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

                                   FORM 10-QSB


                  QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
(X)      Quarterly  report  pursuant  to section 13 or 15 (d) of the Securi ties
         Exchange Act of 1934, for the quarterly period ended July 31, 1998.

( )      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.
        (Exact name of small business issuer as specified in its charter)

New York                                                     #16-1433379
(State of Incorporation)                               (I.R.S. Employer ID No.)

           Building 100A, Hackensack Avenue, Kearny, New Jersey 07032
                    (Address of Principal Executive Offices)

                                (973) 465-5151
                           (Issuer's Telephone Number)

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

Check  whether  the issuer  (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 issuer 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.

            Class                    Outstanding at July 31, 1998

Common stock, $.0001 par value           3,822,149 shares

Transitional Small Business Disclosure Format             Yes         No   X


<PAGE>


                          ECHO SPRINGS WATER CO., INC.



                              Index to Form 10-QSB





                                                                       Page
                   Item                                               Number


PART I.  FINANCIAL INFORMATION                                         3

 Item 1.  Financial Statements:

         Consolidated Balance Sheets -
         July 31, 1998 and October 31, 1997                            3

         Consolidated Statements of Operations -
         Three months ended July 31, 1998 and 1997                     4

         Consolidated Statements of Operations -
         Nine months ended July 31, 1998 and 1997                      5

         Consolidated Statements of Cash Flows -
         Nine months ended July 31, 1998 and 1997                      6

         Notes to Consolidated Financial Statements                   7-10

         Management's Discussion and Analysis of Financial
          Condition and Results of Operations                        11-14

PART II.          OTHER INFORMATION

         Item 1.  Legal Proceedings                                    15
         Item 5.  Other Events                                         15
         Item 6.  Exhibits and Reports on Form 8-K                     15

Signatures                                                             16



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

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                          ECHO SPRINGS WATER CO., INC.

                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                     ASSETS
                                                                                        July 31,            October 31,
                                                                                         1998                   1997
Current assets:
 Cash                                                                                 $   90,031             $  170,288
 Accounts receivable - net of allowance
  for doubtful accounts of $10,000 in
  1998 and $9,000 in 1997                                                                292,605                255,675
 Notes receivable, current portion                                                        40,416                 29,842
 Inventories                                                                              27,837                 25,753
 Prepaid expenses                                                                         46,563                 22,620
                                                                                       ---------              ---------
         Total current assets                                                            497,452                504,178

Notes receivable, net of current portion                                                 110,430                132,254

Property, plant and equipment - net                                                    1,275,295              1,187,029

Other assets                                                                             259,817                353,970
                                                                                       ---------               ---------

         TOTAL ASSETS                                                                 $2,142,994             $2,177,431
                                                                                       =========              =========

                LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
 Installment debt                                                                     $1,050,000             $  624,000
 Debentures                                                                               25,000                 25,000
 Accounts payable and accrued expenses                                                 1,346,663              1,419,074
 Customer deposits                                                                       325,400                304,800
 Unearned revenues                                                                        13,373                 14,963
                                                                                       ---------              ---------
         Total current liabilities                                                     2,760,436              2,387,837
                                                                                       ---------              ---------

Shareholders' equity (deficiency):
 Common stock, $.0001 par value,
  75,000,000 shares authorized; issued
  and outstanding 3,822,149 shares in
  1998 and 1997                                                                              382                    382
 Additional paid-in capital                                                            8,792,884              8,792,884
 Accumulated deficit                                                                  (9,410,708)            (9,003,672)
                                                                                       ---------              ---------
         Total shareholders'
          equity (deficiency)                                                           (617,442)              (210,406)
                                                                                       ---------              ---------

         TOTAL LIABILITIES AND SHAREHOLDERS'
          EQUITY (DEFICIENCY)                                                         $2,142,994             $2,177,431
                                                                                       =========              =========




The  accompanying  notes are an integral  part of these  consolidated  financial
 statements.

                                                         - 3 -

<PAGE>

                          ECHO SPRINGS WATER CO., INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                       FOR THE THREE MONTHS ENDED JULY 31,
                                   (UNAUDITED)


                                                                                    1998                        1997
                                                                                    ----                        ----

Revenues:
 Gross sales                                                                    $ 490,699                 $   593,087

 Credits and allowances                                                              (522)                    (49,321)
 Freight out                                                                       (9,576)                    (13,024)

 Other income                                                                       4,232                       7,940
                                                                                  ----------                 ----------

                                                                                  484,833                     538,682
                                                                               ----------                  ----------


Costs and expenses:
 Cost of sales                                                                    152,841                     193,295

 Selling, general and
  administrative                                                                  392,623                     420,341

 Interest                                                                          28,355                      10,434

 Amortization of other assets                                                       1,219                       1,219

 Other expenses (income) - net                                                      2,000
                                                                               ----------
         Total costs and expenses                                                 577,038                     625,289
                                                                               ----------                  ----------


Net loss                                                                      $   (92,205)                $  (86,607)
                                                                                 ==========                ==========


Net loss per share                                                            $      (.03)                $      (.02)
                                                                               ==========                  ==========


Weighted average shares outstanding                                             3,822,149                   3,557,149
                                                                               ==========                  ==========



The  accompanying  notes are an integral  part of these  consolidated  financial
 statements.



                                                         - 4 -

<PAGE>

                          ECHO SPRINGS WATER CO., INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                       FOR THE NINE MONTHS ENDED JULY 31,
                                   (UNAUDITED)


                                                                                    1998                        1997
                                                                                    ----                        ----

Revenues:
 Gross sales                                                                   $ 1,415,511                $ 1,545,318

 Credits and allowances                                                           (13,655)                   (115,498)
 Freight out                                                                      (24,447)                    (32,812)

 Other income                                                                       6,220                      11,636
                                                                                 ----------                 ----------

                                                                                1,383,629                   1,408,644
                                                                               ----------                  ----------


Costs and expenses:
 Cost of sales                                                                    474,716                    562,657

 Selling, general and
  administrative                                                                1,240,246                  1,196,628

 Interest                                                                          71,447                      36,809

 Amortization of other assets                                                       3,657                       3,657

 Other expenses (income) - net                                                      2,040
 Gain on disposal of assets                                                        (1,441)                     (2,513)
                                                                               ----------                  ----------

         Total costs and expenses                                               1,790,665                   1,797,238
                                                                               ----------                  ----------


Net loss                                                                      $  (407,036)                $  (388,594)
                                                                                ==========                ==========


Net loss per share                                                            $      (.11)                $      (.12)
                                                                               ==========                  ==========


Weighted average shares outstanding                                             3,822,149                   3,334,927
                                                                               ==========                  ==========


The  accompanying  notes are an integral  part of these  consolidated  financial
 statements.



                                                         - 5 -

<PAGE>
                          ECHO SPRINGS WATER CO., INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                       FOR THE NINE MONTHS ENDED JULY 31,
                                   (UNAUDITED)

                                                                                        1998                 1997
                                                                                        ----                 ----
Operating activities:
 Net loss                                                                           $(407,036)           $(388,594)

 Adjustments to reconcile net loss to
  net cash used by
  operating activities -
  Depreciation and amortization                                                       112,180              127,149

  Gain on disposal of assets                                                           (1,441)              (2,513)

  Provision for doubtful accounts                                                       1,000               (9,000)
  Changes in assets and liabilities -
   Accounts receivable                                                                (37,930)             (21,511)
   Inventories                                                                         (2,084)               3,008
   Prepaid expenses                                                                   (23,943)              (5,698)
   Other assets                                                                        (1,290)             (31,416)
   Accounts payable and accrued
    expenses                                                                          (72,411)            (117,715)
   Customer deposits                                                                   20,600              100,700
   Unearned revenues                                                                   (1,590)              (1,915)
                                                                                     --------             --------
         Net cash used by
          operating activities                                                       (413,945)            (347,505)
                                                                                     --------             --------
Investing activities:
 Capital expenditures                                                                (103,549)            (173,240)
 Collections on notes receivable                                                       11,250               19,361

 Proceeds from disposal of assets                                                       1,441               11,975
                                                                                      --------             --------
         Net cash used by
          investing activities                                                        (90,858)            (141,904)
                                                                                     --------             --------

Financing activities:
 Proceeds from issuance of
   common stock                                                                        584,000
 Increase in installment debt                                                         540,000              287,000
 Repayment of installment debt                                                       (114,000)            (385,153)
 Deferred public offering costs                                                        (1,454)             (13,568)
                                                                                    --------             --------
         Net cash provided by
      financing activities                                                            424,546              472,279
                                                                                     --------             --------

Net decrease in cash                                                                  (80,257)             (17,130)

Cash - beginning                                                                      170,288               44,631
                                                                                     --------             --------

CASH - ENDING                                                                       $  90,031            $  27,501
                                                                                     ========             ========
SUPPLEMENTAL INFORMATION:
 Interest paid                                                                      $  40,748            $  34,523


The  accompanying  notes are an integral  part of these  consolidated  financial
 statements.
</TABLE>


                                                         - 6 -

<PAGE>

                          ECHO SPRINGS WATER CO., INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)




NOTE 1 -          BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
                  --------------------------------------------

                  Basis of Presentation
                  The interim  consolidated  financial  statements  are prepared
                  pursuant to the requirements for reporting on Form 10-QSB. The
                  October 31, 1997  balance  sheet data was derived from audited
                  consolidated   financial  statements  and  together  with  the
                  interim  consolidated  financial  statements and notes thereto
                  should be read in conjunction with the consolidated  financial
                  statements and notes  included in the Company's  latest annual
                  report on Form  10-KSB.  In the  opinion  of  management,  the
                  interim   consolidated   financial   statements   reflect  all
                  adjustments of a normal recurring nature neces sary for a fair
                  statement  of the results for  interim  peri ods.  The current
                  period results of operations are not necessarily indicative of
                  results which  ultimately will be reported for the full fiscal
                  year.

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

                  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.  Loss per share  represents both the basis and
                  diluted amounts,  since all conversion and exercise of options
                  and warrants  would be  antidilutive  and  therefore not taken
                  into consideration.


                                                         - 7 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)





NOTE 2 -          INVENTORIES
                  -----------

                  Inventories  are  valued at the lower of cost or market on the
                  first-in, first-out basis and at October 31, 1997 and July 31,
                  1998 consist of the following:

                                                    July               October
                                                    31, 1998           31, 1997

                  Bottles                          $  2,879          $
                  Product held for sale              14,193              16,585
                  Supplies                           10,765               9,168
                                                    ------              ------

                                                    $27,837             $25,753
                                                    ======              ======

NOTE 3 -          PROPERTY, PLANT AND EQUIPMENT
                  -----------------------------

                  Property,  plant  and  equipment  are  recorded  at  cost  and
                  depreciated  by the  straight-line  method over the  estimated
                  economic useful lives of the various asset groups ranging from
                  5 - 40 years and consist of the following:

                                                     July                October
                                                     31, 1998           31, 1997

                  Land                              $ 150,000        $  150,000
                  Buildings and improvements          364,541           362,298
                  Water coolers, bottles and
                   brewers                            824,733           754,084
                  Machinery and equipment             509,670           397,345
                  Vehicles                             10,500            10,500
                  Furniture and fixtures               89,446            77,874
                                                 ---------            ---------
                                                 1,948,890            1,752,101

                  Less: accumulated depreciation
                   and amortization                673,595              565,072
                                                 ---------            ---------

                                                $1,275,295           $1,187,029
                                                =========            =========



                                                         - 8 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)



NOTE 4 -          OTHER ASSETS
                  ------------

                  Other  assets  at  October  31,  1997 and  July  31,  1998 are
                  comprised of the following:

                                                     July               October
                                                     31, 1998          31, 1997

                  Water rights                     $205,000            $205,000
                  Accumulated amortization           42,062              38,405
                                                    -------             -------
                       Net water rights             162,938             166,595

                  Deposits                           63,549             155,499
                  Deferred public offering costs     33,330              31,876
                                                    -------             -------

                                                   $259,817            $353,970
                                                   =======             =======


NOTE 5 -          INDEBTEDNESS
                  ------------

                  The Company is currently in default on principal and inter est
                  payments on its debentures  and $50,000 of its debt.  Although
                  the  debt is in  default  and  therefore  currently  due,  the
                  debtholders  have informally  agreed to wait for payment until
                  completion of a proposed public offering. (Note 7).


NOTE 6 -          INCOME TAXES
                  ------------

                  The Company  files a  consolidated  federal  income tax return
                  with its  subsidiaries.  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.


                                                         - 9 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 7 -          GOING CONCERN
                  -------------

                  The Company  sustained  losses of $739,620 for the fiscal year
                  ended  October 31, 1997 and $407,036 for the nine months ended
                  July 31, 1998.  The Company had deficit net worths of $210,406
                  at  October  31,  1997  and  $617,442  at July  31,  1998.  In
                  addition, the Company was in default on principal and interest
                  payments on a portion of its debt. (Note 5). These facts raise
                  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.   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 busi ness.
                  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  accompany  ing   consolidated
                  financial statements in favor of the liqui dation 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.


                                                         - 10 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

            FOR THE NINE MONTHS ENDED JULY 31, 1998 COMPARED WITH THE

                         NINE MONTHS ENDED JULY 31, 1997

Gross sales  decreased  $129,807  (8.4%) to $1,415,511 for the nine months ended
July 31, 1998 ("1998") from  $1,545,318  for the nine months ended July 31, 1997
("1997").  Five-gallon sales to Aramark  Corporation  increased by approximately
$153,000,  due to increased sales of  approximately  $53,000 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 approximate
ly $100,000. However,  five-gallon and allied product sales to and rental income
from the Company's regular customer base fell by approx imately $83,000, $31,000
and $24,000, respectively, largely due to a deliberate discontinuance of service
to  marginal  customers  and only a nominal  sales and  marketing  effort 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.  Further,  low-margin
five-gallon sales to distributors fell by approximately  $58,000, due largely to
the loss of three  distributors as a result of price  competition.  Sales of one
gallons and one quarts, both low-margin products,  and net freight-out decreased
by approximately $81,000,  $6,000 and $4,000,  respectively,  largely due to the
loss of one of the  Company's  distributors  which  completed  its own  bottling
facility  in July,  1997 and the  three  distributors  noted  above as well as a
discontinuance  of service to one supermarket  customer.  Credits and allowances
decreased  approximately $102,000 as the one-year Aramark Pennsylvania incentive
discount ended on March 8, 1998.

Cost of sales for 1998 was  $474,716  (33.5%  of gross  sales)  as  compared  to
$562,657 (36.4% of gross sales) for 1997. This 2.9 percentage point  improvement
is comprised of a 3.5  percentage  point gain due  primarily to the  above-noted
reductions in the sales of low-margin product lines,  offset by a 0.6 percentage
point  increase  caused by the  above-noted  decrease  in the  equipment  rental
portion of gross sales.

Selling, general and administrative expenses were $1,240,246 in 1998 as compared
to $1,196,628  in 1997.  Delivery and warehouse  costs  decreased  approximately
$1,000.  Advertising  and promotion costs  increased  approximately  $28,000 and
related primarily to the Company's Aramark business. The addition of one outside
salesman added a further  approximately  $20,000 while third-party  commissions,
telephone  costs and bad debt  expense  fell  approximately  $4,000,  $7,000 and
$1,000,  respectively.  Professional  fees increased  approximately  $45,000 and
travel and entertainment expenses were reduced by approxi mately $36,000.

Interest  expense  increased from $36,809 in 1997 to $71,447 in 1998 as a result
of  increased  debt.  Amortization  of other  assets  of $3,657 in 1998 and 1997
related to the amortization of water rights.

The net loss for 1998  increased by $18,442 from $388,594 in 1997 to $407,036 in
1998.







                                                         - 11 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

           FOR THE THREE MONTHS ENDED JULY 31, 1998 COMPARED WITH THE

                        THREE MONTHS ENDED JULY 31, 1997

Gross sales  decreased  $102,388  (17.3%) to $490,699 for the three months ended
July 31, 1998  ("1998")  from  $593,087 for the three months ended July 31, 1997
("1997").  Five-gallon  sales to Aramark Corpora tion increased by approximately
$14,000, due to increased sales of approximately $20,000 to their continuing New
York and New Jersey operations plus the Company's expansion into this customer's
Pennsyl vania locations, which accounted for a decrease of approximately $6,000.
However,  five-gallon  and allied  product  sales to and rental  income from the
Company's  regular  customer  base fell by  approximately  $34,000,  $12,000 and
$7,000,  respectively,  largely due to a deliberate discontinuance of service to
marginal  customers and only a nominal sales and marketing effort 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. Further,  low-margin five-gallon
sales to distributors fell by approximately  $36,000, due largely to the loss of
three  distributors as a result of price compe tition.  Sales of one gallons and
one  quarts,  both  low-margin  prod  ucts,  and net  freight-out  decreased  by
approximately $26,000, $1,000 and $1,000, respectively,  largely due to the loss
of one of the Company's  distributors  which completed its own bottling facility
in July, 1997 and the three  distributors  noted above.  Credits and allow ances
decreased  approximately $49,000 as the one-year Aramark Pennsyl vania incentive
discount ended on March 8, 1998.

Cost of sales for 1998 was  $152,841  (31.2%  of gross  sales)  as  compared  to
$193,295 (32.6% of gross sales) for 1997. This 1.4 percentage point  improvement
is comprised of a 1.5  percentage  point gain due  primarily to the  above-noted
reductions in the sales of low-margin product lines,  offset by a 0.1 percentage
point  increase  caused by the  above-noted  decrease  in the  equipment  rental
portion of gross sales.

Selling,  general and administrative  expenses were $392,623 in 1998 as compared
to $420,341 in 1997. Delivery and warehouse costs decreased approximately $5,000
as a result of reduced fuel and equipment rental costs of  approximately  $6,000
and $6,000,  respectively,  offset by an increase in maintenance  and repairs of
approximately  $7,000. Adver tising and promotion costs increased  approximately
$2,000 and related primarily to the Company's Aramark business.  The addition of
one outside  salesman  added a further  approximately  $7,000 while  third-party
commissions   and  telephone  costs  fell   approximately   $1,000  and  $3,000,
respectively. Bad debt expense rose by approximately $2,000. Clerical costs fell
by approximately  $15,000 and travel and entertain ment expenses were reduced by
approximately $15,000.

Interest  expense  increased from $10,434 in 1997 to $28,355 in 1998 as a result
of  increased  debt.  Amortization  of other  assets  of $1,219 in 1998 and 1997
related to the amortization of water rights.

The net loss for 1998  increased  by $5,598  from  $86,607 in 1997 to $92,205 in
1998.

                                                         - 12 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                         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.

During the nine months  ended July 31, 1998 and 1997,  the Company had  negative
cash flows from  operating  activities of $413,945 and  $347,505,  respectively.
Investing  activities  used  cash of  $90,858  in 1998  and  $141,904  in  1997,
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 installment debt and common stock.

At July 31, 1998,  the Company had a working  capital  deficiency of $2,262,984.
Short-term credit sources are limited to trade credit on purchases and services.
The report issued by the Company's  accoun tants 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  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 benefi  cial  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.

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.



                                                         - 13 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                         LIQUIDITY AND CAPITAL RESOURCES



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.

                                                         - 14 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.




PART II           OTHER INFORMATION


ITEM 1.           Legal Proceedings

                  There have been no new legal  proceedings or material  changes
                  to legal proceedings  during the period from those reported in
                  the Company's Form 10-KSB for the year ended October 31, 1997.

ITEM 5.           Other Events

                  None

ITEM 6.           Exhibits and Reports on Form 8-K

                  a.  Exhibits - Financial Data Schedule

                  b.  Reports on Form 8-K  -  None





                                                         - 15 -

<PAGE>






                                   SIGNATURES


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

                          ECHO SPRINGS WATER CO., INC.
                                    (Issuer)



         By       /s/ Michael S. Rakusin
              Michael S. Rakusin
                  President


Dated: September 16, 1998

                                                         - 16 -