SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q/A


                  QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
                     THE SECURITIES AND 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, 1996.

( )      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 33-30980

                          ECHO SPRINGS WATER CO., INC.

             (Exact name of registrant 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
                                 (201) 465-5151

                     (Address of Principal Executive Offices
              and Principal Place of Business and Telephone Number)

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

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

                                                           Yes   X     No

APPLICABLE ONLY TO CORPORATE ISSUERS:

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, 1996

Common stock, $.0001 par value                          50,499,910 shares


<PAGE>










                          ECHO SPRINGS WATER CO., INC.



                               Index to Form 10-Q





                                                             Page
                   Item                                     Number


PART I.  FINANCIAL INFORMATION                                    3

 Item 1.  Financial Statements:

         Consolidated balance sheets -
         July 31, 1996 and October 31, 1995
                                                                   3

         Consolidated statements of operations -
         Three months ended July 31, 1996 and 1995
                                                                    4
         Nine months ended July 31, 1996 and 1995                   5

         Consolidated statements of cash flows -
         Nine months ended July 31, 1996 and 1995                   6

         Notes to Consolidated Financial Statements               7-10

         Management's Discussion and Analysis of Financial
          Condition and Results of Operations                    11-13

PART II.          OTHER INFORMATION

         Item 1.  Legal Proceedings                                14
         Item 6.  Exhibits and Reports on Form 8-K                 14

Signatures                                                         15











<PAGE>



PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                          ECHO SPRINGS WATER CO., INC.

                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

                                     ASSETS
                                              July 31,            October 31,
                                                1996                   1995
Current assets:
 Cash                                        $   13,368             $   57,224
 Accounts receivable - net of allowance
  for doubtful accounts of $19,000 in
  1996 and $35,000 in 1995                      309,374                279,128
 Notes receivable, current portion               27,691                 22,380
 Inventories                                     31,315                 39,909
 Prepaid expenses                                46,186                 27,406
                                              ---------              ---------
         Total Current Assets                   427,934                426,047

Notes receivable, net of current portion        166,517                157,857

Property, plant and equipment - net           1,329,894              1,395,090

Other assets                                    203,227                219,704
                                              ---------              ---------

         TOTAL ASSETS                         $2,127,572             $2,198,698
                                              =========              =========

                LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
 Current portion of debt                    $  859,628             $  830,544
 Debentures                                  1,325,000              1,325,000
 Accounts payable and accrued expenses       2,196,839              2,242,578
 Customer deposits                             234,400                211,900
 Unearned revenues                              18,585                 49,400
                                             ---------              ---------
         Total Current Liabilities           4,634,452              4,659,422

Installment debt                                                        5,577

         TOTAL LIABILITIES                   4,634,452              4,664,999
                                             ---------              ---------

Shareholders' equity (deficiency):
 Common stock, $.0001 par, 75,000,000
  shares authorized; issued and
  outstanding 50,499,910 shares
  in 1996 and 41,499,910 shares in 1995          5,050                  4,150
 Additional paid-in capital                  6,073,080              5,893,980
 Accumulated deficit                        (8,585,010)            (8,364,431)
                                             ---------              ---------
         Total Shareholders'
          Equity (Deficiency)               (2,506,880)            (2,466,301)
                                             ---------              ---------

         TOTAL LIABILITIES AND
          SHAREHOLDERS' EQUITY (DEFICIENCY)  $2,127,572             $2,198,698
                                             =========              =========




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

                                                         - 3 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS

                       FOR THE THREE MONTHS ENDED JULY 31,
                                   (UNAUDITED)



                              1996                        1995
                              ----                        ----

Revenues:
 Gross sales               $   604,174                 $   716,539
 Credits and allowances        (2,528)                    (13,518)
 Freight out                  (10,796)                    (12,843)
 Other income                  29,015                      17,611
                             ----------                  ----------
                              619,865                     707,789
                             ----------                  ----------

Costs and Expenses:
 Cost of sales                 222,780                     260,785
 Selling, general and
  administrative                360,792                     344,825
 Interest                       51,434                      62,052
 Amortization of other assets    1,219                       1,219
 Other (income) expenses - net  (1,016)                     (3,705)
 Gain on sale of assets         (1,875)                     (1,187)
                               ----------                  ----------
 Total Costs and Expenses       633,334                     663,989
                               ----------                  ----------

Net income (loss)           $   (13,469)                $    43,800
                              ==========                  ==========

Net income (loss) per share  $    (.00)                $       .00
                               ==========                  ==========

Weighted average shares
 outstanding                 49,499,910                  41,499,910
                           ==========                  ==========








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



                                                         - 4 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS

                       FOR THE NINE MONTHS ENDED JULY 31,
                                   (UNAUDITED)



                                         1996                       1995
                                         ----                       ----

Revenues:
 Gross sales                          $ 1,698,482                 $ 1,938,666
 Credits and allowances                   (9,203)                    (54,532)
 Freight out                             (32,861)                    (37,280)
 Other income                             43,433                      49,462
                                        ----------                  ----------
                                       1,699,851                   1,896,316
                                       ----------                  ----------

Costs and Expenses:
 Cost of sales                          661,714                     733,873
 Selling, general and
  administrative                      1,094,294                   1,125,166
 Interest                               167,016                     185,909
 Amortization of other assets             3,657                       3,657
 Other (income) expenses - net           (1,016)                     (3,705)
 Gain on sale of assets                  (5,235)                     (1,187)
                                        ----------                  ----------
         Total Costs and Expenses     1,920,430                   2,043,713
                                      ----------                  ----------

Net loss                            $  (220,579)                $  (147,397)
                                     ==========                  ==========

Net loss per share                  $      (.00)                $      (.00)
                                      ==========                  ==========

Weighted average shares outstanding   44,499,910                  41,499,910
                                      ==========                  ==========








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



                                                         - 5 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                       FOR THE NINE MONTHS ENDED JULY 31,
                                   (UNAUDITED)

                                          1996                   1995
                                           ----                   ----
Operating Activities:
 Net loss                               $(220,579)             $(147,397)
 Adjustments to reconcile net
  loss to net cash used by
  operating activities:
   Depreciation and amortization         115,836                102,960
   Gain on sale of assets                (5,235)                (1,187)
   Provision for doubtful accounts      (16,000)                (5,000)
   Changes in assets and liabilities:
    Accounts receivable                 (36,996)               (32,860)
    Inventories                           8,594                  7,755
    Prepaid expenses                   (18,780)               (17,522)
    Other assets                        11,450                    671
    Accounts payable and
     accrued expenses                  (45,739)              (157,166)
    Customer deposits                   22,500                  8,500
    Unearned revenues                  (30,815)                (8,000)
                                        --------               --------
         Net Cash Used by
          Operating Activities        (215,764)              (249,246)
                                      --------               --------

Investing Activities:
 Capital expenditures                 (46,983)               (49,122)
 Collections on notes receivable       10,149                 18,381
 Proceeds from sale of assets           5,235                  1,187
                                      --------               --------
         Net Cash Provided (Used)
          by Investing Activities     (31,599)               (29,554)
                                      --------               --------

Financing Activities:
 Proceeds from issuance
  of common stock                     180,000
 Repayment of debt                   (166,493)               (72,861)
 Increase in installment debt         190,000                 83,000
                                      --------               --------
         Net Cash Provided by
      Financing Activities            203,507                 10,139
                                     --------               --------

Net decrease in cash                 (43,856)              (268,661)

Cash - beginning                      57,224                247,824
                                      --------               --------

CASH - ENDING                      $  13,368              $ (20,837)
                                    ========               ========


SUPPLEMENTAL INFORMATION:
 Cash paid for interest             $  11,959              $  11,526
 Conversion of accounts receivable
  to notes receivable                  22,750
 Conversion of other assets
  to notes receivable                  1,370


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

                                                         - 6 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE 1 -          SIGNIFICANT ACCOUNTING POLICIES
                  -------------------------------

                  BASIS OF PRESENTATION
                  The interim financial  statements are prepared pursuant to the
                  requirements  for reporting on Form 10-Q. The October 31, 1995
                  balance  sheet  data  was  derived  from  audited  finan  cial
                  statements and together with the interim financial  statements
                  and  notes  thereto  should  be read in  conjunction  with the
                  financial  statements  and  notes  included  in the  Company's
                  latest  annual  report  on Form  10-K.  In the opin ion of the
                  management,  the  interim  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. (formerly Grudge Music Group,
                  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 whole
                  sale to supermarkets and 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.

                  OTHER ASSETS
                  Financing  costs are  capitalized  when incurred and amortized
                  over the term of the  related  indebtedness.  Any  unamortized
                  costs are charged to equity at the time of  conversion  of the
                  related debt to common stock.  Deferred  consulting  costs and
                  intangible  assets are amortized by the  straight-line  method
                  for the various asset groups as follows:
                                  Water rights                   40 years
                                  Non-compete agreements          2 years
                                  Deferred consulting costs       2 years

                                                         - 7 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)





NOTE 1 -          SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                  -------------------------------------------

                  INCOME (LOSS) PER SHARE

                  Net income (loss) per share is based upon the weighted average
                  number of shares outstanding during the period.

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

                  Inventories  are  valued at the lower of cost or market on the
                  first-in  first-out basis and at October 31, 1995 and July 31,
                  1996 consist of the following:

                                                 July               October
                                                31, 1996            31, 1995

                  Bottles                       $   422             $ 2,094
                  Product held for sale          16,272              18,298
                  Supplies                       14,621              19,517
                                                 ------              ------
                                                $31,315             $39,909
                                                 ======              ======

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

                  Property,  plant  and  equipment  are  recorded  at  cost  and
                  depreciated  by the  straight-line  method over the  estimated
                  useful  lives of the assets of 4 - 40 years and consist of the
                  following:
                                                  July                October
                                                31, 1996             31, 1995
                  Land                         $  150,000          $  150,000
                  Buildings and improvements      362,298             362,298
                  Water coolers, bottles and
                   brewers                       905,600             864,068
                  Machinery and equipment        376,773             373,588
                  Vehicles                        60,850              60,850
                  Furniture and fixtures         127,128             124,862
                                                ---------           ---------
                                               1,982,649           1,935,666

                  Less: accumulated depreciation
                   and amortization             652,755             540,576
                                              ---------           ---------

                                             $1,329,894          $1,395,090
                                              =========           =========





                                                         - 8 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)




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

                  Other  assets  at  October  31,  1995 and  July  31,  1996 are
                  comprised of the following:
                                              July                October
                                            31, 1996             31, 1995
                  Water rights              $205,000            $205,000
                  Accumulated amortization    32,310              28,653
                                              -------             -------
                       Net deferred charges  172,690             176,347
                  Security deposits           30,537              43,357
                                             -------             -------
                                            $203,227            $219,704
                                             =======             =======

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

                  Installment Debt

                  During fiscal 1993,  $1,300,000  of a $1,500,000  mortgage was
                  converted to 5,200,000  shares of common stock on the basis of
                  four shares for each dollar of debt and $80,000 was repaid. In
                  addition,  500,000  shares  of  common  stock  were  issued in
                  settlement of $71,143 of accrued  interest and any  additional
                  unpaid  interest.  The  mortgagee  has  agreed to  extend  the
                  maturity until December 31, 1995.

                                                 July                October
                  Debentures                    31, 1996             31, 1995
                  ----------                    --------             --------
                  8% Series D convertible
                   subordinated debentures
                   maturing December 31, 1995   $  85,000           $   85,000

                  10% Series E debentures
                   maturing December 31, 1995   1,240,000            1,240,000
                                               ---------            ---------
                                              $1,325,000           $1,325,000
                                               =========            =========

                  The Series E debentures consist of 1,240 units, with each unit
                  consisting  of a $1,000 Series E debenture and 4,000 shares of
                  common stock which shares were issued during fiscal 1993.

                  The convertible  subordinated  debentures are convertible into
                  common stock at $.50 per share.

                  The  Company  is  currently  in default  as to  principal  and
                  interest on its debt (Note 8).

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

                  The Company  files a  consolidated  federal  income tax return
                  with its  subsidiaries.  As of July 31, 1996,  the Company had
                  net operating loss  carryforwards  in excess of $8,000,000 for
                  financial  as well as State and  Federal  tax  purposes  which
                  expire in varying amounts  beginning in 2004. All deferred tax
                  benefits  from use of net  operating  loss  carryforwards  are
                  offset by valuation allowances.


                                                         - 9 -

<PAGE>



                          ECHO SPRINGS WATER CO., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

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

                  The Company  sustained a loss of $214,268  for the fiscal year
                  ended  October 31, 1995 and $220,579 for the nine months ended
                  July 31,  1996.  At October  31,  1995,  the Company had a net
                  capital  deficiency of $2,466,301  and  $2,506,880 at July 31,
                  1996. These facts raise  substantial doubt about the Company's
                  ability to continue as a going concern.  Consider ations 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 abili ty to acquire,
                  restructure  and develop the bottled water  business  which it
                  believes will be able to achieve profit able  operations.  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  consoli  dated  financial
                  statements in favor of the liquidation  basis. There can be no
                  assurance,  however,  that management will continue to be able
                  to raise sufficient capital or convert existing debt to equity
                  or to achieve profitable operations going forward.

NOTE 8 -          SUBSEQUENT EVENTS
                  -----------------

                  In  June  1996,  the  Company  entered  into  negotiations  to
                  consummate a public  offering with minimum  gross  proceeds of
                  approximately  $4,000,000.  As part of the  negotiations,  the
                  Company has asked their  lenders to convert  outstanding  debt
                  and unpaid interest thereon into shares of common stock of the
                  Company  at a  conversion  ratio of ten cents per  share.  The
                  conversion would extend to $2,020,022 of outstanding principal
                  and unpaid interest of $571,576 through June 30, 1996 assuming
                  full conversion, which would be converted to 25,915,980 shares
                  of common stock. This transaction would reduce future interest
                  expense by approximately $204,000 per year.

                  Had this  transaction  been  completed  at July  31,  1996 the
                  proforma balance sheet would have been as follows:

                                   Historical         Adjustment     Proforma

                  Current assets  $  427,934         $              $  427,934
                  Other assets     1,699,638                         1,699,638
                                   ---------         ----------     ---------
                                  $2,127,572         $              $2,127,572
                                   =========         ==========     =========

                  Current
                   liabilities   $4,634,452        $(2,591,598)     $2,042,854

                  Shareholders'
                  Equity
                   (Deficiency) (2,506,880)          2,591,598         84,718
                               ---------              ----------    ---------
                                $2,127,572          $              $2,127,572
                                =========           ==========      =========



                                                         - 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, 1996 COMPARED WITH THE

                         NINE MONTHS ENDED JULY 31, 1995

Net revenues  decreased $196,465 (10.4%) to $1,699,851 for the nine months ended
July 31, 1996 ("1996") from  $1,896,316  for the nine months ended July 31, 1995
("1995").  The  $240,184  decrease  in gross  sales was due  primarily  to three
factors. First, the less profitable 2.5 gallon and one gallon sales decreased by
approximately  $133,000  largely  due to a  discontinuance  of  service to three
customers,  including  one  bankrupt  cy. The second  contributing  factor was a
deliberate  discontinuance of service to marginal customers as determined from a
customer-by-customer review in setting up the new corporate computer system. The
third factor was a much cooler  summer in 1996  compared to 1995.  The remaining
increase in net revenues related  primarily to reduced credits and allowances of
approximately  $45,000 and discounts earned, upon the negotiation and settlement
of a few older payables,  of  approximately  $32,000,  offset by a lower gain on
unclaimed or lost customer deposits of approximately $33,000.

Cost of sales for 1996 was  $661,714  (39.0%  of gross  sales)  as  compared  to
$733,873 (37.9% of gross sales) for 1995.  This  percentage  increase was caused
primarily by small increases in freight in, labor costs and real estate taxes.

Selling,  general and  administrative  expenses  were  $1,094,294  (64.4% of net
revenues)  in 1996 as compared to  $1,125,166  (59.3% of net  revenues) in 1995.
$113,850 of the net $30,872 decrease represented a significant  reduction in the
sales and  marketing  staff in an effort to better  concentrate  on the  current
customer base.  This was offset by increased costs in the delivery and warehouse
operation of $74,588 which resulted  primarily from increased  labor and vehicle
costs to improve the timeli ness of product  deliveries.  The  remaining  $8,390
decrease resulted from a streamlining of the  administrative  staff and expenses
and a reduction in third party commission,  resulting from the discontinuance of
service to the above-noted three customers, offset by the start-up costs related
to the new  corporate  computer  system of  approximately  $15,000 and increased
business development costs of approximately $16,000 to investigate new potential
business investments.

Interest  expense  decreased from $185,909 in 1995 to $167,016 in 1996 primarily
as a result of the $200,000 8% mortgage  note  payable  under  litigation  being
eliminated at October 31, 1995 and the effect of the debt  conversion  described
in Note 8 to the consolidated financial statements. Amortization of other assets
of $3,657 in 1996 and 1995 related to the  amortization  of water rights.  Other
income of $1,016 in 1996 and $3,705 in 1995 related to  non-recurring  operating
items.

The net loss for 1996  increased by $73,182 from $147,397 in 1995 to $220,579 in
1996.

                                                         - 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, 1996 COMPARED WITH THE

                        THREE MONTHS ENDED JULY 31, 1995



Net revenues  decreased  $87,924  (12.4%) to $619,865 for the three months ended
July 31, 1996  ("1996")  from  $707,789 for the three months ended July 31, 1995
("1995").  The  $112,365  decrease  in gross  sales was due  primarily  to three
factors. First, the less profitable 2.5 gallon and one gallon sales decreased by
approximately  $61,000  largely  due  to a  discontinuance  of  service  to  two
customers,  including  one  bankruptcy.  The  second  contributing  factor was a
deliberate  discontinuance of service to marginal customers as determined from a
customer-by-customer review in setting up the new corporate computer system. The
third factor was a much cooler  summer in 1996  compared to 1995.  The remaining
increase in net revenue  related  primarily to reduced credits and allowances of
approximately  $11,000 and discounts earned, upon the negotiation and settlement
of a few older payables,  of  approximately  $24,000,  offset by a lower gain on
unclaimed or lost customer deposits of approximately $11,000.

Cost of sales for 1996 was  $222,780  (36.9%  of gross  sales)  as  compared  to
$260,785 (36.4% of gross sales) for 1995.  This  percentage  increase was caused
primarily by a small increase in real estate taxes.

Selling,  general  and  administrative  expenses  were  $360,792  (58.2%  of net
revenues)  in 1996 as compared to $344,825  (48.7% of net  revenues)  in 1995. A
$21,776  decrease,  related to a reduction in the sales and  marketing  staff in
1995 in an  effort to better  concentrate  on the  current  customer  base,  was
largely  offset by increased  administrative  labor costs of $16,862  related to
improved  customer service in 1996. The remaining $20,881 increase resulted from
increased  costs in the  delivery  and  warehouse  operation  of $33,077,  which
resulted  primarily  from  increased  labor and  vehicle  costs to  improve  the
timeliness  of  product  deliveries,  offset  by  a  reduction  in  third  party
commissions, resulting from the discontinuance of service to the above-noted two
customers and a reduction in bad debt expense of approximately $9,000.

Interest expense  decreased from $62,052 in 1995 to $51,434 in 1996 primarily as
a result of the  $200,000  8%  mortgage  note  payable  under  litigation  being
eliminated at October 31, 1995 and the effect of the debt  conversion  described
in Note 8 to the consolidated financial statements. Amortization of other assets
of $1,219 in 1996 and 1995 related to the  amortization  of water rights.  Other
income of $1,016 in 1996 and $3,705 in 1995 related to  non-recurring  operating
items.

The net loss for 1996 was $13,469 as compared to net income of $43,800 for 1995.

                                                         - 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 the proceeds of its initial
public offering, cash generated from sales, issuance of common stock, debentures
and installment debt, and borrowings from its offi cers.

During the nine months  ended July 31, 1996 and 1995,  the Company had  negative
cash flows from  operating  activities of $215,764 and  $249,246,  respectively.
Investing  activities used cash of $31,599 in 1996 and $29,554 in 1995 primarily
for the  acquisition  of property  and  equipment.  The Company has financed its
operating and investing  activities  during these periods  primarily through the
issuance of common stock and installment debt.

At July 31, 1996,  the Company had a working  capital  deficiency of $4,206,518.
Short-term credit sources are limited to trade credit on purchases and services.
The report issued by the Company's  accountants  that  accompanies the Company's
consolidated  financial  statements  for the year ended  October 31, 1995 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  financ  ing  with  major
creditors, past and present efforts to convert debt to equity and the ability to
acquire,  restructure  and develop the bottled water  business which it believes
will be able to achieve profitable  operations.  The Company 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 liquida tion
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 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'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.

                                                         - 13 -

<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-K for the year ended October 31, 1995.


ITEM 6.           Exhibits and Reports on Form 8-K

                  a.  Exhibits - None

                  b.  Reports on Form 8-K
                                      None


                                                         - 14 -

<PAGE>






                                   SIGNATURES


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

                          ECHO SPRINGS WATER CO., INC.
                                  (Registrant)



         By
                  Michael S. Rakusin
                  Chief Executive Officer &
                  Chief Financial Officer

Date:  October 31, 1996
<PAGE>