or 34%, for the six month period and $306,917,
or 57% for the three  month  period  compared  to the  respective  corresponding
periods of fiscal 1996. The increase in  advertising  expenses was due to higher
promotional   expenses   associated  with  increased   market   penetration  and
introduction  of new product sizes.  For the first six months and second quarter
of fiscal year 1997 amortization increased  significantly from the corresponding
periods  in  fiscal  year  1996 as a  result  of  increased  goodwill  from  the
acquisition of assets in western New York.

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 six months of fiscal
year 1997 was $452,850, as compared to $1,165,341 for the same period last year,
an improvement of $712,491 or 61%. Profit from operations for the quarter ending
April 26, 1997 was $155,371 compared to a loss of $431,286 for the corresponding
period of the prior fiscal year, an improvement of $586,657.  The decline in the
loss for the six months and the  improvement  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 less cyclical  business.  No assurance can be given that
this plan will be successful.

Net Loss - The  Company's  net loss for the first six months of fiscal year 1997
was $602,585 compared to $1,215,988 for the  corresponding  period last year, an
improvement of $613,403 or 50%. Net profit for the second quarter of fiscal year
1997 was $67,656  compared to a net loss of $458,829  for the second  quarter of
the previous year.  Net interest  expense was $151,871 and $78,880 for the first
six  months and three  months of fiscal  year 1997,  respectively,  compared  to
$53,847  and $31,578 for the same  respective  periods in fiscal year 1996.  The
increase  in  interest  expense  was a result  of  increased  borrowing  to fund
operations  through a bank line of credit and finance the  acquisition of assets
in western New York.




                                       11

<PAGE>



                         Liquidity and Capital Resources

As of April 26,  1997,  the  Company had a working  capital  deficit of $305,962
compared to positive  working  capital of $318,642 at the end of its fiscal year
on October 26,  1996.  Largely as a result of  reduction of the net loss for the
first six  months of the fiscal  year,  cash flow from operations  showed an
improvement for the six month period as compared to the corresponding  period in
fiscal year 1996. The net cash inflow  improved to $239,074 from an outflow of 
$606,158, for those  respective  periods.  The  Company's  primary  requirements
for capital continue to be for the marketing  and  promotional  activities  
needed to effec 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 $624,604 reflects the use of cash to fund the
operating loss and purchase equipment as well as scheduled debt repayment. As of
April 26, 1997 the Company had borrowed  $552,616 on its line of credit compared
to $441,811 at the beginning of the fiscal year. The maximum amount available to
borrow as of that date was  $1,238,658,  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 1.50%,  which was 10.00% per
annum on June 6,  1997.  The loan  facility  is  secured  by all the  inventory,
receivables  and intangible  assets of the Company and expires July 1, 1997. The
Company  has  received  a  commitment  from the  Chittenden  Bank to renew  this
facility for two more years under the same terms with a maximum  credit limit of
$1,500,000  and  interest  rate of prime rate plus .5% and  expects to  formally
accept  this  commitment  in June  1997.  In  addition,  the  Chittenden  Bank's
commitment included availability of $2,500,000 to finance acquisitions under the
same terms and interest rate.

The Company borrowed $325,000 from Chittenden Bank for the acquisition of assets
from  GRS by  increasing  the  amount  owed to  Chittenden  Bank by the  Company
pursuant to an  acquisition  note  issued in May of 1996 and  maturing in May of
1999.  In addition to the note,  the  Company  issued a note  payable to GRS for
$75,000,  payable in March 1998,  without  interest  discounted at the Company's
current borrowing rate.

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 in the future.  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.

                                       12

<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 March 10, 1997 the Company  issued 38,095 shares of its Common Stock
         to  Greatwater  Refreshment  Services,  Inc.  In  connection  with  the
         acquisition  of certain  assets of such  company  pursuant  to an Asset
         Purchase  Agreement  dated  February  19, 1997  between the Company and
         Greatwater Refreshment Services.

         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

                                       13

<PAGE>



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 #                                            Description

      10.1     Asset Purchase Agreement between Vermont Pure Springs, Inc. and
               Greatwater Refreshment Services, Inc. dated February 19, 1997

                                       14

<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:            June 6, 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)


                                       15

<PAGE>


                                  EXHIBIT INDEX


         Exhibit #                                            Description

      10.1     Asset Purchase Agreement between Vermont Pure Springs, Inc. and
               Greatwater Refreshment Services, Inc. dated February 19, 1997





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