PURO WATER GROUP INC, SB-2/A, 1997-02-07

PURO WATER GROUP INC
SB-2/A, 1997-02-07
GROCERIES, GENERAL LINE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 1997

REGISTRATION NO. 333-16247

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 4
TO

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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PURO WATER GROUP, INC.

(Name of small business issuer in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 5149 11-325396-8
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification
Organization) Number)
</TABLE>

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56-45 58TH STREET
MASPETH, NEW YORK 11378
(718) 326-7000
(Address and telephone number of Principal Executive Offices)

MR. JACK C. WEST
PURO WATER GROUP, INC.
56-45 58TH STREET
MASPETH, NEW YORK 11378
(718) 326-7000

(Name, address, and telephone number of Agent for Service)

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

COPIES OF COMMUNICATIONS TO:

DUANE L. BERLIN, ESQ. STEPHEN IRWIN, ESQ.
ERIC J. DALE, ESQ. JEFFREY S. SPINDLER, ESQ.
Lev, Berlin & Dale, P.C. Olshan Grundman Frome & Rosenzweig LLP
535 Connecticut Avenue 505 Park Avenue
Norwalk, Connecticut 06854 New York, New York 10022

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.

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<PAGE>

PROSPECTUS

[LOGO]

PURO WATER GROUP, INC.

1,350,000 SHARES OF COMMON STOCK
----------------

Puro Water Group, Inc. (the "Company") is hereby offering (the "Offering")
1,350,000 shares (the "Shares") of its common stock, $.0063 par value per share
(the "Common Stock").

Prior to this Offering, there has been no public market for the Common Stock
and no assurance can be given that any such market will develop. For information
regarding the factors considered in determining the price to the public in the
Offering, see "Underwriting." The Common Stock has been approved for listing on
the American Stock Exchange under the symbol "HHO," subject to official notice
of issuance.

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE AND
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" CONTAINED AT PAGES 8 TO 11 OF
THIS PROSPECTUS AND "DILUTION."
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY (2)
<S> <C> <C> <C>
Per Share............................................ $6.00 $.60 $5.40
Total (3)............................................ $8,100,000 $810,000 $7,290,000
</TABLE>

(1) Does not include the Representatives' non-accountable expense allowance
equal to 3% of the gross proceeds of the Offering or warrants to purchase up
to 135,000 shares of Common Stock issuable to the Representatives. The
Company has agreed to indemnify the Underwriters against certain liabilities
under the Securities Act of 1933, as amended (the "Act"). See
"Underwriting."

(2) Before deducting expenses of the Offering payable by the Company, including
the non-accountable expense allowance, estimated to be $790,000, or $826,450
if the Underwriters' over-allotment option is exercised in full.

(3) The Company has granted the Underwriters an option, exercisable within 45
days after the date of this Prospectus, to purchase up to an additional
202,500 shares of Common Stock upon the same terms as set forth above,
solely to cover over-allotments, if any. If such over-allotment option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $9,315,000, $931,500 and
$8,383,500, respectively. See "Underwriting."

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

The Shares are being offered by the Underwriters, subject to prior sale,
when, as and if delivered to the Underwriters and subject to the right to reject
orders in whole or in part, approval of certain legal matters by counsel and
certain additional conditions. It is expected that delivery of the Shares will
be made against payment therefor at the offices of Laidlaw Equities, Inc., 100
Park Avenue, New York, New York 10017 on or about February 12, 1997.

LAIDLAW EQUITIES, INC. GILFORD SECURITIES INCORPORATED

THE DATE OF THIS PROSPECTUS IS FEBRUARY 7, 1997

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PURO WATER GROUP, INC.

The Company brochure photos here

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE
OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION OR THE REPRESENTATIVES' WARRANTS AND
(II) HAS BEEN ADJUSTED TO REFLECT A .4928 TO 1 REVERSE STOCK SPLIT EFFECTED ON
FEBRUARY 4, 1997 (DECREASING THE NUMBER OF ISSUED AND OUTSTANDING SHARES FROM
4,315,375 TO 2,126,789). EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS
PROSPECTUS IN ITS ENTIRETY.

THE COMPANY

The Company is a leading bottler and distributor of spring and purified
drinking water, serving commercial and residential users in the metropolitan New
York area. The Company markets its drinking water under the brand names Puro,
American Eagle Spring Water, Nature's Best Spring Water and Lectro-Still. The
Company also rents and services water coolers, filtration systems, and
plumbed-in fountains numbering in excess of 25,000 located in businesses,
factories, and homes in the metropolitan New York area. The Company's facilities
consist of NSF (National Sanitation Foundation) certified bottling plants in
East Orange, New Jersey and Commack, Long Island, New York. In addition, the
Company is an authorized factory service center for all major water cooler
manufacturers and provides warranty repair coverage to many of its competitors.

According to a study prepared by the Beverage Marketing Corporation, bottled
water has been the fastest growing segment of the beverage industry for the past
ten years. Total bottled water consumption in the United States has more than
tripled from 1983 to 1995. Annual consumption increased from 2.8 gallons per
capita in 1980 to 11.0 gallons per capita in 1995 and it is projected to reach
14.2 gallons per capita by the year 2000. Bottled water volume in the United
States has grown significantly, increasing from approximately 1.1 billion
gallons in 1984 to approximately 2.9 billion gallons in 1995; from approximately
$1.3 billion in sales in 1984 to over $3.3 billion in 1995. This growth has been
fueled by increasing public concern about the taste and safety of municipal
water supplies and the desire among today's increasingly diet and health
conscious consumers for an "ideal" beverage.

The Company's strategy is to capitalize on the growing demand for high
quality drinking water through the expansion of its existing customer base and
through the acquisition of regional bottlers and distributors in targeted
geographic markets. The bottled water distribution market is highly fragmented
and composed of many small regional companies, as well as a few larger companies
which own several brands, thus providing the Company with acquisition
opportunities. In addition, the Company continually seeks to grow revenues by
increasing route density through the acquisition and consolidation of new routes
within the existing route structure, thereby minimizing distribution and
administration costs. The continued consolidation of production and distribution
capabilities is a key component of the Company's operating plans, both within
its current markets and any additional markets that it may enter.

The Company is also the manager of a cooperative buying group, Quality
Bottler's Cooperative, Inc. (the "Cooperative"). Membership consists of the
twelve leading regional bottled water companies located throughout the United
States which are similar in size to the Company. Members are contractually
required to purchase all of their coolers, bottles, closures, and other key
items on a group basis. The Company believes that the purchasing power of the
Cooperative permits the group to buy at prices that are no higher than those
charged the largest buyer in the industry, Nestle's Perrier group (whose brands
in the Company's markets include Poland Spring, Great Bear and Deer Park).

RECENT TRANSACTIONS

Consistent with its strategy of acquiring regional water bottlers and
distributors, on January 31, 1996, the Company purchased the assets and assumed
certain liabilities of American Eagle Water/Electrified Co.,

3
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Inc. ("Electrified"). Electrified was a direct competitor of the Company in the
bottled water distribution and water cooler rental business in the New York City
area. The Company's acquisition of Electrified's modern high-speed production
facility in East Orange, New Jersey, together with its new bottling facility in
Commack, Long Island, New York, permits it to absorb additional bottling demand
without a commensurate increase in production costs.

On June 13, 1996, the Company entered into a long-term spring water supply
contract for its Commack, Long Island, New York, bottling facility with
Shawangunk Bulk Spring Water. The agreement provides for "most-favored-customer"
treatment with respect to pricing and priority water rights for the next
forty-five years to the Indian Camp Spring source which is owned by Shawangunk
Bulk Spring Water and located in the foothills of the Catskill Mountains in New
York.

On June 27, 1996, the Company entered into a long-term spring water supply
contract for its East Orange, New Jersey bottling facility with its primary bulk
spring water supplier, Mountainwood Spring Water Co., Inc. ("Mountainwood"). The
agreement provides for "most-favored-customer" treatment with respect to
priority water rights over a forty-three year period. Management believes that
Mountainwood's spring source, in the foothills of the Kittatinny Mountains near
the Delaware Water Gap, is considered the highest volume, free flowing certified
natural spring water source in the northeastern United States. Effective July 1,
1996, the Company also acquired Mountainwood's five-gallon bottled water direct
delivery and bottled water cooler rental routes.

The Company is continuing to pursue mergers and/or acquisitions with
regional water bottlers and distributors, as well as with certain members of the
Cooperative. As of the date of this Prospectus, the Company has thirteen
companies under active review as candidates for acquisition or merger, although
the Company has no agreements, commitments or arrangements with respect to any
proposed mergers or acquisitions. As consideration for any future acquisitions,
the Company may pay cash, incur indebtedness or issue debt or equity securities.
Such acquisitions could result in material changes in the Company's financial
condition and operating results. There can be no assurance that suitable merger
or acquisition opportunities will be available to the Company or that the
Company will be able to consummate any mergers or acquisitions on satisfactory
terms. In addition, there can be no assurance that the Company will be able to
integrate or manage successfully other acquired businesses.

The Company was incorporated in January 1994 and represents the acquisition
of LSL Hydro Corp. and Puro Corporation of America. The Company is organized
under the laws of the State of Delaware. The Company's principal executive
offices are located at 56-45 58th Street, Maspeth, New York 11378 and its
telephone number is (718) 326-7000. After the consummation of this Offering, the
Company intends to move its principal executive offices to 76 Mall Drive,
Commack, Long Island, New York 11725. Its telephone number at such location is
(516) 864-8800. The Company's home page address on the Internet is
www.purowater.com.

4
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THE OFFERING

<TABLE>
<S> <C>
Common Stock offered......................... 1,350,000 shares

Common Stock outstanding prior to this
Offering.................................... 2,126,789 shares(1)

Common Stock to be outstanding after this
Offering.................................... 3,476,789 shares(1)

Use of proceeds.............................. Repayment of certain outstanding
indebtedness, and working capital. See "Use
of Proceeds."

American Stock Exchange symbol............... HHO
</TABLE>

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(1) Includes 56,860 shares of Common Stock issued upon the exercise of warrants
on October 1, 1996 for consideration of $1,000. Does not include (i) 400,000
shares of Common Stock reserved for issuance pursuant to the Company's Stock
Option Plan (none of which options have been granted to date; however, the
Company has committed to grant options to purchase 88,167 shares of Common
Stock at an exercise price equal to the initial public offering price per
share of the Shares offered hereby less underwriting discounts and
commissions pursuant to the Stock Option Plan to two employees of the
Company upon consummation of this Offering), (ii) an aggregate of 123,210
shares of Common Stock reserved for issuance upon the exercise of
outstanding options at an exercise price equal to the initial public
offering price per share of the Shares offered hereby less underwriting
discounts and commissions, and (iii) shares of Common Stock in an amount
equal to the outstanding principal amount of a convertible note ($265,707.08
as of February 1, 1997, which amount is reduced by $1,428.58 per month)
divided by the initial public offering price per share of the Shares offered
hereby, less underwriting discounts and commissions, reserved for issuance
upon conversion of such note.

5
<PAGE>
SUMMARY FINANCIAL INFORMATION

The summary financial information presented below for the period from
inception (February 1, 1994) through December 31, 1994 and as of and for the
year ended December 31, 1995 has been derived from financial statements which
have been audited by Arthur Andersen LLP, independent public accountants, and
are included elsewhere in this Prospectus. The summary financial information for
the nine months ended September 30, 1995 and as of and for the nine months ended
September 30, 1996 has been derived from unaudited financial statements which
have been prepared on the same basis as the audited financial statements and, in
the opinion of management, includes all adjustments of a normal recurring nature
necessary for the fair presentation of the information shown therein. The
results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the full fiscal
year. The information set forth below should be read in conjunction with the
Company's financial statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS ENDED
INCEPTION YEAR
(FEBRUARY 1, 1994) ENDED SEPTEMBER 30,
THROUGH DECEMBER 31, --------------------
DECEMBER 31, 1994 1995 1995 1996
------------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
Bottled water sales and other revenue........................ $ 2,918 $ 4,175 $ 3,121 $ 6,384
Rental revenue............................................... 1,136 1,326 992 1,684
------ ------ --------- ---------
Total revenue.............................................. 4,054 5,501 4,113 8,068
------ ------ --------- ---------
Costs and expenses:
Costs of goods sold (excluding depreciation)................. 1,147 1,616 1,263 2,293
Operating expenses (excluding depreciation and
amortization)............................................... 1,197 1,306 1,014 1,523
General and administrative expenses.......................... 948 1,309 917 1,892
------ ------ --------- ---------
Total costs and expenses................................... 3,292 4,231 3,194 5,708
------ ------ --------- ---------
Depreciation and amortization:
Cost of goods sold........................................... 106 237 130 337
Operating expenses........................................... 113 214 149 422
------ ------ --------- ---------
Total depreciation and amortization........................ 219 451 279 759
------ ------ --------- ---------
Income from operations.......................................... 543 819 640 1,601
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Other income (expense):
Interest expense............................................. (130) (303) (221) (541)
Other income (expense)....................................... 47 119 108 (5)
Plant relocation charges (1)................................. -- -- -- (250)
------ ------ --------- ---------
Total other expense........................................ (83) (184) (113) (796)
------ ------ --------- ---------
Income before provision for income taxes........................ 460 635 527 805
Provision for income taxes...................................... 204 231 190 290
------ ------ --------- ---------
Net income...................................................... $ 256 $ 404 $ 337 $ 515
------ ------ --------- ---------
------ ------ --------- ---------
Earnings per share (2).......................................... $ 0.14 $ 0.21 $ 0.18 $ 0.23
------ ------ --------- ---------
------ ------ --------- ---------
Weighted average common shares outstanding (2).................. 1,843 1,928 1,843 2,238
------ ------ --------- ---------
------ ------ --------- ---------
Pro forma net income (3)........................................ $ 7
------
------
Pro forma earnings per share.................................... $ 0.00
------
------
Pro forma weighted average common shares outstanding............ 1,928
------
------
</TABLE>

6
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<TABLE>
<CAPTION>
DECEMBER 31, 1995 SEPTEMBER 30, 1996
------------------- -------------------------
ACTUAL ACTUAL AS ADJUSTED(4)
------------------- --------- --------------
<S> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash................................................................ $ 689 $ 326 $ 1,326
Working capital (deficit)........................................... 1,049 (248) 1,530
Total assets........................................................ 8,350 17,253 18,253
Long-term debt...................................................... 2,505 7,688 2,966
Total stockholders' equity.......................................... 3,515 4,530 11,030
</TABLE>

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(1) Represents non-recurring charges of $250,000 related to the closing of two
of the Company's bottling plants and the relocation of such production
facilities to the Company's Commack, Long Island, New York and East Orange,
New Jersey facilities.

(2) See Notes 2 and 13 of Notes to Financial Statements appearing elsewhere
herein.

(3) The pro forma statement of operations data for the year ended December 31,
1995 gives effect to the purchase of Electrified as if it had occurred as of
January 1, 1995. The effects of this transaction are set forth below.

(i) Reflects the increase of intangible assets as a result of the purchase
and an increase in the corresponding amortization expense of $272,000
for the year ended December 31, 1995.

(ii) Reflects the increase in interest expense of $342,000 as a result of
the issuance of notes payable to the sellers of Electrified.

(iii) Income taxes have been decreased by $614,000 to reflect the
adjustments described in (i) and (ii) above.

(4) Adjusted to give effect to the sale by the Company of 1,350,000 shares of
Common Stock offered hereby and the initial application of the net proceeds
therefrom. See "Use of Proceeds".

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RISK FACTORS

AN INVESTMENT IN THE SHARES IS HIGHLY SPECULATIVE, INVOLVES A HIGH DEGREE OF
RISK AND SHOULD BE CONSIDERED ONLY BY THOSE PERSONS WHO ARE ABLE TO AFFORD A
LOSS OF THEIR ENTIRE INVESTMENT. IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN
EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OFFERED
HEREBY.

RISK ASSOCIATED WITH GROWTH STRATEGY AND RAPID EXPANSION. Implementation of
the Company's proposed expansion will be substantially dependent on, among other
things, the Company's ability to hire and retain skilled management, financial,
marketing and other personnel, and successfully manage growth (including
monitoring operations, controlling costs and maintaining effective quality and
inventory controls). The Company's growth strategy and plans are subject to
change as a result of a number of factors, including progress or delays in the
Company's marketing efforts, changes in market conditions and competitive
factors. There can be no assurance that the Company will be able to successfully
implement its business strategy or otherwise expand its operations. See "Use of
Proceeds."

DEPENDENCE ON OFFERING PROCEEDS TO FINANCE EXPANSION; NEED FOR ADDITIONAL
FINANCING. The Company is dependent on the proceeds of this Offering or other
financing to implement its proposed expansion. The Company anticipates, based on
currently proposed plans and assumptions relating to its operations (including
the costs associated with its proposed expansion), that the net proceeds of this
Offering and cash generated from operations will be sufficient to satisfy its
anticipated cash requirements for at least 12 months following the consummation
of this Offering. In the event that the Company's plans change, its assumptions
change or prove to be inaccurate or the proceeds of this Offering prove to be
insufficient to fund the Company's operations (due to unanticipated expenses,
delays, problems, difficulties or otherwise), the Company would be required to
seek additional financing sooner than anticipated. The Company may determine,
depending upon the opportunities available to it, to seek additional debt or
equity financing to fund the cost of continuing expansion. To the extent that
the Company incurs indebtedness or issues debt securities, the Company will be
subject to risks associated with incurring substantial indebtedness, including
the risks that interest rates may fluctuate and cash flow may be insufficient to
pay principal and interest on any such indebtedness. The Company has no current
arrangements with respect to, or sources of, additional financing. There can be
no assurance that additional financing will be available to the Company on
commercially reasonable terms or at all. If the Company is unable to obtain
additional financing, its current plans for expansion could be materially
adversely affected. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

CONSEQUENCES OF FAILURE TO COMPLY WITH GOVERNMENTAL REGULATION. The
Company's water bottling plants and water coolers are subject to the
jurisdiction of the Federal Food and Drug Administration (FDA) and various state
and local health and other regulatory agencies which regulate the quality of
drinking water and other products. The Company believes that it is in compliance
with all applicable laws and regulations and has all required licenses to
conduct its business. However, no assurances can be given that current laws or
regulations applicable to the Company's business will not change. Any such new
laws or regulations or the Company's expansion into new geographic areas could
subject the Company to substantial costs in order to comply with such applicable
laws or regulations. Any failure by the Company to comply with any new or
existing laws or regulations could subject the Company to substantial penalties.
See "Business -- Regulation."

COMPETITION. The Company competes with numerous well-established companies
which distribute drinking water sold off the shelf at retail (primarily
supermarket) locations. Many of the Company's competitors have achieved
significant national, regional and local brand name and product recognition and
additional competitors have sought to enter the drinking water market.

8
<PAGE>
Company will be subject to increasing competition from companies whose products
or marketing strategies address these consumer preferences. Some of the
Company's competitors and potential competitors possess substantially greater
financial, personnel, marketing and other resources than the Company and have
established reputations for success in the sale of purified water products. See
"Business--Competition."

DEPENDENCE ON KEY PERSONNEL; ATTRACTION AND RETENTION OF KEY PERSONNEL. The
Company is dependent to a great extent, on the experience, abilities and
continued services of Mr. West and Mr. Levy, the Company's President and Chief
Executive Officer, respectively. While the Company's management has substantial
experience in the bottled water distribution business, no assurances can be
given that such prior experience will assure the Company's success. Each of
Messrs. West and Levy has entered into a five year employment agreement with the
Company, each of which employment agreement contains confidentiality and
non-competition provisions. The Company has key-person life insurance policies
on the lives of Messrs. West and Levy in the amount of $1,000,000 per person.
The loss of the services of Messrs. West or Levy could have a material adverse
effect on the Company. The Company's success also depends upon its ability to
attract and retain other qualified personnel. There can be no assurances that
the Company will be able to attract and retain qualified personnel. See
"Management."

CONTROL BY PRINCIPAL STOCKHOLDERS. Upon completion of this Offering, the
Company's directors and officers will beneficially own approximately 63% of the
Company's outstanding shares of Common Stock. These persons will be able to
control actions requiring the consent of stockholders, such as the election of
directors. See "Security Ownership of Management and Others" and "Description of
Securities."

FAILURE TO CONSUMMATE POSSIBLE ACQUISITIONS. It is currently anticipated
that a portion of the Company's future growth will result from acquisitions of
other similar or complementary businesses, although no such acquisitions are
currently pending. There can be no assurance that suitable acquisition
opportunities will be available or that the Company will be able to consummate
acquisition transactions on satisfactory terms. In addition, there can be no
assurance that the Company will be able to integrate or manage successfuly other
acquired businesses.

USE OF PROCEEDS TO REPAY INDEBTEDNESS. The Company intends to use
approximately $5,500,000 or approximately 85% of the net proceeds from this
Offering to repay indebtedness incurred in recent acquisitions.

POTENTIAL LIABILITY; INSURANCE. The Company is engaged in a business which
could expose it to possible liability claims from others, including personal
injury claims. The Company maintains a general liability insurance policy that
is subject to a $1,000,000 per occurrence limit with a $2,000,000 aggregate
limit and a $4,000,000 umbrella liability policy. There can be no assurance,
however, that the Company's insurance will be sufficient to cover potential
claims or that an adequate level of coverage will be available in the future at
a reasonable cost. A partially insured or completely uninsured successful claim
against the Company could have a material adverse effect on the Company. See
"Business -- Product Liability and Insurance."

IMMEDIATE AND SUBSTANTIAL DILUTION; PURCHASE OF COMMON STOCK BY INSIDERS AT
BELOW OFFERING PRICE. The shares of Common Stock held by the Company's current
stockholders were purchased for prices significantly lower than the initial
public offering price. A purchaser in this Offering will experience immediate
and substantial dilution of approximately 84% or $5.03 per share. See
"Dilution."

NO DIVIDENDS. The Company has never paid a cash dividend on its Common
Stock and does not intend to pay any cash dividends to its stockholders in the
foreseeable future. The Company currently intends to reinvest earnings, if any,
in the development and expansion of its business. See "Dividend Policy."

NO ASSURANCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE
VOLATILITY OF MARKET. Prior to this Offering, there has been no public trading
market for the Common Stock. Consequently, the initial public offering price of
the Common Stock has been determined by negotiations between the Company and the
Underwriters and does not necessarily reflect the Company's book value or other
established criteria of

9
<PAGE>
valuation. There can be no assurance that a regular trading market for the
Common Stock will develop after this Offering or that, if developed, it will be
sustained. The market price of the Common Stock following this Offering may be
highly volatile as has been the case with the securities of many emerging
companies. Factors such as the Company's operating results and announcements by
the Company or its competitors may significantly impact the market price of the
Company's securities. In addition, in recent years, the stock market has
experienced a high level of price and volume volatility and market prices for
the securities of many companies have experienced wide price fluctuations not
necessarily related to the operating performance of such companies. Although the
Representatives intend to make a market in the Common Stock, they are not
obligated to do so and may cease such market making activities at any time. See
"Underwriting."

POSSIBLE DILUTIVE EFFECT OF OUTSTANDING OPTIONS AND CONVERTIBLE NOTE,
COMPANY'S STOCK OPTION PLAN AND REPRESENTATIVES' WARRANTS. As of the date of
this Prospectus, (i) options to purchase an aggregate of 123,210 shares of
Common Stock are issued and outstanding which are exercisable at the initial
public offering price of the Shares offered hereby less underwriting discounts
and commissions, and (ii) a convertible note convertible into shares of Common
Stock in an amount equal to the outstanding principal amount of such note
($265,707.08 as of February 1, 1997, which amount is reduced by $1,428.58 per
month) divided by the initial public offering price per share of the Shares
offered hereby less underwriting discounts and commissions is issued and
outstanding. In addition, while no options are presently issued and outstanding
under the Company's Stock Option Plan, the Company may from time to time issue
options under the Stock Option Plan to purchase up to 400,000 shares of Common
Stock. The Company has committed to grant options to purchase 88,167 shares of
Common Stock at an exercise price equal to the initial public offering price of
the Shares offered hereby less underwriting discounts and commissions pursuant
to the Stock Option Plan to two employees of the Company upon consummation of
this Offering. In connection with this Offering, the Company will issue and sell
to the Representatives for nominal consideration Warrants which entitle the
Representatives to purchase an aggregate of 135,000 shares of Common Stock. The
Representatives' Warrants will be exercisable, commencing one year and ending
five years after the date of this Prospectus, at an exercise price of 140% of
the initial public offering price per share of the Shares offered hereby. The
holders of the options and a convertible note presently outstanding, holders of
any subsequently issued options, warrants or other convertible securities of the
Company, as well as the Representatives will have the opportunity to profit from
a rise in the market price of the Company's Common Stock without assuming the
risk of ownership. The sale of Common Stock or other securities held by or
issuable to any such holders, or merely the potential of such sales, could have
an adverse effect on the market price of the Company's Common Stock. The Company
may find it more difficult to raise additional equity capital, if it should be
needed for the business of the Company, while any of such securities are
outstanding. At any time when the holders thereof might be expected to convert
or exercise them, the Company would probably be able to obtain additional equity
capital on terms more favorable than those provided by such securities. To the
extent that any such securities are converted or exercised, as the case may be,
the percentage of ownership interest of the Company's stockholders will be
diluted. See "Dilution" and "Management--1996 Stock Option Plan."

SHARES ELIGIBLE FOR FUTURE SALE. The 2,126,789 shares of Common Stock
outstanding immediately prior to this Offering are "restricted securities"
within the meaning of the Act and, generally, may be sold only in compliance
with Rule 144 under the Act. In addition, all of the 2,126,789 shares are
subject to lockup restrictions described below. Of such restricted securities,
2,069,929 may be sold pursuant to Rule 144 upon the expiration of the lockup
restrictions described below and 56,860 may be sold pursuant to Rule 144 on
October 1, 1998. Under Rule 144, a person who has held restricted securities for
a period to two years may sell a limited number of such securities into the
public market without registration of such securities under the Act. Rule 144
also permits, under certain circumstances, persons who are not affiliates of the
Company to sell their restricted securities without quantity limitations once
they have satisfied Rule 144(k)'s three-year holding period. In addition, the
Securities and Exchange Commission (the "Commission") has proposed revisions to
Rule 144 and Rule 144(k), the effect of which would be to shorten the holding
period under Rule 144 from two years to one year and to shorten the holding
period under Rule 144(k) from three

10
<PAGE>
years to two years. Sales made pursuant to Rule 144 by the Company's existing
stockholders may have a depressive effect on the price of the shares of Common
Stock in the public market, should a public market for the shares develop. Such
sales could also adversely affect the Company's ability to raise capital at that
time through the sale of its equity securities. All of the Company's officers,
directors and stockholders have agreed not to sell, assign or transfer any of
their shares of Common Stock for a period of eighteen (18) months from the
consummation of this Offering without the Representatives' prior written
consent. The holders of all of the 2,126,789 shares of "restricted securities"
have certain registration rights with respect to such shares. All such holders
have waived such registration rights for a period of eighteen months from the
consummation of this Offering. The holders of the Representatives' Warrants will
have certain registration rights with respect to the Common Stock underlying
such warrants, commencing one year after the effective date of this Offering.
See "Shares Eligible for Future Sale."

FORWARD LOOKING STATEMENTS. This Prospectus contains forward-looking
statements. Investors are cautioned that all forward-looking statements involve
risks and uncertainty. Although the Company believes that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate, and therefore, there can be no assurance
that the forward-looking statements included in this Prospectus will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.

11
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Shares
offered hereby, after deducting underwriting discounts and expenses payable by
the Company, are estimated to be $6,500,000 ($7,557,050 if the Underwriters'
over-allotment option is exercised in full).

The Company presently intends to use the net proceeds as follows:

<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS AMOUNT NET PROCEEDS
- -------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Repayment of seller's notes(1)........................................................ $ 3,500,000 54%
Repayment of outstanding loan(2)...................................................... 2,000,000 31
Working capital(3).................................................................... 1,000,000 15
------------ -----
Total........................................................................... $ 6,500,000 100%
------------ -----
------------ -----
</TABLE>

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

(1) Reflects repayment in full of indebtedness incurred in connection with the
acquisition by the Company of certain assets of Electrified. The notes
evidencing the indebtedness were originally issued in January 1996. The
notes bear interest at the prime rate, interest payments only due through
February 1997, and then equal monthly installments of principal and interest
from March 1997 through February 2000.

(2) Reflects repayment of a note payable to European American Bank having an
outstanding principal amount of $2,000,000 bearing interest at an annual
rate of prime plus .25%, due in monthly installments of interest only
through May 31, 1997 at which time the principal plus any accrued and unpaid
interest is due in full. The proceeds of this note were used for acquisition
financing.

(3) The Company may seek to utilize funds allocated to working capital for
business acquisitions. Although the Company has no current plan to acquire
any other business, the Company may seek to acquire, where feasible,
companies whose businesses are compatible with those of the Company. The
Company does not currently have any agreements, commitments or arrangements
with respect to any proposed acquisitions, and no assurance can be given
that any acquisition opportunity will be consummated in the future.

The allocation of the net proceeds of this Offering set forth above
represents the Company's best estimate based upon its present plans and certain
assumptions regarding general economic and industry conditions and the Company's
future revenue and expenditures. The Company reserves the right to reallocate
these proceeds within the above-mentioned categories or to other purposes if
management believes it is in the Company's best interest because of any
unpredictable factors.

Any additional net proceeds realized from the exercise of the Underwriters'
over-allotment option (up to $1,057,050) will be added to the Company's working
capital.

Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds and interest-bearing savings and
management accounts.

DIVIDEND POLICY

The Company has not declared or paid any cash dividends on the Common Stock.
The Company currently intends to reinvest earnings, if any, to finance the
development and expansion of its business and does not intend to declare or pay
any cash dividends in the foreseeable future.

12
<PAGE>
DILUTION

The net tangible book value (deficit) of the Company at September 30, 1996
was $(3,114,759) or $(1.46) per share of Common Stock based on the 2,126,789
shares of Common Stock outstanding. Net tangible book value per share represents
the amount of the Company's total tangible assets less the Company's total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to the receipt and initial application of net proceeds (estimated
to be approximately $6,500,000) from the sale of the Shares offered hereby, the
pro forma net tangible book value of the Company at September 30, 1996 would
have been $3,386,241 or $.97 per share of Common Stock. This represents an
immediate increase in pro forma net tangible book value of $2.43 per share to
existing stockholders and an immediate, substantial dilution of approximately
84% or $5.03 per share to purchasers of Common Stock offered hereby. The
following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share.............................. $ 6.00
Net tangible book value (deficit) per share at September 30,
1996.............................................................. $ (1.46)
Increase per share attributable to new investors................... 2.43
---------
Pro forma net tangible book value per share after this Offering...... .97
---------
Dilution per share to new investors.................................. $ 5.03
---------
---------
</TABLE>

The following table, calculated on the same basis as above, sets forth, with
respect to current stockholders and new investors, a comparison of the number of
shares of Common Stock acquired from the Company, the percentage ownership of
such shares, the total consideration paid, the percentage of total consideration
paid and the average price per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- -------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current stockholders (1)................................ 2,126,789 61% $ 3,356,114 29% $ 1.58
New investors........................................... 1,350,000 39 8,100,000 71 $ 6.00
---------- --- ------------- ---
3,476,789 100% $ 11,456,114 100%
---------- --- ------------- ---
---------- --- ------------- ---
</TABLE>

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

(1) Includes 56,860 shares of Common Stock issued upon the exercise of warrants
on October 1, 1996 for consideration of $1,000. Does not include (i) 400,000
shares of Common Stock reserved for issuance pursuant to the Company's Stock
Option Plan (none of which options have been granted to date; however, the
Company has committed to grant options to purchase 88,167 shares of Common
Stock at an exercise price equal to the initial public offering price per
share of the Shares offered hereby less underwriting discounts and
commissions pursuant to the Stock Option Plan to two employees of the
Company upon consummation of this Offering), (ii) an aggregate of 123,210
shares of Common Stock reserved for issuance upon the exercise of
outstanding options at an exercise price equal to the initial public
offering price per share of the Shares offered hereby less underwriting
discounts and commissions, and (iii) shares of Common Stock in an amount
equal to the outstanding principal amount of a convertible note ($265,707.08
as of February 1, 1997, which amount is reduced by $1,428.58 per month)
divided by the initial public offering price per share of the Shares offered
hereby, less underwriting discounts and commissions, reserved for issuance
upon conversion of such note.

13
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at
September 30, 1996, and as adjusted to reflect the issuance and sale by the
Company of the Shares offered hereby and the initial application of the net
proceeds therefrom. This table should be read in conjunction with the Company's
financial statements and pro forma unaudited financial statements of operations
and the notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------
ACTUAL AS ADJUSTED
------------- -------------
<S> <C> <C>
Total long-term debt (less current portion)(1)..................................... $ 7,687,589 $ 3,200,096
------------- -------------
Stockholders' equity:
Common stock, $.0063 par value; 10,000,000 shares authorized; 2,069,929; issued
and outstanding and 3,476,789, as adjusted, respectively (2);................... 13,041 21,904
Additional paid-in capital....................................................... 3,342,073 9,834,210
Retained earnings................................................................ 1,174,517 1,174,517
------------- -------------
Total stockholders' equity................................................... 4,529,631 11,030,631
------------- -------------
Total capitalization....................................................... $ 12,217,220 $ 14,230,727
------------- -------------
------------- -------------
</TABLE>

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

(1) See Notes 7 and 10 to the Financial Statements included elsewhere herein for
information regarding the Company's long-term debt and other long-term
obligations.

(2) Includes 56,860 shares of Common Stock issued upon the exercise of warrants
on October 1, 1996 for consideration of $1,000. Does not include (i) 400,000
shares of Common Stock reserved for issuance pursuant to the Company's Stock
Option Plan (none of which options have been granted to date; however, the
Company has committed to grant options to purchase 88,167 shares of Common
Stock at an exercise price equal to the initial public offering price per
share of the Shares offered hereby less underwriting discounts and
commissions pursuant to the Stock Option Plan to two employees of the
Company upon consummation of this Offering), (ii) an aggregate of 123,210
shares of Common Stock reserved for issuance upon the exercise of
outstanding options at an exercise price equal to the initial public
offering price per share of the Shares offered hereby less underwriting
discounts and commissions, and (iii) shares of Common Stock in an amount
equal to the outstanding principal amount of a convertible note ($265,707.08
as of February 1, 1997, which amount is reduced by $1,428.58 per month)
divided by the initial public offering price per share of the Shares offered
hereby, less underwriting discounts and commissions, reserved for issuance
upon conversion of such note.

14
<PAGE>
PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma financial information set forth below for the year
ended December 31, 1995, gives effect to the acquisition of Electrified as
though acquired on January 1, 1995. The pro forma statement of operations
information also reflects (a) the increase in amortization expense as a result
of the increase of intangible assets from the acquisition for the year ended
December 31, 1995 and (b) the increase in interest expense for the year ended
December 31, 1995 resulting from the issuance of notes payable to the sellers in
connection with the Electrified transaction. The pro forma financial information
is not necessarily indicative of what the Company's results of operations would
have been had such transaction occurred at the beginning of the period. The pro
forma financial information below should be read in conjunction with the audited
financial statements of the Company and the notes thereto contained elsewhere in
this Prospectus. Pro forma results of operations of the Company for the nine
months ended September 30, 1996 are not provided as the Company's actual results
of operations for the nine months ended September 30, 1996 include the results
of operations of Electrified for the period from February 1, 1996 to September
30, 1996. The acquisition of Electrified was consummated on January 31, 1996.
Electrified's results of operations for the one month ended January 31, 1996
were not material to the Company's overall results of operations.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------------
PRO FORMA
PURO ELECTRIFIED COMBINED ADJUSTMENTS(1) COMBINED
------------ ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenue:
Bottled water sales and other revenue............. $ 4,175 $ 4,425 $ 8,600 $ -- $ 8,600
Rental revenue.................................... 1,326 733 2,059 -- 2,059
------------ ----------- ----------- ----- ------------
Total revenue................................... 5,501 5,158 10,659 -- 10,659
------------ ----------- ----------- ------------

Costs and expenses:
Cost of goods sold (excluding depreciation)....... 1,616 2,615 4,231 -- 4,231
Operating expenses (excluding depreciation and
amortization).................................... 1,306 1,479 2,785 -- 2,785
General and administrative expenses............... 1,309 883 2,192 -- 2,192
------------ ----------- ----------- ----- ------------
Total costs and expenses........................ 4,231 4,977 9,208 -- 9,208
------------ ----------- ----------- ----- ------------
Depreciation and amortization....................... 451 447 898 272 1,170
------------ ----------- ----------- ----- ------------
Income (loss) from operations....................... 819 (266) 553 (272) 281
------------ ----------- ----------- ----- ------------
Other income (expense):

Interest expense.................................. (303) (53) (356) (342) (698)
Other income (expense)............................ 119 310 429 -- 429
Plant relocation charges.......................... -- -- -- -- --
------------ ----------- ----------- ----- ------------
Total other income (expense).................... (184) 257 73 (342) (269)
------------ ----------- ----------- ----- ------------
Income (loss) before provision for income taxes..... 635 (9) 626 (614) 12
Provision for income taxes.......................... 231 9 240 235 5
------------ ----------- ----------- ----- ------------
Net income (loss)................................... $ 404 $ (18) $ 386 $ (379) $ 7
------------ ----------- ----------- ----- ------------
------------ ----------- ----------- ----- ------------
Earnings per share(2)............................... $ 0.21 $ 0.00
------------ ------------
------------ ------------
Weighted average common shares outstanding(2)....... 1,928 1,928
------------ ------------
------------ ------------
</TABLE>

15
<PAGE>
- ------------------------

(1) The pro forma statement of operations data for the year ended December 31,
1995 gives effect to the purchase of Electrified as if it had occurred as of
January 1, 1995. The effects of this transaction are set forth below.

(i) Reflects the increase of intangible assets as a result of the purchase
and an increase in the corresponding amortization expense of $272,000
for the year ended December 31, 1995.

(ii) Reflects the increase in interest expense of $342,000 as a result of
the issuance of notes payable to the sellers of Electrified.

(iii) Income taxes have been decreased by $614,000 to reflect the
adjustments described in (i) and (ii) above.

(2) See Notes 2 and 13 of Notes to Financial Statements appearing elsewhere
herein.

16
<PAGE>
SELECTED FINANCIAL DATA

The selected financial data presented below for the period from inception
(February 1, 1994) through December 31, 1994 and as of and for the year ended
December 31, 1995 have been derived from financial statements which have been
audited by Arthur Andersen LLP, independent public accountants, and are included
elsewhere in this Prospectus. The selected financial data for the nine months
ended September 30, 1995 and as of and for the nine months ended September 30,
1996 has been derived from unaudited financial statements which have been
prepared on the same basis as the audited financial statements and, in the
opinion of management, include all adjustments of a normal recurring nature
necessary for a fair presentation of the information shown therein. The results
of operations for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
data set forth below should be read in conjunction with the Company's financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 1, NINE MONTHS ENDED
1994) THROUGH YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ------------------------
1994 1995 1995 1996
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
Bottled water sales and other revenue:..................... $ 2,918 $ 4,175 $ 3,121 $ 6,384
Rental revenue............................................. 1,136 1,326 992 1,684
------ ------ ----------- -----------
Total revenue.......................................... 4,054 5,501 4,113 8,068
------ ------ ----------- -----------
Costs and expenses:
Cost of goods sold (excluding depreciation)................ 1,147 1,616 1,263 2,293
Operating expenses (excluding depreciation and
amortization)............................................. 1,197 1,306 1,014 1,523
General and administrative expenses........................ 948 1,309 917 1,892
------ ------ ----------- -----------
Total costs and expenses............................... 3,292 4,231 3,194 5,708
------ ------ ----------- -----------
Depreciation and amortization:
Cost of goods sold......................................... 106 237 130 337
Operating expenses......................................... 113 214 149 422
------ ------ ----------- -----------
Total depreciation and amortization.................... 219 451 279 759
------ ------ ----------- -----------
Income from operations....................................... 543 819 640 1,601
------ ------ ----------- -----------
Other income (expense):
Interest expense........................................... (130) (303) (221) (541)
Other income (expense)..................................... 47 119 108 (5)
Plant relocation charges (1)............................... -- -- -- (250)
------ ------ ----------- -----------
Total other expense.................................... (83) (184) (113) (796)
------ ------ ----------- -----------
Income before provision for income taxes..................... 460 635 527 805
Provision for income taxes................................... 204 231 190 290
------ ------ ----------- -----------
Net income................................................... $ 256 $ 404 $ 337 $ 515
------ ------ ----------- -----------
------ ------ ----------- -----------
Earnings per share(2)........................................ $ 0.14 $ 0.21 $ 0.18 $ 0.23
------ ------ ----------- -----------
------ ------ ----------- -----------
Weighted average common shares outstanding(2)................ 1,843 1,928 1,843 2,238
------ ------ ----------- -----------
------ ------ ----------- -----------
Pro forma net income(3)...................................... $ 7
------
------
Pro forma earnings per share................................. $ 0.00
------
------
Pro forma weighted average common shares outstanding......... 1,928
------
------
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- -------------------------
ACTUAL ACTUAL AS ADJUSTED(4)
----------------- --------- --------------
<S> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash........................................................ $ 689 $ 326 $ 1,326
Working capital (deficit)................................... 1,049 (248) 1,530
Total assets................................................ 8,350 17,253 18,253
Long-term debt.............................................. 2,505 7,688 2,966
Total stockholders' equity.................................. 3,515 4,530 11,030
</TABLE>

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

(2) See Notes 2 and 13 of Notes to Financial Statements appearing elsewhere
herein.

(i) Reflects the increase of intangible assets as a result of the purchase
and an increase in the corresponding amortization expense of $272,000 for
the year ended December 31, 1995.

(ii) Reflects the increase in interest expense of $342,000 as a result of
the issuance of notes payable to the sellers of Electrified.

(iii) Income taxes have been decreased by $614,000 to reflect the
adjustments described in (i) and (ii) above.

(4) Adjusted to give effect to the sale by the Company of the 1,350,000 shares
of Common Stock offered hereby and the initial application of the net
proceeds therefrom. See "Use of Proceeds."

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analylsis should be read in conjunction with
the Company's financial statements and the notes thereto included elsewhere in
this Prospectus.

GENERAL BACKGROUND

The Company is a leading bottler and distributor of spring and purified
drinking water, serving commercial and residential users in the metropolitan New
York area. The Company also rents and services water coolers, filtration
systems, and plumbed-in fountains located in businesses, factories, and homes in
the metropolitan New York area.

The Company was formed in January 1994 and represents the acquisition of LSL
Hydro Corp. and Puro Corporation of America. Subsequently, the Company has
acquired eight additional distributors of high quality drinking water in the New
York City, New Jersey and Long Island markets. Since 1994, the Company has grown
from approximately 5,000 water customers to in excess of 25,000.

OVERVIEW

The Company's strategy is to capitalize on the growing demand for high
quality drinking water through the expansion of its existing customer base and
through the acquisition of regional water bottlers and distributors in targeted
geographic markets. The Company's acquisition of Electrified's modern high-speed
production facility enables it to absorb new bottling demand without a
commensurate increase in production costs. Similarly, the new bottling facility
in Commack, Long Island, New York can absorb additional volume with minimum
incremental cost. In addition, management continually seeks to grow revenues by
increasing route density through the acquisition and consolidation of new routes
within its existing route structure, thereby minimizing distribution and
administration costs. The continued consolidation of production and distribution
capabilities is a key component of the Company's operating plans, both within
its current markets and any additional markets it may enter.

RESULTS OF OPERATIONS

The Company derives its revenues from two major sources: bottled water sales
and the rental and service of water coolers, filtration systems and plumbed-in
fountains. While most other bottled water companies sell only pre-packaged
bottled water, the Company also rents water treatment equipment which processes
and dispenses drinking water at the point of use enabling the consumer to enjoy
quality drinking water with reduced contaminants.

Additionally, in contrast to most other water treatment dealers and
distributors that have historically sold their water treatment equipment
outright, the Company creates long-term relationships with its own customers by
renting or placing the equipment under lease/service agreements. These
agreements result in revenue streams which provide the Company with a base of
recurring revenue.

19
<PAGE>
The following table sets forth, for the periods indicated, the percentage
relationship to total revenues of certain items included in the Company's
Statement of Operations.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
PERIOD FROM INCEPTION SEPTEMBER 30,
(FEBRUARY 1, 1994) YEAR ENDED --------------------
THROUGH DECEMBER 31, 1994 DECEMBER 31, 1995 1995 1996
------------------------- ----------------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Bottled water sales and other revenue..................... 72.0 75.9 75.9 79.1
Rental revenue............................................ 28.0 24.1 24.1 20.9
------ ------ --------- ---------
Total revenue........................................... 100.0% 100.0% 100.0% 100.0%
------ ------ --------- ---------
Costs and expenses:
Cost of goods sold (excluding depreciation)............... 28.3 29.4 30.7 28.4
Operating expenses (excluding depreciation and
amortization)........................................... 29.5 23.7 24.7 18.9
General and administrative expenses....................... 23.4 23.8 22.3 23.5(1)
------ ------ --------- ---------
Total costs and expenses................................ 81.2 76.9 77.7 70.8
------ ------ --------- ---------
Depreciation and amortization:
Cost of goods sold........................................ 2.6 4.3 3.2 4.2
Operating expenses........................................ 2.8 3.9 3.6 5.2
------ ------ --------- ---------
Total depreciation and amortization..................... 5.4 8.2 6.8 9.4
------ ------ --------- ---------
Income from operations...................................... 13.4 14.9 15.5 19.8
Other income (expense):
Interest expense.......................................... (3.2) (5.5) (5.4) (6.7)
Other income (expense).................................... 1.1 2.2 2.6 (0.1)
Plant relocation charges(2)............................... 0.0 0.0 0.0 (3.1)
------ ------ --------- ---------
Total other expense..................................... (2.1) (3.3) (2.8) (9.9)
------ ------ --------- ---------
Income before provision for income taxes.................... 11.3 11.6 12.7 9.9
Provision for income taxes.................................. 5.0 4.2 4.6 3.6
------ ------ --------- ---------
Net income.................................................. 6.3% 7.4% 8.1% 6.3%
------ ------ --------- ---------
------ ------ --------- ---------
</TABLE>

- ------------------------
(1) Includes certain "non-recurring" expenses totaling $47,000 for the nine
months ended September 30, 1996.

(2) Represents non-recurring charges of $250,000 related to the closing of two
of the Company's bottling plants and the relocation of such production
facilities to the Company's Commack, Long Island, New York and East Orange,
New Jersey facilities.

THE PERIOD FROM INCEPTION (FEBRUARY 1, 1994) TO DECEMBER 31, 1994, YEAR ENDED
DECEMBER 31, 1995 AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996

REVENUES. Revenues in 1995 increased by 34% to $5.5 million from $4.1
million in the period from inception (February 1, 1994) to December 31, 1994.
The growth in revenues was attributable to the increase in the number of coolers
in operation as well as the acquisition of smaller distributors in the Company's
market area. Revenues for the nine months ended September 30, 1996 increased by
98% to $8.1 million from $4.1 for the nine months ended September 30, 1995. This
increase in revenues reflects the acquisition of Electrified's operations in
East Orange, New Jersey for eight of the nine months and the acquisition of the

20
<PAGE>
five-gallon routes from Mountainwood for three months beginning July 1, 1996.
Moreover, this increase occurred notwithstanding unusually cold spring and
summer seasons in 1996 compared to the heat wave in 1995 and record breaking
snow storms in early 1996.

COST OF GOODS SOLD. Cost of goods sold (excluding depreciation) increased
by 45% to $1.6 million in 1995 from $1.1 million in the period from inception
(February 1, 1994) to December 31, 1994. Cost of goods sold (excluding
depreciation) increased as a percentage of revenues to 29.4% in 1995 from 28.3%
in the period from inception (February 1, 1994) to December 31, 1994. This
increase is reflective of the trend to a higher percentage of natural spring
water sold compared to processed drinking water. Although cost of goods sold
(excluding depreciation) for the nine months ended September 30, 1996 increased
by 77% to $2.3 million from $1.3 million for the nine months ended September 30,
1995, cost of goods sold (excluding depreciation) as a percentage of revenues
for the nine months ended September 30, 1996 fell to 28.4% from 30.7% for the
same period in 1995. This decrease was the result of the production economies
associated with the newly acquired East Orange, New Jersey bottling facility.

OPERATING EXPENSES. Operating expenses (excluding depreciation and
amortization) increased by 8.3% to $1.3 million in 1995 from $1.2 million in the
period from inception (February 1, 1994) to December 31, 1994. However,
operating expenses (excluding depreciation and amortization) decreased as a
percentage of revenues to 23.7% in 1995 from 29.5% in the period from inception
(February 1, 1994) to December 31, 1994. This decrease was due to efficiencies
achieved in the Company's bottling operations, route delivery, and servicing
system -- primarily from the addition of new accounts in existing market areas
that did not cause a commensurate increase in the required number of route
delivery personnel and field technicians. Operating expenses (excluding
depreciation and amortization) increased by 50% to $1.5 million for the nine
months ended September 30, 1996, from $1.0 million for the nine months ended
September 30, 1995. Due to the acquisition of Electrified's operations for eight
of the nine months ended September 30, 1996 and the acquisition of
Mountainwood's delivery routes for the three months beginning July 1, 1996,
operating expenses (excluding depreciation and amortization) as a percentage of
revenues decreased to 18.9% for the nine months ended September 30, 1996
compared to 24.7% for the nine months ended September 30, 1995.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by 44% to $1.3 million in 1995 from $0.9 million in the period from
inception (February 1, 1994) to December 31, 1994. General and administrative
expenses increased as a percentage of revenues to 23.8% in 1995 from 23.4% in
the period from inception (February 1, 1994) to December 31, 1994. This increase
was the result of increased insurance costs associated with an increase in the
number of the Company's delivery vehicles. General and administrative expenses
increased by 111% to $1.9 million in the nine months ended September 30, 1996
from $0.9 million for the same period in 1995. General and administrative
expenses increased as a percentage of revenues to 23.5% for the nine months
ended September 30, 1996 from 22.3% for the same period in 1995. This increase
in general and administrative expenses reflects the addition of occupancy costs
of the East Orange, New Jersey and Commack, Long Island, New York facilities.

TOTAL DEPRECIATION AND AMORTIZATION. Total depreciation and amortization
increased by 150% to $0.5 million in 1995 from $0.2 million in the period from
inception (February 1, 1994) to December 31, 1994. Total depreciation and
amortization increased as a percentage of revenues to 8.2% in 1995 from 5.4% in
the period from inception (February 1, 1994) to December 31, 1994. This increase
was due primarily to the Company's continued investment in new coolers and route
acquisitions. Total depreciation and amortization for the nine month period
ended September 30, 1996 increased by 167% to $0.8 million from $0.3 million for
the same period in 1995. Total depreciation and amortization increased as a
percentage of revenues to 9.4% for the nine months ended September 30, 1996 from
6.8% for the same period in 1995. This increase resulted primarily from the
Electrified acquisition, which included a modern high-capacity bottling facility
and the opening of a new bottling facility in Commack, Long Island, New York.

INCOME FROM OPERATIONS. Income from operations increased by 60% to $0.8
million in 1995 from $0.5 million in the period from inception (February 1,
1994) to December 31, 1994. Income from operations

21
<PAGE>
increased as a percentage of revenues to 14.9% in 1995 from 13.4% in the period
from inception (February 1, 1994) to December 31, 1994. Income from operations
for the nine month period ended September 30, 1996 increased by 167% to $1.6
million from $0.6 million for the same period in 1995. Income from operations as
a percentage of revenues increased to 19.8% for the nine months ended September
30, 1996 from 15.5% for the same period in 1995. This increase was the result of
an increase in sales, the consolidation of production facilities and an
improvement in route densities and scheduling.

INTEREST EXPENSE. Interest expense increased by 200% to $0.3 million in
1995 from $0.1 million in the period from inception (February 1, 1994) to
December 31, 1994. Interest expense increased as a percentage of revenues to
5.5% in 1995 from 3.2% in the period from inception (February 1, 1995) to
December 31, 1994. This increase was primarily due to increased borrowing in
order to fund the Company's expansion. For the nine months ended September 30,
1996, interest expense increased by 150% to $0.5 million from $0.2 million for
the same period in 1995. Interest expense increased as a percentage of revenues
to 6.7% for the nine months ended September 30, 1996 from 5.4% for the same
period in 1995. This increase was due to additional borrowings in connection
with certain acquisitions.

PLANT RELOCATION CHARGES. During the nine months ended September 30, 1996,
the Company relocated all bottled water production from its plants in Maspeth,
New York, and Port Jefferson, New York, to the Electrified facility in East
Orange, New Jersey, and the newly opened bottling plant in Commack, Long Island,
New York. The Maspeth and Port Jefferson bottling plants were subsequently
closed. Non-recurring plant relocation charges of $0.3 million or 3.1% of
revenues for the period ended September 30, 1996 were incurred.

PROVISION FOR INCOME TAXES

The effective income tax rate was 44% for the year ended December 31, 1994
and 36% for the year ended December 31, 1995. The decrease in the effective tax
rate is primarily attributable to the one-time write-off of certain accounts
receivable balances as bad debt expense. These balances were not valued in the
allocation of the purchase price in connection with the merger transaction of
Puro (NY) and LSL Hydro because such amounts were not realizeable.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity and capital resources have been
cash flow from operations, proceeds from the sale of equity securities to the
Company's current stockholders, purchase money financing of business
acquisitions, and borrowing under the Company's bank agreement described below.
During 1995, net cash provided by operating activities was $0.4 million. In
1995, the Company made capital expenditures for coolers, other equipment, and
routes aggregating $2.8 million, which was funded by cash from operations,
private equity placement, purchase money financing of business acquisitions and
borrowings under the Company's bank agreement.

At December 31, 1995, cash totalled $0.7 million, and approximately $1.0
million of additional borrowings were available under the Company's bank
agreement. As of September 30, 1996, cash totalled $0.3 million, and no
additional borrowing was available under the Company's bank agreement.

The Company's bank agreement provides for aggregate long-term borrowings of
up to $3.0 million, approximately all of which is currently outstanding,
maturing between November 1, 1997 and December 31, 2001, bearing interest at the
prime rate plus .25% per annum, secured by substantially all of the assets of
the Company and guaranteed by certain stockholders of the Company. In addition,
the bank agreement contains covenants that include requirements to maintain
certain working capital, debt coverage and other financial ratios and
restrictions and limitations on the payment of dividends, guaranty payments,
additional borrowings and the amount of compensation paid to employees who are
stockholders. The Company is in material compliance with all such covenants.
Approximately $2.0 million of the net proceeds from this Offering will be used
to repay amounts outstanding under the Company's bank agreement.

22
<PAGE>
In addition, approximately $3.5 million of the net proceeds will be used to
repay certain purchase money financing incurred in connection with the
Electrified transaction. Simultaneously with the Electrified transaction, the
Company obtained a letter of credit in the amount of $3,500,000 from European
American Bank to secure such financing. In addition, in connection with the
Mountainwood transaction in June 1996, the Company obtained a letter of credit
in the amount of $500,000 from European American Bank to secure seller financing
of a like amount. Peter T. Dixon, the Company's Chairman of the Board of
Directors and a principal stockholder, secured both of these letters of credit
with personal assets. See "Certain Transactions."

The Company believes that the net proceeds from this Offering, together with
cash provided from operations, will be sufficient to satisfy its anticipated
cash requirements for at least twelve months following the consummation of this
Offering.

The Company is in negotiations with its principal lender regarding an
increase in its borrowing facilities, which may consist of either or both long
and short term borrowings. There can be no assurance that such negotiations will
be successfully completed.

FORWARD LOOKING STATEMENTS

This Prospectus contains forward-looking statements. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
included in this Prospectus will prove to be accurate. Factors that could cause
actual results to differ from the results discussed in the forward-looking
statements include, but are not limited to, those discussed in "Risk Factors."
In light of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.

23
<PAGE>
BUSINESS

The Company is also the manager of the Quality Bottler's Cooperative, Inc.
(the "Cooperative"). Membership consists of the twelve leading regional bottled
water companies located throughout the United States which are similar in size
to the Company. Members are contractually required to purchase all of their
coolers, bottles, closures, and other key items on a group basis. A management
fee is paid to the Company based on purchase volume. The Company believes that
the purchasing power of the Cooperative permits the group to buy at prices which
are no higher than those charged the largest buyer in the industry.

INDUSTRY OVERVIEW

Bottled water has been the fastest growing segment of the beverage industry
for the last ten years. According to "Bottled Water in the United States, May
1996" a study prepared by the Beverage Marketing Corporation of New York (the
"BEVERAGE MARKET SURVEY"), total bottled water consumption in the United States
has more than tripled from 1983 to 1995. Annual consumption increased from 2.8
gallons per capita in 1980 to 11.0 gallons per capita in 1995, and it is
projected to reach 14.2 gallons per capita by the year 2000. Bottled water
volume in the United States has grown significantly, increasing from
approximately 1.1 billion gallons in 1984 to approximately 2.9 billion gallons
in 1995; from approximately $1.3 billion in sales in 1984 to over $3.3 billion
in 1995.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
1995 U.S. BOTTLED WATER SALES
<S> <C> <C>
(AMOUNTS IN MILLIONS)
GALLONS SOLD
NONSPARKLING 2,430.20 84.30%
IMPORTED 97.1 3.40%
SPARKLING 356.2 12.40%
TOTAL2,883.5
DOLLAR SALES
NONSPARKLING $2,121.20 62.90%
IMPORTED $425.00 12.60%
SPARKLING $828.80 24.60%
TOTAL$3,375.0
SOURCE: BEVERAGE MARKET SURVEY
</TABLE>

24
<PAGE>
The bottled water market comprises three segments: non-sparkling (domestic),
sparkling (domestic) and imported water (both sparkling and non-sparkling).
Non-sparkling water, which is consumed as an alternative to tap water, is the
segment in which the Company competes, is the largest of the three segments and
represented 84.3% of the total market in terms of gallons of water sold in 1995.
Sparkling water contains carbonation and is positioned to compete in the broad
"refreshment beverage" category. In 1995, domestic sparkling water accounted for
approximately 12.4% of total bottled water consumption and the remaining 3.4%
consisted of imported bottle water brands.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
NON-SPARKLING SPARKLING IMPORTS
<S> <C> <C> <C>
Millions of Gallons
1977 256.7 85.6 3.2
1978 352.9 113.5 13.4
1979 401.2 133.8 28.1
1980 463.1 155.2 11.4
1981 537.7 175.9 11.6
1982 614.0 196.5 12.9
1983 722.4 210.3 13.6
1984 843.3 230.3 16.5
1985 953.1 254.8 29.8
1986 1070.4 281.6 30.8
1987 1223.4 300.6 37.2
1988 1406.9 316.5 49.7
1989 1623.5 329.5 55.6
1990 1753.3 371.3 73.9
1991 1770.5 368.0 71.4
1992 1839.5 365.9 86.3
1993 1990.5 366.4 92.5
1994 2214.6 366.4 104.0
1995 2430.2 356.2 97.0
Source: Beverage Market Survey
</TABLE>

The Company believes this growth in bottled water consumption is largely a
function of two consumer trends. First, consumers have increasingly turned to
alternative sources of drinking water as a result of growing concerns about the
perceived decline in the quality of the tap water available in their homes and
offices. Second, an increasing diet and health consciousness among consumers has
led many consumers to seek a beverage choice which closely resembles the "ideal"
refreshment beverage. That is, one that has NO CALORIES, NO PRESERVATIVES, NO
ADDITIVES OR SUGAR, NO SODIUM AND NO ALCOHOL. High quality bottled drinking
water meets these demands.

According to the BEVERAGE MARKET SURVEY, the bottled water market has grown
at an average annual rate of 5.5% (1990-1995), and the Beverage Marketing
Corporation of New York projects that it will grow at a slightly higher rate of
6.5% between 1995 and 2000. Bottled water volume in the United States is
projected to grow from approximately 2.9 billion gallons in 1995 to
approximately 3.9 billion gallons by the year 2000. Per capita consumption is
projected to reach 14.2 gallons for every person in the United States by the
year 2000.

25
<PAGE>
PROJECTED U.S. BOTTLED WATER MARKET
1995-2000

<TABLE>
<CAPTION>
5 YEARS'
AVERAGE
MILLIONS OF ANNUAL GALLONS
YEAR GALLONS GROWTH PER CAPITA
- ------------------------------------ ----------- ------------- -------------
<S> <C> <C> <C>
1995................................ 2,883.5 5.5% 11.0
2000................................ 3,943.2 6.5% 14.2
</TABLE>

- ------------------------
SOURCE: BEVERAGE MARKET SURVEY

Bottled water channels of distribution consists of drinking water purchased
in pre-filled containers from retail locations (primarily supermarkets), water
delivered in pre-filled containers to residential or commercial establishments,
and water sold through a self-service or "vended" format to retail consumers who
fill their own containers. The market share of each of these distribution
channels varies considerably by geographical area. According to the BEVERAGE
MARKET SURVEY, the total share of the national bottled water of these
distribution channels for 1995 was: retail (53.0%), home delivery (20.6%),
commercial delivery (18.4%) and vended (8.0%).

Further impetus for consumers' tap water concern took place on August 6,
1996 when President Clinton signed into law the Safe Drinking Water
Reauthorization Act of 1996. For the first time, federal law requires all local
water utilities to issue annual reports disclosing the chemicals and bacteria
that the tap water contains. The language must be simple and sent directly to
customers with the water utility bills. Especially important is a 24-hour
notification requirement when any contaminant poses a significant risk. The
Company believes that this change in the nation's law will increase the public's
concern over the quality and safety of public water supplies. Usage of high
quality bottled water and drinking water filtration systems can be expected to
benefit from this increased awareness.

BUSINESS STRATEGY

The bottled water distribution market is highly fragmented and composed of
many small regional companies as well as a few larger companies which own
several brands. The Company's strategy is to capitalize on the growing demand
for high quality drinking water resulting from the increasing public concern
about the taste and safety of municipal water supplies and the desire among
today's increasingly diet and health conscious consumers for an "ideal" beverage
through the expansion of its existing customer base and through the acquisition
of regional water bottlers and distributors in targeted geographic markets. In
addition, management continually seeks to grow revenues by increasing route
density through the acquisition and consolidation of new routes within its
existing route structure, thereby minimizing distribution and administration
costs. The continued consolidation of production and distribution capabilities
is a key component of the Company's operating plans, both within its current
markets and any additional markets it may enter.

In support of its growth strategy the Company is continuing to pursue the
acquisition of regional water bottlers and distributors, as well as mergers with
certain members of the Cooperative. As of the date of this Prospectus, the
Company has thirteen companies under active review as candidates for acquisition
or merger, although the Company has no agreements, commitments or arrangements
with respect to any proposed mergers or acquisitions. As consideration for any
future acquisitions, the Company may pay cash, incur indebtedness or issue debt
or equity securities. Such acquisitions could result in material changes in the
Company's financial condition and operating results. There can be no assurance
that suitable merger or acquisition opportunities will be available to the
Company or that the Company will be able to consummate any mergers or
acquisitions on satisfactory terms. In addition, there can be no assurance that
the Company will be able to integrate or manage successfully other acquired
businesses.

26
<PAGE>
BOTTLED WATER PROCESSING

The Company employs a broad spectrum of treatment technologies for its
various bottled waters, ranging from minimum treatment of its natural spring
waters, to extensive treatment of public water sources for its distilled and
drinking waters. Manufacturing practices, quality standards, and labeling of the
Company's bottled water products are regulated by the Federal Food and Drug
Administration ("FDA") as well as the states and some localities in which the
water is distributed. In addition, the Company participates in the International
Bottled Water Association's inspection program which incorporates quality
standards stricter than those prescribed by law.

NATURAL SPRING WATER: As "natural" waters, the Company's state-certified
spring sources may not be subjected to any treatment which alters the mineral
composition of the product. Spring water, by law, may not be derived from a
municipal system or public water supply, and must be derived from an underground
source, free of surface water influence, which flows continuously to the surface
under its own pressure. A hydrogeological report must validate the integrity of
the source and safety of the water-collection operations before any groundwater
source can be certified as a spring. Regular bacteriological and chemical
compliance monitoring of the Company's springs assures that these sources remain
uncontaminated.

The Company's water sources, at Mountainwood Spring and Indian Camp Spring
are located in remote, pristine environments where the spring's recharge areas
have not been encroached by industry, agriculture or housing development.
Consequently, the spring water must be transported to the Company's plants by
stainless steel tanker trucks used solely for its water. At the spring source
the water is filtered and ozonated (see below) prior to loading. This disinfects
the spring water, and the residual ozone in the water disinfects the inside of
the tanker, thereby insuring that bacteria are not transferred from the spring
or the tanker to the Company's bottling plants. Samples for each tanker load are
tested for bacterial safety, consistency, and ozone residual.

Sanitary bulk, stainless tanks at the Company's bottling plants protect the
spring water while it is again ozonated and finally filtered through one-micron
absolute filters immediately before being bottled in sanitized containers. The
Company employs this "multiple barrier" approach to protect its natural spring
water from contaminants, including dangerous protozoan cysts such as
Cryptosporidium which can survive municipal tap water disinfection with
chlorine.

DISTILLED WATER: The Company uses more extensive treatment techniques for
its processed waters. For example, the Company's distilled water is produced by
the recapture of condensed steam, one of the oldest water purification
mechanisms known. Automated distillation units at the Company's East Orange
bottling plant vaporize the local municipal water through heating, leaving
behind impurities of minerals and other compounds. The condensed water vapor
produces a water of extremely high purity and very low mineral content
(typically less than 10mg/liter of total dissolved solids). This level of purity
enables distilled water to be used for pharmaceutical purposes, photographic
processes, humidifiers, and similar applications as well as for drinking.

DRINKING WATER: The processes involved in producing the Company's drinking
waters include particle filtration, carbon adsorption (molecular adhesion),
ultraviolet disinfection, deionization, one-micron absolute filtration, and
ozonation. Public water is initially filtered using a five micron filter to
remove sedimentation. The water is then processed through an activated carbon
bed to remove organic compounds and associated tastes and odors. This step also
removes chlorine which is added as a disinfectant to public supplies. The
by-products of chlorine disinfection, such as trihalomethanes, are also removed
by activated carbon adsorption. Ultraviolet treatment is a precaution against
any microbial contamination which might be transported further along in the
production line. Deionization is used at the Company's East Orange plant to
reduce dissolved minerals in the final drinking water. As is the case with all
of the Company's waters, a one-micron absolute filter is the final filtration
stage prior to ozonation and bottling.

27
<PAGE>
Ozonation involves a special form of oxygen, ozone (O(3)), which is the
strongest disinfectant and oxidizing agent available for water treatment. It is
the standard disinfectant for bottled water processing. A highly unstable gas,
ozone must be generated on site, prior to transport at the spring locations, and
at the Company's bottling plants. Because it is only partially soluble in water,
sufficient ozone contact with the water is established by special contact tanks
and mixing vessels. These extended contact times and the closely monitored ozone
concentrations are the reason that properly ozonated bottled water can be
assured to be free of chlorine-resistant organisms such as the recently
publicized parasitic cyst, Cryptosporidium. A special "hyperozonator" provides a
final disinfecting rinse of ozonated water in the bottle washing and sanitizing
machines at both of the Company's plants.

After the appropriate treatments, the product water is piped to the Clean
Room, which houses the automatic filing and capping equipment. Its design
mandated by the FDA, the Clean Room is totally enclosed with a positive-pressure
ventilation system which feeds filtered, sterilized air into the room. This room
and its equipment are sanitized every day. The final product, whether natural
spring water, distilled, or drinking water, is a high quality, clean bottled
water that is one of the most strictly regulated and reliable pure food products
available to the American consumer.

BOTTLING AND DISTRIBUTION FACILITIES

The Company's offices and plants are located in East Orange, New Jersey,
Commack, Long Island, New York and Maspeth, New York. The following table sets
forth certain information relating to the leased and owned space for each
location.

<TABLE>
<CAPTION>
APPROXIMATE #
OF SQUARE
FEET
LOCATION OF FACILITY OF SPACE LEASE TERM MONTHLY RENT EXPIRES
- ------------------------------------------------------------------ ------------- ---------- ------------ -------
<S> <C> <C> <C> <C>

East Orange, New Jersey........................................... 48,000 10 years $10,000(1) 2007
Commack, Long Island, New York.................................... 23,000 5 years $10,200(2) 2001
Maspeth, New York (3)............................................. 24,000 -- -- --
</TABLE>

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

(1) Rent is fixed through January 31, 2001 and thereafter adjusts annually based
upon the change in the consumer price index.

(2) Commencing November 1, 1997, and continuing through the lease term, rent is
subject to periodic increases averaging approximately $550 per month.

(3) The Company owns this facility and is mortgagee with respect to a mortgage
covering this facility. This mortgage requires monthly payments of $9,941,
including interest at an annual rate of 10.75%. The mortgage provides for a
balloon payment of the entire principal, $886,873, on June 1, 1998.

At the East Orange, New Jersey, facility the Company bottles spring,
purified and distilled water in five and one gallon sizes. This modern
production plant features high-speed sanitizing and filling equipment.
Management believes that this facility contains the only fully automatic five
gallon bottle rack loader in the metropolitan New York area. Additional bottling
volume can be added at low incremental production cost for both the five-gallon
and one-gallon lines.

The Company's most recent 1996 plant inspection at East Orange resulted in a
sanitary compliance rating in excess of 97%, making the facility eligible to
receive the International Bottled Water Association's EXCELLENCE IN
MANUFACTURING recognition.

In addition, the Company performs water cooler servicing and refurbishment
activities at this facility including warranty repairs, filtration system
installation, and renovation of rental units for placement back in service in
the field. This facility services the Company's bottled water and water cooler
customers in Manhattan, the Bronx, Staten Island and New Jersey.

28
<PAGE>
The Company's Long Island bottling plant in Commack was opened in the summer
of 1996 with a modern high-speed five gallon sanitizing and filling line for
spring and purified drinking water. This facility, which replaced a smaller
plant in Port Jefferson, Long Island, New York, serves the Company's Brooklyn,
Queens and Long Island customers. Additional bottling volume can be added at low
incremental production costs.

The Company currently utilizes its Maspeth, New York facility for servicing
of water coolers, limited water distribution and corporate headquarters. The
Company expects to sell its facility in Maspeth, New York. Upon such sale, the
Company intends to move its corporate headquarters to its Commack, Long Island,
New York facility and the business currently conducted from its Maspeth, New
York facility will be allocated between its Commack, Long Island, New York and
East Orange, New Jersey facilities. The Company believes its facilities are
adequate for its present needs.

WATER SUPPLY AGREEMENTS

SPRING WATER SUPPLIERS: On June 13, 1996, the Company entered into a
long-term spring water supply contract for its Commack, Long Island, New York,
bottling facility with Shawangunk Bulk Spring Water. This agreement provides for
"most-favored-customer" treatment with respect to pricing and priority water
rights for the next forty-five years to the Indian Camp Spring source which is
owned by Shawangunk Bulk Spring Water and located in the foothills of the
Catskill Mountains in New York.

On June 27, 1996, the Company entered into a long-term spring water supply
contract for its East Orange, New Jersey bottling facility with its primary bulk
spring water supplier, Mountainwood. The agreement provides for
"most-favored-customer" treatment with respect to priority water rights over a
forty-three year period. Management believes that Mountainwood's spring source,
in the foothills of the Kittatinny Mountains near the Delaware Water Gap, is
considered the highest volume, free flowing certified natural spring water
source in the northeastern United States. Effective July 1, 1996, the Company
also acquired Mountainwood's five-gallon bottled water direct delivery and
bottled water cooler rental routes.

PURIFIED WATER SUPPLIERS: The Company obtains the water for distilled and
purified drinking water from public water sources. The public water source for
the Company's East Orange, New Jersey facility is the East Orange public water
supply and the public water source for the Company's Commack Long Island, New
York facility is the Suffolk County Water Authority.

DRINKING WATER SYSTEMS

In addition to the rapid growth in bottled water consumption, the past
decade has also seen the emergence of water treatment technologies which can
produce high quality water economically at the point of use. These technologies,
including micron filtration, have had a major impact on the growth and
development of water processed at the point of use (rather than delivered in
bottles). The Company's non-bottled water dispensing systems are equipped with
filtration systems which remove substantial amounts of the chlorine, dirt
particles, rust, lead, and other objectionable materials from the source tap
water.

The Company believes that it is the only full-service provider in its market
able to provide its customers with a "one-stop" solution to drinking water
needs. If a customer has neither the space nor the budget for bottled water, the
Company can provide a wide variety of filtration and treatment units to meet any
drinking water needs. A staff of installers and plumbers will assume
responsibility for survey, equipment selection, installation, contract
maintenance, and rental/service. As a factory authorized sales and service
center for all of the major types of drinking fountains and coolers, the Company
can offer the customer a complete choice of models: wall-hung, recessed,
stand-alone, handicapped, under the sink, drainless, counter-top, etc. A
computerized follow-up system insures that cartridge changes and routine service
are performed on a timely basis by the Company's field staff. This reliance upon
the Company for installation, equipment, and maintenance is a firm basis for the
long-term relationship that the Company enjoys with its point of use customers.

29
<PAGE>
Most of the Company's equipment is placed in the customer's home or office
under a standard two-year rental contract which is renewable thereafter on a
month to month basis and is terminable by either party upon 30 days' notice. The
attachment of its point of use equipment to the plumbing makes it less likely
that a customer will request that the equipment be removed.

EQUIPMENT SUPPLY, ASSEMBLY AND RENTAL SERVICES

The Company purchases the various water treatment systems and bottled water
dispensers used in its home and office equipment from major suppliers such as
EBCO Manufacturing Company and Sunroc Corp. through the Cooperative. Once a
customer has chosen a water treatment system and a dispenser, the two components
are connected as a unit, tested and installed by the Company's service
personnel. The Company is not dependent on any single supplier for any of these
components.

The Company rents a broad range of water treatment and dispensing units to
commercial and residential customers. The Company generally rents such units to
customers at prices ranging from $6.00 to $45.00 per month depending on the
components selected. As of September 30, 1996, the Company had in excess of
25,000 water treatment and dispensing units in service, located in the
metropolitan New York area, which accounted for approximately 19% of the
Company's revenues. In addition, from time to time the Company has sold water
treatment and dispensing units to customers upon request; such outright sales
have accounted for less than 5% of revenues in the twelve months ended September
30, 1996.

The Company uses its factory authorized warranty and repair facilities to
recondition most of the rental water coolers which have been returned from the
field. The cost associated with this refurbishment of returned rental units is
expensed on a current basis. The reconditioned units are available for rental
placement in the field at a cost lower than that of newly purchased coolers.

SALES AND MARKETING

The Company markets its commercial and residential water treatment and
dispensing units to commercial customers that are using or have used bottled
water coolers as an alternative to providing tap water to their employees, and
to residential customers who have been introduced to the Company's water
treatment and bottled water units through the Company's commercial customers.
The Company markets its products principally through the effort of salaried and
independent sales personnel as well as through print advertising, telemarketing,
trade shows, its internet website, sponsored community events, field
delivery/service personnel and customer referrals. To date, the Company has
concentrated its marketing efforts on targeting commercial customers in the
metropolitan New York markets where demographic, economic and water consumption
trends, as well as the overall quality of municipal water supplies, indicate a
growing demand for affordable, high quality drinking water. Upon consummation of
this Offering, the Company expects to increase its marketing efforts,
principally through increased print and broadcast media advertising, additional
sales personnel and attendance at additional trade-shows.

CUSTOMERS

Since 1994, the Company has grown from approximately 5,000 water customers
to in excess of 25,000 currently served. The Company's customer base for its
bottled water and water treatment and dispensing units is currently comprised of
approximately 90% commercial accounts and approximately 10% residential
accounts. Through its American Eagle Spring and Lectro-Still retail brands the
Company markets one-gallon natural spring and distilled waters in supermarkets
and pharmacies in the northeastern United States.

In addition, the Company has been selected by several distributors to bottle
under their own label on a contract basis. Given the Company's ability to absorb
such additional volume at its plants with little marginal cost and no disruption
to existing business, management will continue to do such private label bottling
for selected accounts. In the past two years, such five-gallon private label
bottling relationships have resulted in the Company being able to acquire a
number of the distributor's routes and blend them into the Company's

30
<PAGE>
route structure. The East Orange, New Jersey facility will also continue to
provide one-gallon private label water bottling on a select basis for local
supermarket chains and health care stores so long as there is no adverse impact
on the Company's production of its own brands.

COMPETITION

The Company competes with numerous well-established companies, including
Nestle's Perrier group (whose brands in the Company's market include Poland
Spring, Great Bear and Deer Park), which distribute drinking water sold off the
shelf at retail (primarily supermarket) locations. Many of the Company's
competitors have achieved significant national, regional and local brand name
and product recognition and additional competitors have sought to enter the
drinking water market.

In recent years, several companies have introduced drinking water products
positioned to capitalize on the growing consumer preference for purified and
aesthetically pleasing water. It can be expected that the Company will be
subject to increasing competition from companies whose products or marketing
strategies address these consumer preferences. Some of the Company's competitors
and potential competitors possess substantially greater financial, personnel,
marketing and other resources that the Company and have established reputations
for success in the sale of purified water products. The Company believes that it
competes on the basis of quality of service, convenience and price.

SEASONALITY

The revenues of the Company have been subject to seasonal variations with
decreased revenues during cold weather months and increased revenues during the
hot weather months.

PATENTS AND TRADEMARKS

The Company holds two patents related to bacteriostatic carbon formulation
and production.

The Company has registered the Puro trademark and service mark in the United
States Patent and Trademark Office. The Company acquired the American Eagle
Spring Water trademark among others in its acquisition of the assets of
Electrified. The Company has no reason to believe that there are any conflicting
rights which might impair the Company's use of its marks outside the United
States; however, there can be no assurance that such conflicting rights do not
exist. The Company believes that the trademarks and service mark are valuable to
the operation of it business. The Company's policy is to pursue registration of
its marks whenever possible and to oppose vigorously any infringement of its
mark.

As is typically the case with drinking water treatment components, the
Company does not believe its business is materially dependent upon obtaining
patent protection for its various systems.

REGULATION

The Company's business is subject to various federal, state and local laws
and regulations, which require the Company, among other things, to obtain
licenses for its business and equipment, to pay annual license and inspection
fees, to comply with certain detailed design and quality standards regarding the
Company's bottling plant and equipment, and to continuously control the quality
and quantity of the water dispensed. Several states have regulations that
require the Company to obtain certification for its bottled water. The Company
believes that it is currently in compliance with these laws and regulations and
has passed all regulatory inspections. In addition, the Company does not believe
that the cost of compliance with applicable government laws and regulations is
material to its business. However, recent media attention has been given to the
health and safety standards and to the degree of governmental oversight in the
drinking water industry. To the extent that additional regulations are imposed
as a result of these or other concerns and such regulations are unreasonably
burdensome, such regulations could significantly increase the costs of
compliance and reduce the ability of the Company to maintain or increase its
customer base.

PRODUCT LIABILITY AND INSURANCE

The Company is engaged in a business which could expose it to possible
claims for personal injury resulting from contamination of water produced by its
bottling plants or dispensing equipment. While the

31
<PAGE>
Company believes that, through regular testing, it carefully monitors the
quality of water produced by its plants, it may be subject to exposure in the
case of customer misuse of a cooler or bottle storage. The Company maintains
blanket "claims made" product liability insurance against liability resulting
from certain types of injuries in amounts that it believes to be adequate.
Additionally, the Company maintains an umbrella policy that it believes to be
adequate to cover claims above the limits of the product liability insurance.
Although no claims have been made against the Company or any of its customers to
date and the Company believes that its current level of insurance is adequate
for its present business operations, there can be no assurance that such claims
will not arise in the future or that the proceeds of the Company's policy will
be sufficient to pay such claims.

EMPLOYEES

As of December 31, 1996, the Company had 110 full-time employees, of which
five are in executive positions, 45 in distribution, 11 in maintenance and
service, 5 in sales, 14 in manufacturing and 30 in administration. Certain of
the Company's employees are represented by Teamsters, Chauffeurs, Warehousemen &
Helpers Local Union No. 560. The Company is a party to a collective bargaining
agreement expiring February 28, 1999. The Company considers its employee
relations to be satisfactory.

LITIGATION

The Company is not a party to any legal proceedings which individually or in
the aggregate are believed to be material to the Company's business.

32
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executive officers, their ages and present
positions with the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Peter T. Dixon............................. 66 Chairman of the Board
Scott Levy................................. 39 Chief Executive Officer and Director
Jack C. West............................... 55 President and Director
James G. Botti............................. 33 Chief Financial Officer
Stephen Edberg*............................ 44 Director
Wilmer J. Thomas, Jr....................... 69 Director
Leonard D. Rosinski*....................... 45 Director
</TABLE>

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

* These individuals will become directors of the Company upon consummation of
this Offering.

All directors hold office until the next annual meeting of stockholders or
the election and qualification of their successors. The officers of the Company
are elected by and serve at the discretion of the Board of Directors until their
successors are duly chosen and qualified.

The following is a brief summary of the background of each director and
executive officer of the Company:

PETER T. DIXON
Mr. Dixon has served as Chairman of the Board of Directors of the Company
since January 1994. He was the Senior Executive Vice President of Loeb Partners
Corporation, a private investment banking firm from June 1986 to December 1993.
From 1981 to May 1986, Mr. Dixon was Senior Vice President of Shearson, Lehmann
Brothers, and, prior thereto, a partner in Loeb, Rhoades. Mr. Dixon was Chairman
of the Board of Directors and a principal stockholder of Glacier Water Services,
Inc., a public company traded on the American Stock Exchange under the Symbol
HOO, from February 1993 to May 1993, when he sold his stock in Glacier Water
Services, Inc.

SCOTT LEVY
Mr. Levy has been Chief Executive Officer of the Company since November 1,
1996 and a director of the Company since January 1994. From January 1994 to
October 1996, Mr. Levy was Co-President and Co-Chief Executive Officer of the
Company. In 1980, Mr. Levy founded LSL Hydro Systems, and was the President of
LSL Hydro Systems from 1980 to January 1994. LSL Hydro Systems specialized in
point-of-use drinking water systems sales, rentals, installation, service,
bottled water and plumbing contracting. The Company acquired LSL Hydro Systems,
Inc. in January 1994. Mr. Levy is active in the National Coffee Service
Association and instrumental in the administration of the Cooperative.

JACK C. WEST
Mr. West has been President of the Company since November 1, 1996 and a
director of the Company since January 1994. From January 1994 to October 1996,
Mr. West was Co-President and Co-Chief Executive Officer of the Company. Mr.
West was a principal stockholder and vice president of Puro Corporation of
America (New York) from 1979 to January 1994. He is a past president and
director of the International Bottled Water Association (IBWA). He is currently
Vice Chairman of the Drinking Water Research Foundation; Chairman of the New
York Water Bottlers Committee; Chairman of the IBWA Government Relations
Committee; Vice President and Director of the Cooperative; and Member of the
Bottled Water Industry Forum of the National Sanitation Foundation.

JAMES G. BOTTI, CPA
Mr. Botti has been Chief Financial Officer of the Company since October
1996. From October 1995 to October 1996 he was Chief Financial Officer of
Hampshire Securities Corp. in New York City, an investment bank and securities
broker dealer. From April 1992 to October 1995 he was Controller of Laidlaw
Holdings, Inc., an affiliate of Laidlaw Equities, Inc., one of the
Representatives. He was manager of Financial Reporting for Needham & Company,
Inc., from 1991 to 1992, and prior to that worked in the public accounting firms
of Anchin, Block & Anchin, and Pustorino, Puglisi and Co. as an accountant.

33
<PAGE>
STEPHEN C. EDBERG, PHD

Dr. Edberg will become a director of the Company upon consummation of this
Offering. Since 1992, Dr. Edberg has been the Chairman of the Education Policy
and Curriculum Committee of the Yale University School of Medicine where he is a
professor in the Departments of Laboratory Medicine and Internal Medicine. He
also directs the Clinical Microbiology Laboratory of Yale-New Haven Hospital. He
is the inventor of Defined Substrate Technology, the major iteration of which is
Colilert, an EPA-approved test system for monitoring of bacterial contamination
in the nation's drinking water supplies. Since 1990, Dr. Edberg has been a
consultant to IDEXX, Inc., an invitro diagnostics company, the common stock of
which trades on the Nasdaq National Market under the symbol IDXX. Dr. Edberg has
been a Trustee of the Drinking Water Research Foundation since 1991, and has
authored more than 150 publications in the scientific literature.

WILMER J. THOMAS, JR.

Mr. Thomas has been a director of the Company since December 1995. Mr.
Thomas has been a private investor for at least the past five years and is a
member of the Board of Directors of Great Dane Corp., Savannah, Georgia and of
Moore Medical Corp., New Britain, Connecticut.

LEONARD D. ROSINSKI

Mr. Rosinski will become a director of the Company upon consummation of this
Offering. Since March, 1996, Mr. Rosinski has been President and Chief Executive
Officer of In-Store Opportunities, Guilford, Connecticut, a third-party
merchandising firm specializing in frozen food. From January 1994 to March 1996,
Mr. Rosinski was Vice-President and Chief Operating Officer of Pure Fill
Corporation, a bottled water vending company in California and Florida. From
July 1990 to December 1993, Mr. Rosinski was the President of National Water
Services, Inc.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has authorized two standing committees: Audit
Committee and Compensation Committee. Only independent directors will be
appointed to these Committees.

AUDIT COMMITTEE. The Audit Committee of the Board of Directors will review
the results and scope of the annual audit and other services provided by the
Company's independent accountant, review and evaluate the Company's internal
audit and control functions, and monitor transactions between the Company and
its employees, officers and directors.

COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors will review and approve the compensation and benefits of the Company's
executive officers and administer the Stock Option Plan.

The number of directors of the Company is currently set at four. All
directors serve terms of one year and hold office until the next annual meeting
of stockholders or until their respective successors are duly elected and
qualified.

EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Company's Chairman, Chief Executive Officer and President during the
fiscal year ended December 31, 1996 (collectively, the "Named Executive
Officers").

<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
-------------------- ----------------------
NAME AND PRINCIPAL POSITION SALARY COMPENSATION
- ------------------------------------------------------------------------ -------------------- ----------------------
<S> <C> <C>
Peter T. Dixon, Chairman(1)............................................. $ 12,000 $ 0.00
Scott Levy, Chief Executive Officer..................................... $ 187,000 $ 1,102.52(2)
Jack C. West, President................................................. $ 100,000 $ 1,325.00(2)
</TABLE>

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

(1) Mr. Dixon has a consulting agreement with the Company pursuant to which he
is paid $1,000 per month.

(2) Represents the dollar value of insurance premiums paid by the Company with
respect to term life insurance.

34
<PAGE>
EMPLOYMENT AND CONSULTING AGREEMENTS

The Company has entered into an employment agreement with each of Messrs.
West, Levy and Botti. Mr. West's agreement provides that he shall be employed as
President of the Company on a full time basis for a term of five years. Mr.
West's agreement may be extended at the sole discretion of the Board of
Directors upon the same terms and conditions. Mr. West receives an annual base
salary of $100,000 for the term of his agreement. In the event that the Board of
Directors does not extend the term of the agreement and a mutually acceptable
alternative agreement cannot be negotiated with the Board of Directors upon the
expiration of this agreement, Mr. West will be entitled to a severance payment
equal to two times his annual base salary. Mr. West's employment agreement
contains a covenant not to compete for a period ending one year after the
expiration or termination of such employment agreement along with
confidentiality and non-solicitation undertakings. Mr. West is required to
devote substantially all of his time and attention to the affairs of the
Company, and is entitled to receive such benefits as are generally provided from
time to time by the Company to its senior management employees.

Mr. Levy's agreement provides that he shall be employed as Chief Executive
Officer of the Company on a full time basis for a term of five years. Mr. Levy's
agreement may be extended at the sole discretion of the Board of Directors upon
the same terms and conditions. Mr. Levy receives an annual base salary of
$187,000 for the term of his agreement. In the event that the Board of Directors
does not extend the term of the agreement and a mutually acceptable alternative
agreement cannot be negotiated with the Board of Directors upon the expiration
of this agreement, Mr. Levy will be entitled to a severance payment equal to
three times his annual base salary. Mr. Levy's employment agreement contains a
covenant not to compete for a period ending one year after the expiration or
termination of such employment agreement along with confidentiality and
non-solicitation undertakings. Mr. Levy is required to devote substantially all
of his time and attention to the affairs of the Company, and is entitled to
receive such benefits as are generally provided from time to time by the Company
to its senior management employees.

Mr. Botti's agreement provides that he shall be employed as Chief Financial
Officer of the Company on a full time basis for a term continuing to October 31,
1997. Mr. Botti receives an annual base salary of $100,000 for the term of his
employment, subject to review of the Board of Directors. Mr. Botti will receive
stock options covering 35,000 shares of Common Stock subject to a five-year
vesting period. Mr. Botti's employment agreement contains a covenant not to
compete for a period ending one year after the expiration or termination of such
employment agreement along with confidentiality and non-solicitation
undertakings. Mr. Botti is required to devote substantially all of his time and
attention to the affairs of the Company, and is entitled to receive such
benefits as are generally provided from time to time by the Company to employees
on a comparable level.

On January 28, 1994, the Company entered into a consulting agreement with
Mr. Dixon pursuant to which Mr. Dixon provides certain consulting services to
the Company. The Company pays Mr. Dixon $1,000 per month pursuant to the
consulting agreement. The consulting agreement expires in January 1999.

The Company has key-person life insurance policies on the lives of Messrs.
West and Levy in the amount of $1,000,000 per person. The Company is the sole
beneficiary under these policies and the Company will keep such policies in
force for a minimum of three years from the completion of this Offering.

1996 STOCK OPTION PLAN

In 1996, the Company's stockholders approved the Company's 1996 Stock Option
Plan (the "Stock Option Plan"). The purpose of the Stock Option Plan is to
promote the success of the Company by providing

35
<PAGE>
a method whereby eligible employees of the Company may be awarded additional
remuneration for services rendered, thereby increasing their personal interest
in the Company. The Stock Option Plan is also intended to aid in attracting
persons of suitable ability to become employees of the Company and its
subsidiaries.

The Stock Option Plan provides that the maximum number of shares of Common
Stock reserved for awards thereunder shall be 400,000. The Stock Option Plan
provides for the grant of incentive stock options (as defined in Section 422 of
the Internal Revenue Code of 1986, as amended) and nonstatutory stock options.
The exercise price of options granted under the Stock Option Plan may be more
than or equal to the fair market value of such shares on the date of grant. Any
options granted under the Stock Option Plan that shall expire, terminate or
otherwise be annulled for any reason without having been exercised shall again
be available for purposes of the Stock Option Plan.

The Stock Option Plan is to be administered by the Compensation Committee
(the "Committee"), each member of which shall be a member of the Company's Board
of Directors who during the one year period prior to service on the Committee
was not, and during such service is not, granted or awarded any equity
securities pursuant to the Stock Option Plan or any other plan of the Company if
such grant or award or participation on such Stock Option Plan would prevent
such member from being a "disinterested person" with respect to the Stock Option
Plan for purposes of Rule 16b-3 under the Exchange Act. The Committee will have
the power and authority to grant to eligible persons options to purchase shares
of the Company's Common Stock under the Stock Option Plan and to determine the
restrictions, terms and conditions of all such options granted as well as to
interpret the provisions of the Stock Option Plan, any agreements relating to
awards granted under the Stock Option Plan, and to supervise the administration
of the Stock Option Plan.

Subject to the provisions of the Stock Option Plan with respect to death,
retirement and termination of employment, the term of each option shall be for
such period as the Committee shall determine as set forth in the applicable
option agreement, but not more than ten years from the date of grant.

DIRECTORS' COMPENSATION

Except for an option in favor of Edberg Associates L.P., of which Stephen C.
Edberg, who will become a director of the Company upon consummation of this
Offering, is a partner, to purchase 49,284 shares of Common Stock of the
Company, directors of the Company do not receive fixed compensation for their
services as directors. However, the Board of Directors may authorize the payment
of a fixed sum to directors for their attendance at regular and special meetings
of the Board of Directors as is customary for similar companies. Directors will
be reimbursed for their reasonable out-of-pocket expenses incurred in connection
with their duties to the Company.

LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION

Pursuant to the Company's Bylaws, the Company must, to the fullest extent
permitted by the Delaware General Corporations Law, as amended from time to time
(the "GCL"), indemnify all persons (e.g., directors and officers) whom it may
indemnify pursuant thereto and to advance expenses incurred in defending any
proceeding for which such right to indemnification is applicable, provided that,
if the GCL so requires, the indemnitee must provide the Company with an
undertaking to repay all amounts advanced if so determined by a final judicial
decision. The Company's Certificate of Incorporation contains a provision
eliminating, to the full extent permitted by Delaware law, the personal
liability of the Company's directors for monetary damages for breach of a
fiduciary duty. By virtue of this provision, under current Delaware law, a
director of the Company will not be personally liable for monetary damages for
breach of his fiduciary duty as director, except for liability for (i) any
breach of his duty of loyalty to the Company or to its stockholders, (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) dividends or stock purchases or redemptions that
are unlawful under Delaware law and (iv) any

36
<PAGE>
transactions from which he derives an improper personal benefit. This provision
of the Company's Certificate of Incorporation pertains only to breaches of duty
by directors as directors and not in any other corporate capacity such as
officers, and limits liability only for breaches of fiduciary duties under
Delaware corporate law and not for violations of other laws such as the federal
securities laws. As a result of the inclusion of such provision, stock holders
may be unable to recover monetary damages against directors for actions taken by
them that constitute negligence or gross negligence or that are in violation of
their fiduciary duties, although it may be possible to obtain injunctive or
other equitable relief with respect to such actions. The inclusion of this
provision in the Company's Certificate of Incorporation may have the effect of
reducing the likelihood of derivative litigation against directors for breach of
their duty of care, even though such an action, if successful, might otherwise
have benefitted the Company and its stockholders. Insofar as indemnification for
liabilities arising under the Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.

37
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS

The following table sets forth information as of the date of this Prospectus
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person (including any group) known to the Company to be the beneficial
owner of more than 5% of the outstanding Common Stock, (ii) each director of the
Company, (iii) each executive officer of the Company and (iv) all directors and
executive officers of the Company as a group. Except as may be indicated in the
footnotes to the table, each such person has the sole voting and investment
power with respect to the shares owned, subject to applicable community property
laws.

<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF CLASS(3)
NATURE OF ------------------------
BENEFICIAL BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(2) OFFERING OFFERING
- ------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Peter T. Dixon(4).............................................................. 1,084,926 49.3% 30.6%
The Trusts Under Article 16 of the Will of W. Palmer Dixon for the Benefit of
Peter T. and Palmer Dixon (the "Dixon Trusts")(5)............................. 981,429 45.1% 27.8%
Beth and Scott Levy............................................................ 425,814 20.0% 12.2%
Jack C. West................................................................... 394,272 18.5% 11.3%
Thomas Limited Partnership(6).................................................. 197,136 9.3% 5.7%
Wilmer J. Thomas, Jr.(6)....................................................... 197,136 9.3% 5.7%
Edberg Associates Limited Partnership(7)....................................... 147,852 6.8% 4.2%
All directors and executive officers as a group (5 persons).................... 2,250,000 100.0% 62.5%
</TABLE>

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

(1) Unless otherwise indicated, the address of each beneficial owner is c/o the
Company, 56-45 58th Street, Maspeth, New York 11378.

(2) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities and includes options exercisable within 60 days of the date of
this Prospectus. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.

(3) The percentage of class is calculated in accordance with Rule 13d-3 under
the Exchange Act and assumes that the beneficial owner has exercised any
options or other rights to subscribe which are exercisable within 60 days
and that no other options or rights have been exercised by anyone else.

(4) These shares consist of (i) 78,855 shares of Common Stock held by Peter T.
Dixon, (ii) 932,145 shares of Common Stock held by the Dixon Trusts, and
(iii) 73,926 shares of Common Stock issuable upon the exercise of options
currently outstanding, of which options to purchase 24,642 shares of Common
Stock are held by Peter T. Dixon and options to purchase 49,284 shares of
Common Stock are held by the Dixon Trusts, which shares represent a
one-third interest in options in favor of Peter T. Dixon and the Dixon
Trusts, jointly.

(5) These shares consist of (i) 932,145 held by the Dixon Trusts, and (ii)
49,284 shares of Common Stock issuable upon the exercise of options
currently outstanding, which shares represent a two-thirds interest in
options in favor of Peter T. Dixon and the Dixon Trusts, jointly.

(6) Wilmer J. Thomas, Jr., a partner of Thomas Limited Partnership, is a
director of the Company.

(7) Dr. Stephen C. Edberg, a partner of Edberg Associates Limited Partnership,
will become a director of the Company upon consummation of this Offering.
These shares consist of (i) 98,568 shares of Common Stock, and (ii) 49,284
shares of Common Stock issuable upon the exercise of options currently
outstanding.

38
<PAGE>
Each of the stockholders and the Company is party to a Stockholders'
Agreement dated January 28, 1994, as amended (the "Stockholders' Agreement").
The Stockholders' Agreement addresses, among other things, corporate governance
issues as well as stock transferability. Upon the consummation of this Offering,
the Stockholders' Agreement shall be null and void and of no force or effect.

CERTAIN TRANSACTIONS

On January 28, 1994, the Dixon Trusts loaned the Company $300,000 to be used
for working capital. This loan is callable on demand and bears annual interest
at the rate of prime +.75%. The founders of the Company are Peter T. Dixon, the
Trusts under Article 16 of the Will of Palmer Dixon for the benefit of Peter T.
and Palmer Dixon, Scott and Beth Levy, and Jack C. West. Peter T. Dixon and the
Dixon Trusts purchased from the issuer 1,010,999 shares of Common Stock. In
connection with the acquisition of LSL Hydro Systems, Inc., the Company issued
to Scott and Beth Levy 425,814 shares of Common Stock. In connection with the
acquisition of Puro Corporation of America (New York), the Company issued to
Jack West 394,272 shares of Common Stock. No assets are being acquired from any
of the founders.

On January 28, 1994, the Company entered into a consulting agreement with
Peter T. Dixon, pursuant to which Mr. Dixon provides certain consulting services
to the Company. The Company pays Mr. Dixon $1,000 per month pursuant to the
consulting agreement. The consulting agreement expires in January 1999.

In connection with the Electrified transaction in January 1996, the Company
obtained a letter of credit in the amount of $3,500,000 from European American
Bank to secure seller financing of a like amount. Peter T. Dixon secured the
letter of credit with personal assets. In connection with the Mountainwood
transaction in June 1996, the Company obtained a letter of credit in the amount
$500,000 from European American Bank to secure seller financing of a like
amount. Mr. Dixon also secured that letter of credit with personal assets. In
consideration of pledging his personal assets as described above, the Company
issued to Mr. Dixon and the Dixon Trusts options to purchase 73,926 shares of
Common Stock.

All future transactions and loans with officers, directors and principal
stockholders of the Company will be on terms no less favorable than could be
obtained from independent third parties and will be approved by a majority of
the disinterested directors of the Company.

DESCRIPTION OF SECURITIES

COMMON STOCK

The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Company's Certificate of
Incorporation, as amended.

The Company's Certificate of Incorporation, as amended, authorizes the
issuance of 10,000,000 shares of Common Stock, $.0063 par value. As of the date
of this Prospectus, the Company has eight holders of record of its Common Stock
and there are 2,126,789 shares of the Company's Common Stock issued and
outstanding. There will be 3,476,789 shares of Common Stock outstanding after
giving effect to the Offering (3,679,289 if the Underwriters' over-allotment
option is exercised in full). All outstanding shares of Common Stock are, and
the Shares offered hereby will be, validly issued, fully paid and
non-assessable. Holders of Common Stock are entitled to share ratably in such
dividends and distributions as may from time to time be declared by the Board of
Directors of the Company from funds legally available therefor and upon
liquidation will be entitled to share ratably in any assets of the Company
legally available for distribution to holders of the Common Stock. The Company's
Certificate of Incorporation, as amended, and By laws do not confer any
preemptive, subscription, redemption or conversion rights on the holders of
Common Stock. Holders of Common Stock are entitled to cast one vote for each
share held of record on each matter submitted to a vote of stockholders. There
is no cumulative voting, which means that holders of a majority of the voting
power may elect all of the directors.

39
<PAGE>
OPTIONS AND CONVERTIBLE SECURITIES

Peter T. Dixon and the Dixon Trusts hold two options to purchase an
aggregate of 73,926 shares of Common Stock at a price per share equal to the
initial public offering price, less underwriting discounts and commissions,
which become exercisable 120 days following the consummation of this Offering.
These options were issued in consideration of the collateralization by the Dixon
Trusts of certain debt obligations of the Company in connection with the
Electrified and Mountainwood business acquisitions. The option to purchase
24,642 shares of Common Stock will expire in April 2001. The option to purchase
49,284 shares of Common Stock will expire in August 2001. Edberg Associates L.P.
holds an option to purchase 49,284 shares of Common Stock at a price per share
equal to the initial public offering price, less underwriting discounts and
commissions, which becomes exercisable 120 days following the consummation of
this Offering. This option was issued in November 1996 as an inducement for an
equity investment by said entity in the Company and to induce Dr. Stephen C.
Edberg to serve as a director of the Company. This option to purchase 49,284
shares of Common Stock will expire in May 2001. In addition, the holder of a
convertible purchase money note arising out of the Nature's Way acquisition has
the option to purchase upon conversion of such note that number of shares of
Common Stock of the Company equal to the outstanding principal amount of a
convertible note ($265,707.08 as of February 1, 1997, which amount is reduced by
$1,428.58 per month) divided by the initial public offering price per share,
less underwriting discounts and commissions, reserved for issuance upon
conversion of such note. Such note shall become convertible 120 days following
the consummation of this Offering.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock will be Continental
Stock Transfer and Trust Company, New York, New York.

DELAWARE ANTI-TAKEOVER LAW

Section 203 of the GCL ("Section 203") provides, in general, that a
stockholder acquiring more than 15% of the outstanding voting shares of a
corporation subject to the statute (an "Interested Stockholder"), but less than
85% of such shares, may not engage in certain "Business Combinations" (as
defined below) with the corporation for a period of three years subsequent to
the date on which the stockholder became an Interested Stockholder unless (i)
prior to such date the corporation's Board of Directors approved either the
Business Combination or the transaction in which the stockholder became an
Interested Stockholder or (ii) the Business Combination is approved by the
corporation's Board of Directors and authorized by a vote of at least two thirds
of the outstanding voting stock of the corporation not owned by the Interested
Stockholder.

Section 203 defines the term "Business Combination" to encompass a wide
variety of transactions with or caused by an Interested Stockholder in which the
Interested Stockholder receives or could receive a benefit on other than on a
PRO RATA basis with other stockholders, including mergers, certain asset sales,
certain issuances of additional shares to the Interested Stockholder,
transactions with the corporation which increase the proportionate interest of
the Interested Stockholder or transactions in which the Interested Stockholder
receives certain other benefits.

These provisions could have the effect of delaying, deferring or preventing
a change of control of the Company. The Company's stockholders, by adopting an
amendment to the Certificate of Incorporation or Bylaws of the Company, may
elect not to be governed by Section 203, effective twelve months after adoption.
Neither the Certificate of Incorporation nor the Bylaws of the Company currently
excludes the Company from the restrictions imposed by Section 203.

SHARES ELIGIBLE FOR FUTURE SALE

Of the 3,476,789 Shares to be outstanding immediately after this Offering,
the 1,350,000 Shares offered hereby will be freely tradeable. The holders of all
of the remaining shares have agreed with the Representatives not to sell such
shares for a period of eighteen months after the date of this Prospectus
pursuant to the terms of lock-up agreements without the Representatives' prior
written consent. Immediately after such

40
<PAGE>
period, 2,069,929 shares of Common Stock will immediately be available for sale
and on October 1, 1998, 56,860 shares of Common Stock will become available for
sale, in each case subject to the resale conditions of Rule 144 promulgated
under the Act.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her shares for at
least two years, including an affiliate, is entitled to sell within any
three-month period that number of shares equal to the greater of 1% of the then
outstanding shares of Common Stock or the average weekly trading volume of the
Common Stock during the four calendar weeks immediately preceding such sale.
Sales under Rule 144 are also subject to certain requirements as to the number
of shares for sale, notice and availability of current public information
regarding the Company. A person who has not been an affiliate of the Company at
any time during the three months preceding a sale, and who has beneficially
owned shares for at least three years, is entitled to sell such shares under
Rule 144 without regard to the volume limitations, manner of sale provisions or
notice or current public information requirements. Affiliates, however, continue
to be subject to such volume limitations and other requirements. As defined in
Rule 144, an affiliate of an issuer is a person who directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with such issuer and generally includes members of the Board of
Directors and senior management. In addition, the Commission has proposed
revisions to Rule 144 and Rule 144(k), the effect of which would be to shorten
the holding period under Rule 144 from two years to one year and to shorten the
holding period under Rule 144(k) from three years to two years. The foregoing is
a summary of Rule 144 and is not intended to be a complete description.

Prior to this Offering, there has been no public market for the Common Stock
and no prediction can be made as to the effect, if any that market sales of
shares of Common Stock or the availability of such shares for sale to the public
will have on the market price prevailing from time to time. Sales of substantial
amounts of Common Stock following this Offering could adversely affect the
market price of Common Stock.

REGISTRATION RIGHTS

The holders of the Company's outstanding shares of Common Stock have certain
rights to require the Company to register their shares of Common Stock for sale
to the public under the Act. If the Company proposes to register any of its
shares of Common Stock under the Act, such stockholders will be entitled to
require the Company to include all or a portion of their shares in such
registration, provided that the underwriter of any such offering may limit the
number of such shares so registered. In addition, such holders have certain
demand registration rights. Each of the holders of the Company's outstanding
shares of Common Stock having registration rights has waived such rights for a
period of eighteen months from the consummation of this Offering. See "Shares
Eligible for Future Sale" and "Underwriting".

41
<PAGE>
UNDERWRITING

The Underwriters named below (the "Underwriters"), for whom Laidlaw
Equities, Inc. and Gilford Securities Incorporated are acting as representatives
(the "Representatives"), have severally agreed, subject to the terms and
conditions contained in the Underwriting Agreement between the Company and the
Underwriters (the "Underwriting Agreement"), to purchase from the Company, and
the Company has agreed to sell to the Underwriters, the number of Shares set
forth opposite their names in the table below at the price set forth on the
cover page of this Prospectus:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Laidlaw Equities, Inc.......................................................................... 437,500
Gilford Securities Incorporated................................................................ 437,500
Brean Murray & Co., Inc........................................................................ 40,000
Cleary Gull Reiland & McDeavitt Inc............................................................ 40,000
Cruttenden Roth Incorporated................................................................... 40,000
EVEREN Securities, Inc......................................................................... 40,000
Fahnestock & Co. Inc........................................................................... 40,000
Janney Montgomery Scott Inc.................................................................... 40,000
Jesup & Lamont Securities Corporation.......................................................... 40,000
Pennsylvania Merchant Group Ltd................................................................ 40,000
Roney & Co., LLC............................................................................... 40,000
Van Kasper Company............................................................................. 40,000
Baird, Patrick & Co., Inc...................................................................... 15,000
First Southwest Company........................................................................ 15,000
Keane Securities Co., Inc...................................................................... 15,000
Ormes Capital Markets, Inc..................................................................... 15,000
Westport Resources Investment Services, Inc.................................................... 15,000
-----------------

Total...................................................................................... 1,350,000
-----------------
-----------------
</TABLE>

A copy of the Underwriting Agreement has been filed as an exhibit to the
Registration Statement to which reference is hereby made. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions. The Underwriters shall be obligated to purchase all of the
Shares if any are purchased.

The Underwriters have advised the Company that the Underwriters propose to
offer the Shares to the public at the public offering price set forth on the
cover page of this Prospectus and that they may allow to certain dealers who are
members of the NASD, and to certain foreign dealers, concessions of not in
excess of $.35 per share, of which amount a sum not in excess of $.10 per share
may in turn be reallowed by such dealers to other dealers who are members of the
NASD and to certain foreign dealers. After the commencement of this Offering,
the concessions and the reallowances may be changed by the Underwriters.

The offering price of the Shares was determined by negotiation between the
Company and the Underwriters. Among the factors considered in such negotiations
were (i) assessment of the Company's future prospects, (ii) the experience of
the Company's management, (iii) the current financial position of the Company,
and (iv) the prevailing conditions in the securities markets, including the
market value of the Company's Common Stock, the market value of publicly-traded
common stock of companies in similar industries, the market conditions for new
offerings of securities and the demand for similar securities of comparable
companies.

The Company has agreed to pay to the Representatives an expense allowance,
on a non-accountable basis, equal to 3.0% of the gross proceeds derived from the
sale of the Shares. The Company has paid an advance on such allowance in the
amount of $50,000. The Company has also agreed to pay all its expenses in

42
<PAGE>
connection with this Offering, including expenses in connection with qualifying
the Shares offered hereby for sale under the laws of such states as the
Representatives may designate. In addition, the Company will sell to the
Representatives, or to their designees, for nominal consideration, warrants to
purchase an aggregate of 135,000 shares of Common Stock exercisable at 140% of
the offering price. See "Underwriting -- Representatives' Warrants." The Company
has agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Act, and to contribute to payments the Underwriters may be
required to make in respect thereof.

All directors, officers, and stockholders of the Company have agreed not to
sell or otherwise dispose of their shares of Common Stock to the public without
the prior consent of the Representatives for a period of eighteen (18) months
from the date of this Prospectus. In addition, the Company has agreed that for a
period of eighteen (18) months after the date of this Prospectus, it will not
sell any shares of Common Stock, or options to purchase Common Stock other than
options to purchase shares of Common Stock which may be granted under the Stock
Option Plan without the Representatives' prior written consent.

OVER-ALLOTMENT OPTION

The Company has granted the Underwriters an option, exercisable during the
45-day period commencing on the date of this Prospectus to purchase up to
202,500 shares of Common Stock solely to cover over-allotments. The purchase
price per share will be the public offering price, less underwriting discounts
and the non-accountable expense allowance. After the commencement of this
Offering, the Underwriters may confirm sales of shares of Common Stock subject
to the over-allotment option.

REPRESENTATIVES' WARRANTS

In connection with this Offering, the Company has agreed to sell to the
Representatives, for nominal consideration, Warrants to purchase 135,000 shares
of Common Stock. The Representatives' Warrants are exercisable for a period of
four years commencing one year from the date hereof at an exercise price per
share ("Exercise Price") of 140% of the public offering price per share. The
Representatives' Warrants may not be sold, transferred, assigned, pledged, or
hypothecated for a period of twelve (12) months from the date of this Prospectus
except to officers or partners of the Representatives and other members of the
underwriting or selling group and officers or partners thereof in compliance
with the applicable provisions of the Corporate Financing Rules of the NASD. The
Representatives' Warrants contain anti-dilution provisions providing for
adjustment of the Exercise Price upon the occurrence of certain events,
including recapitalizations, mergers, consolidations and combinations. The
holders of the Representatives' Warrants have no voting, dividend, or other
rights as stockholders of the Company with respect to shares of Common Stock
underlying the Representatives' Warrants, unless the Representatives' Warrants
have been exercised.

A new registration statement or post-effective amendment to the Registration
Statement will be required to be filed and declared effective before
distribution to the public of the shares of Common Stock issuable upon exercise
of the Representatives' Warrants (the "Warrant Shares"). The Company has agreed,
on one occasion when requested and at its expense, to make all necessary filings
to permit a public offering of the Warrant Shares during the period beginning
one year after the date hereof and ending four years thereafter and to use its
best efforts to cause such filing to become effective under the Act and remain
effective under such Act for a period of at least twelve (12) months. In
addition, the Company has agreed for the period starting at the beginning of the
second year after the date hereof and ending at the conclusion of the fifth year
after the date hereof to give advance notice to holders of the Representatives'
Warrants and Warrant Shares of its intention to file a registration statement,
and in such case, the holders shall have the right to require the Company to
include the Representatives' Warrants and Warrant Shares in such registration
statement at the Company's expense.

During the period that the Representatives' Warrants are exercisable, the
Representatives and any transferee will have the opportunity to profit from a
rise in the market price of Common Stock with a resulting dilution in the
interest of other stockholders. In addition, the terms on which the Company will
be able to obtain additional capital during the exercise period may be adversely
affected insofar as the

43
<PAGE>
Representatives are likely to exercise the Representatives' Warrants at a time
when the Company would, in all likelihood, be able to obtain capital by a new
offering of securities on terms more favorable than those provided by the terms
of the Representatives' Warrants.

OBSERVER OF THE BOARD OF DIRECTORS

In connection with this Offering, the Company has agreed that, for the
three-year period commencing on the date of this Prospectus, Laidlaw Equities,
Inc. has the right to appoint a designee as an observer at all meetings of the
Company's Board of Directors. This designee has the right to attend all meetings
of the Board of Directors and shall be entitled to receive the same
reimbursement for all expenses of attendance at such meetings as is paid to
Board members. Laidlaw Equities, Inc. has not yet selected a designee and
Laidlaw Equities, Inc. may designate different individuals to serve in this
capacity from time to time. In addition, the Company has agreed to purchase
directors and officers liability insurance in an amount not less than
$1,000,000.

Laidlaw Holdings Asset Management, whose portfolio managers are also
registered representatives of Laidlaw Equities, Inc., one of the
Representatives, is the subject of an informal investigation by the enforcement
division of the Commission which investigation involves the possible charging of
its advisory clients disparate commission rates without adequate disclosure.

The foregoing summary of the principal terms of the Underwriting Agreement
and the Representatives' Warrants does not purport to be complete and is
qualified in its entirety by reference to the form of Underwriting Agreement and
the form of Representatives' Warrants, which have been filed as exhibits to the
Registration Statement.

LEGAL MATTERS

The validity of the Common Stock offered hereby and certain other legal
matters will be passed upon for the Company by Lev, Berlin & Dale, P.C.,
Norwalk, Connecticut. Certain legal matters relating to the Offering will be
passed upon for the Underwriters by Olshan Grundman Frome & Rosenzweig LLP, New
York, New York.

EXPERTS

The financial statements and schedules included in this Prospectus and
included elsewhere in the Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form SB-2 under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Certain items are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules files as a part thereof.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and, in each
instance, if such contract or document is filed as an exhibit, reference is made
to the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
to such exhibit. The Registration Statement, including exhibits and schedules
thereto, may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World

44
<PAGE>
Trade Center, Suite 1300, New York, NY 10048, and copies of all or any part
thereof may be obtained from such office after payment of fees prescribed by the
Commission. Such material may also be accessed electronically by the means of
the Commission's home page on the Internet at http://www.sec.gov. In addition,
the Common Stock has been approved for listing on the American Stock Exchange
(AMEX), subject to official notice of issuance . Reports and other information
concerning the Company may be inspected at the offices of AMEX, 86 Trinity
Street, New York, New York 10006.

The Company intends to furnish its stockholders with annual reports
containing financial statements which will be audited by its independent public
accounting firm, and such other periodic reports as the Company may determine to
be appropriate or as may be required by law.

45
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PURO WATER GROUP, INC.

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Balance Sheets............................................................................................. F-3
Statements of Operations................................................................................... F-4
Statements of Stockholders' Equity......................................................................... F-5
Statements of Cash Flows................................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>

ELECTRIFIED COMPANIES, INC.

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-17
Balance Sheet.............................................................................................. F-18
Statements of Operations................................................................................... F-19
Statements of Stockholders' Equity......................................................................... F-20
Statements of Cash Flows................................................................................... F-21
Notes to Financial Statements.............................................................................. F-22
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of Puro Water Group, Inc.:

We have audited the accompanying balance sheet of Puro Water Group, Inc. (a
Delaware corporation) as of December 31, 1995, and the related statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1995 and for the period from inception (February 1, 1994) to December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Puro Water Group, Inc. as of
December 31, 1995 and the results of its operations and its cash flows for the
year ended December 31, 1995 and for the period from inception (February 1,
1994) to December 31, 1994, in conformity with generally accepted accounting
principles.

/s/ Arthur Andersen LLP

New York, New York
May 1, 1996 (except for the
matters described in Note 13,
as to which the date
is February 4, 1997)

F-2
<PAGE>
PURO WATER GROUP, INC.
BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1995 1996
----------------- -------------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash............................................................................... $ 689,332 $ 326,285
Accounts receivable, less allowance for doubtful accounts of $195,905 and $157,320,
respectively..................................................................... 1,149,187 2,495,156
Inventory.......................................................................... 348,960 442,592
Prepaid expenses................................................................... 89,912 314,003
----------------- -------------
Total current assets............................................................. 2,277,391 3,578,036
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $385,044 and
$734,763, respectively (Note 4).................................................... 3,404,240 5,652,429
INTANGIBLE ASSETS, net of accumulated amortization of $285,619 and $687,948,
respectively (Note 5).............................................................. 2,607,336 7,644,390
DEFERRED REGISTRATION COSTS -- 198,800
OTHER ASSETS......................................................................... 61,359 179,212
----------------- -------------
TOTAL ASSETS..................................................................... $8,350,326 $ 17,252,867
----------------- -------------
----------------- -------------
</TABLE>

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable................................................................... $ 288,810 $ 619,106
Accrued expenses and other current liabilities..................................... 191,074 316,442
Deferred income.................................................................... 116,466 248,874
Short-term borrowings (Note 6)..................................................... 50,000 1,050,000
Current portion of long-term debt (Note 7)......................................... 415,775 1,380,726
Current portion of capital lease obligations (Note 10)............................. 166,262 210,865
----------------- -------------
Total current liabilities........................................................ 1,228,387 3,826,013
LONG-TERM LIABILITIES:
Long-term debt (Note 7)............................................................ 2,505,090 7,687,589
Capital lease obligations (Note 10)................................................ 317,423 234,731
Deferred tax liability............................................................. 372,000 603,655
Other liabilities.................................................................. 412,584 371,248
----------------- -------------
Total long-term liabilities...................................................... 3,607,097 8,897,223
COMMITMENTS (Note 12)
STOCKHOLDERS' EQUITY:
Common stock, $.0063 par value, 10,000,000 shares authorized; and 1,971,361 and
2,069,929 shares issued and outstanding, respectively............................ 12,420 13,041
Additional paid-in capital......................................................... 2,842,694 3,342,073
Retained earnings.................................................................. 659,728 1,174,517
----------------- -------------
Total stockholders' equity....................................................... 3,514,842 4,529,631
----------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................................... $8,350,326 $ 17,252,867
----------------- -------------
----------------- -------------
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-3
<PAGE>
PURO WATER GROUP, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION FOR THE FOR THE FOR THE
(FEBRUARY 1, 1994) YEAR NINE MONTHS NINE MONTHS
TO DECEMBER 31, ENDED ENDED ENDED
1994 DECEMBER 31, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
------------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
REVENUE:
Bottled water sales and other
revenue.............................. $ 2,918,844 $ 4,175,395 $ 3,121,054 $ 6,383,653
Rental revenue....................... 1,135,624 1,325,769 992,157 1,684,092
------------------- ----------------- ------------------ ------------------
4,054,468 5,501,164 4,113,211 8,067,745

COST OF GOODS SOLD:
Cost of goods sold (excluding
depreciation)........................ 1,146,789 1,615,228 1,262,876 2,292,550
Depreciation......................... 106,178 237,518 130,160 336,440
------------------- ----------------- ------------------ ------------------
GROSS PROFIT........................... 2,801,501 3,648,418 2,720,175 5,438,755

OPERATING EXPENSES:
Operating expenses (excluding
depreciation and amortization)....... 1,196,894 1,305,786 1,013,959 1,523,137
General and administrative
expenses............................. 948,358 1,309,478 917,177 1,892,384
Depreciation and amortization........ 113,112 213,855 148,714 422,277
------------------- ----------------- ------------------ ------------------
Total operating expenses............. 2,258,364 2,829,119 2,079,850 3,837,798
------------------- ----------------- ------------------ ------------------

INCOME FROM OPERATIONS................. 543,137 819,299 640,325 1,600,957

OTHER INCOME (EXPENSE):
Other income (expense)............... 46,933 118,577 107,520 (5,335)
Interest expense..................... (130,245) (302,973) (220,864) (541,264)
Plant relocation charges............. -- -- -- (250,000)
------------------- ----------------- ------------------ ------------------
(83,312) (184,396) (113,344) (796,599)
------------------- ----------------- ------------------ ------------------

INCOME BEFORE PROVISION FOR INCOME
TAXES................................ 459,825 634,903 526,981 804,358

PROVISION FOR INCOME TAXES............. 204,000 231,000 189,713 289,569
------------------- ----------------- ------------------ ------------------

NET INCOME............................. $ 255,825 $ 403,903 $ 337,268 $ 514,789
------------------- ----------------- ------------------ ------------------
------------------- ----------------- ------------------ ------------------

PER SHARE INFORMATION:
Earnings per share (Note 2).......... $ 0.14 $ 0.21 $ 0.18 $ 0.23
------------------- ----------------- ------------------ ------------------
------------------- ----------------- ------------------ ------------------
Weighted average common shares
outstanding (Note 2)................. 1,843,407 1,927,662 1,843,407 2,237,679
------------------- ----------------- ------------------ ------------------
------------------- ----------------- ------------------ ------------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE>
PURO WATER GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
----------------------- ADDITIONAL
NUMBER OF PAID-IN- RETAINED
SHARES PAR VALUE CAPITAL EARNINGS TOTAL
---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT INCEPTION
(February 1, 1994)............................ -- $ -- $ -- $ -- $ --
Issuance of common stock (Note 1).............. 1,577,089 9,936 845,178 -- 855,114
Net income..................................... -- -- -- 255,825 255,825
---------- ----------- ------------ ------------ ------------

BALANCE, December 31, 1994..................... 1,577,089 9,936 845,178 255,825 1,110,939
Issuance of common stock....................... 394,272 2,484 1,997,516 -- 2,000,000
Net income..................................... -- -- -- 403,903 403,903
---------- ----------- ------------ ------------ ------------

BALANCE, December 31, 1995..................... 1,971,361 12,420 2,842,694 659,728 3,514,842
Issuance of common stock (Note 13)............. 98,568 621 499,379 -- 500,000
Net income (unaudited)......................... -- -- -- 514,789 514,789
---------- ----------- ------------ ------------ ------------
BALANCE, September 30, 1996 (unaudited)........ 2,069,929 $ 13,041 $ 3,342,073 $ 1,174,517 $ 4,529,631
---------- ----------- ------------ ------------ ------------
---------- ----------- ------------ ------------ ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>
PURO WATER GROUP, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE
FROM INCEPTION YEAR FOR THE FOR THE
(FEBRUARY 1, 1994) ENDED NINE MONTHS NINE MONTHS
TO DECEMBER ENDED ENDED
DECEMBER 31, 1994 31, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
------------------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. $ 255,825 $ 403,903 $ 337,268 $ 514,789
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 219,290 451,373 278,874 758,717
Deferred taxes............................. 185,000 187,000 40,980 231,655
Provision for allowance for doubtful
accounts................................. 86,920 (11,026) 20,978 (38,585)
Changes in Assets and Liabilities..........
Decrease (increase) in accounts
receivable............................. 10,214 (535,069) (450,063) (1,307,384)
Increase in inventory.................... (52,242) (91,960) (4,100) (93,632)
Increase in prepaid expenses and other
assets................................. (114,755) (36,516) (33,487) (341,944)
Increase in deferred registration
costs.................................. -- -- -- (198,800)
Increase (decrease) in accounts payable,
accrued expenses and other
liabilities............................ 198,072 (1,363) 247,733 414,328
(Decrease) increase in deferred income... (561,174) 26,386 (28,157) 132,408
-------- ----------- ------------------ ------------------
Net cash provided by operating
activities........................... 227,150 392,728 410,026 71,552
-------- ----------- ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and
equipment................................ (453,540) (1,143,105) (629,628) (2,517,503)
Net assets acquired (Note 3)............... -- (1,683,135) (999,051) (5,446,052)
-------- ----------- ------------------ ------------------
Net cash (used in) investing
activities........................... (453,540) (2,826,240) (1,628,679) (7,963,555)
-------- ----------- ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings...................... 150,000 (100,000) 400,000 1,000,000
Repayment of capital lease obligations..... (36,465) (149,623) (140,638) (118,494)
Repayment of long-term debt................ (211,262) (373,517) (280,138) (280,138)
Proceeds from long-term debt............... 277,040 1,686,386 1,249,799 6,427,588
Proceeds from sale of common stock......... -- 2,000,000 -- 500,000
-------- ----------- ------------------ ------------------
Net cash provided by financing
activities........................... 179,313 3,063,246 1,229,023 7,528,956
-------- ----------- ------------------ ------------------
NET (DECREASE) INCREASE IN CASH.............. (47,077) 629,734 10,370 (363,047)
CASH, beginning of period.................... 106,675 59,598 59,598 689,332
-------- ----------- ------------------ ------------------
CASH, end of period.......................... $ 59,598 $ 689,332 $ 69,968 $ 326,285
-------- ----------- ------------------ ------------------
-------- ----------- ------------------ ------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest................................... $ 146,995 $ 302,973 $ 182,214 $ 521,019
Income taxes............................... $ 6,887 $ 121,039 $ -- $ --
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
ACTIVITIES:
Capital lease obligations incurred......... $ 415,728 $ 113,041 $ 113,041 $ 80,405
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995

1. ORGANIZATION AND BUSINESS
Puro Water Group, Inc. (the "Company"), a Delaware corporation, formerly The
Puro Corporation of America, is a bottler and distributor of spring and purified
drinking water, serving commercial and residential users in the metropolitan New
York area. The Company markets its drinking water under the brand names Puro,
American Eagle Spring Water, Nature's Best Spring Water and Lectro-Still. The
Company also rents and services water coolers, filtration systems, and
plumbed-in fountains located in businesses, factories and homes in the
metropolitan New York area.

On February 1, 1994, the Company, a holding company, completed the
acquisition of all of the outstanding common stock of The Puro Corporation of
America, a New York corporation ("Puro NY"), and LSL Hydro Systems, Inc.
("Hydro"). Immediately prior to the acquisition, Puro NY and Hydro purchased
stock owned by certain stockholders which represented ownership of 50% of each
of the companies for cash of $1,000,000 and the issuance of $100,000 in notes
payable. The transaction was accounted for under the purchase method with the
purchase price deemed to be $1,500,000 based on the ultimate ownership and
management's estimate of fair value at the time of the acquisition. Such
purchase price was in excess of the net assets acquired in the amount of
approximately $1,200,000. Because Hydro and Puro NY had a common control group,
that portion of the assets of the Company attributable to the control group
(approximately 26%), were accounted for as having been acquired at a carryover
historical basis of $31,000. The purchase has been allocated to the fair market
value of the assets acquired and liabilities assumed which resulted in goodwill
of approximately $1,200,000. This amount is being amortized over fifteen years.
The individual predecessor financial statements as of and for the one month
ended January 31, 1994 are not presented as this information is not material to
the Company's overall results of operations.

2. SIGNIFICANT ACCOUNTING POLICIES

MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

INVENTORY

Inventory is stated at the lower of cost or market and cost is determined
using the first-in, first-out method. Inventory is comprised of water coolers
and parts, office refreshment supplies and water.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at historical cost. The building is
depreciated utilizing the straight-line method over 40 years and equipment is
depreciated utilizing the straight-line method over the estimated useful lives
of 8 to 25 years. Equipment held under capital leases are amortized utilizing
the straight-line method over the lesser of the lease or estimated useful life
of the asset in accordance with Statement of Financial Accounting Standards
("SFAS") No. 13 "Accounting for Leases."

F-7
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS

Intangible assets are recorded based on the value of certain assets obtained
in the acquisition of other companies and are amortized on the straight-line
method over the following periods:

<TABLE>
<S> <C>
Goodwill........................................ 15 years
Customer lists.................................. 6 years
Covenants-not-to-compete........................ 3 - 7 years
</TABLE>

Subsequent to its acquisitions, the Company continually evaluates whether later
events and circumstances have occurred that indicate the remaining estimated
useful life of the intangible assets may warrant revision or that the remaining
balance may not be recoverable. When factors indicate that intangible assets
should be evaluated for possible impairment, the Company uses an estimate of the
undiscounted net income over the remaining life of the intangible assets in
measuring whether it is recoverable.

REVENUE RECOGNITION

Revenue on sales of bottled water and coolers is recognized upon delivery.
Leases of water coolers and filters are accounted for under the operating method
and, accordingly, rental income is reported over the terms of the leases.

INCOME TAXES

The Company accounts for its income taxes under SFAS No. 109, "Accounting
for Income Taxes", which requires recognition of deferred tax liabilities and
assets for the estimated future tax effects of events that have been recognized
in the financial statements or income tax returns. Under this method, deferred
tax liabilities and assets are determined based on differences between the
financial accounting and income tax bases of assets and liabilities, and the use
of carryforwards, if any, using enacted tax rates in effect for the years in
which the differences and carryforwards are expected to reverse and be utilized.

EARNINGS PER SHARE

Earnings per share was computed by dividing net income by the weighted
average number of common shares and common share equivalents outstanding during
the respective periods, which includes for all periods, (i) the retroactive
effect of the April 1996 stock split (Note 13) and the reverse stock split,
which will occur prior to the consummation of the Company's initial public
offering (Note 13), (ii) the sale of 98,568 shares of common stock in May 1996
(Note 13), (iii) the impact of options, held by two stockholders, to purchase
123,210 shares of Common Stock at the initial offering price, less underwriting
discounts and commissions (Note 13) and (iv) the impact of the exercise of
56,860 warrants (Note 13).

NEW ACCOUNTING PRONOUNCEMENTS

During March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", which is effective for the fiscal year
beginning after December 15, 1995. The Company does not expect the adoption of
this standard to have a material effect on the Company's financial position or
results of operations.

During October 1995, the FASB issued SFAS No. 123, "Accounting for Stock
Based Compensation". This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS No. 123
encourages entities to adopt a fair value based method of accounting for stock

F-8
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
compensation plans. However, SFAS No. 123 also permits the Company to continue
to measure compensation costs under pre-existing accounting pronouncements. If
the fair value based method of accounting is not adopted, SFAS No. 123 requires
pro forma disclosures of net income and net income per common share in the notes
to financial statements. The accounting requirements of SFAS No. 123 are
effective for transactions entered into in fiscal years that begin after
December 15, 1995, though they may be adopted on issuance. The disclosure
requirements of SFAS No. 123 are effective for financial statements for fiscal
years beginning after December 15, 1995, or for an earlier fiscal year for which
SFAS No. 123 is initially adopted for recognizing compensation cost. The Company
does not expect the adoption of this statement to have a material effect on the
Company's financial position or results of operations.

INTERIM PERIODS PRESENTED

The interim financial statements for the nine months ended September 30,
1996 and the nine months ended September 30, 1995 are unaudited. Accordingly,
they do not include all of the information and notes required by generally
accepted accounting principals for complete financial statements. In the opinion
of the Company, these unaudited financial statements reflect all adjustments
necessary, consisting of normal recurring adjustments, for a fair presentation
of such data on a basis consistent with that of the audited data presented
herein. The results of operations for interim periods are not necessarily
indicative of the results for a full year.

3. ACQUISITIONS
During 1994 and 1995, the Company acquired certain assets and assumed
certain liabilities of several companies operating in the bottled water
industry. The acquisitions were paid for with cash and the issuance of notes
(Note 7). All acquisitions have been accounted for under the purchase method and
therefore operations of the companies acquired have been included in the
accompanying Statements of Operations from their respective dates of
acquisition. Although the individual acquisitions were not material to the
Company's financial position or results of operations, the total purchase price
for all of the Company's 1995 acquisitions was approximately $2,200,000. Pro
Forma results of operations have not been provided as the information was not
material to the Company's overall results of operations. Additionally, the
Company incurred certain non-recurring expenses associated with these
acquisitions which have been reflected in the Company's Statements of Operations
for the years ended December 31, 1995 and for the period from inception to
December 31, 1994.

In accordance with one of the purchase agreements, the seller has the option
to convert the unpaid principal of the note into shares of Common Stock of the
Company in the event of an Initial Public Offering ("IPO") of the Common Stock
of the Company, at the Offering price less underwriting discounts and
commissions.

F-9
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Land and building............................................... $ 946,088 $ 946,088
Building improvements........................................... 67,488 180,406
Rental equipment................................................ 1,418,106 2,142,794
Vehicles held under capital leases.............................. 669,775 750,170
Vehicles........................................................ 126,826 363,826
Bottles and crates.............................................. 304,388 475,894
Machinery and equipment......................................... 128,585 1,341,234
Furniture and fixtures.......................................... 128,028 186,780
------------ -------------
3,789,284 6,387,192
Less: Accumulated depreciation.................................. 385,044 734,763
------------ -------------
Property, plant and equipment, net.......................... $3,404,240 $ 5,652,429
------------ -------------
------------ -------------
</TABLE>

Depreciation aggregated $262,074 and $122,970, respectively, for the year ended
December 31, 1995 and for the period from inception to December 31, 1994.

5. INTANGIBLE ASSETS
Intangible assets are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMER 30,
1995 1996
------------ -------------
<S> <C> <C>
Goodwill........................................................ $2,290,408 $ 7,729,791
Covenants-not-to-compete........................................ 338,333 338,333
Customer lists.................................................. 264,214 264,214
------------ -------------
2,892,955 8,332,338
Less: Accumulated amortization.................................. 285,619 687,948
------------ -------------
Intangible assets, net...................................... $2,607,336 $ 7,644,390
------------ -------------
------------ -------------
</TABLE>

Amortization on intangible assets aggregated $189,299 and $96,320, respectively,
for the year ended December 31, 1995 and for the period from inception to
December 31, 1994.

6. SHORT-TERM BORROWINGS
The Company has a line of credit available with a bank for $3,000,000 and a
subordinated line of credit with a bank for $4,000,000 as of September 30, 1996
and had a $1,000,000 line of credit with a bank at December 31, 1995. The
Company had $2,500,000 outstanding on the $3,000,000 line which was converted
into two notes with the bank (see Note 7) as of September 30, 1996 (unaudited).
There were no amounts

F-10
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

6. SHORT-TERM BORROWINGS (CONTINUED)
outstanding on the $4,000,000 subordinated line of credit as of September 30,
1996 and no amounts were outstanding on the $1,000,000 line of credit as of
December 31, 1995. The outstanding amounts on short-term borrowings as of
September 30, 1996 (unaudited) and December 31, 1995 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Demand notes with stockholder with interest at prime plus
.75%........................................................... $ 50,000 $ 1,050,000
------------ -------------
$ 50,000 $ 1,050,000
------------ -------------
------------ -------------
</TABLE>

The prime rate was 8.25% and 8.50% as of September 30, 1996 and December 31,
1995, respectively.

7. LONG-TERM DEBT
Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------ SEPTEMBER 30,
1996
-------------
(UNAUDITED)

<S> <C> <C>
BANK FINANCING
Mortgage payable, due in monthly installments of $9,941 including interest at
10.75%, balloon payment of $886,873 due June 1, 1998............................... $ 939,190 $ 925,042
Promissory note payable to bank, bearing interest at prime plus .50%, due in monthly
installments through October 2003.................................................. -- 1,500,000
Promissory note payable to bank, bearing interest at prime plus .25%, monthly
interest payments only through September 1999 and then balloon payment of full
principal due September 1999....................................................... -- 1,000,000
Promissory note payable to bank, bearing interest at prime plus 1.50%, due in
monthly installments through February 1999......................................... 257,291 --
Promissory note payable to bank, bearing interest at prime plus 1.50%, due in
monthly installments through April 1999............................................ 52,500 --
ACQUISITION FINANCING (NOTES 3 AND 13)
Note payable to seller of $500,000, related to Mountainwood acquisition, bearing
interest at 8%, monthly interest payments only through July 1, 1999 principal
payment of $125,000 on July 1, 1999, and then equal monthly installments through
July 1, 2003....................................................................... -- 500,000
Note payable to seller of $250,000, related to Mountainwood acquisition, bearing
interest at 8%, monthly interest payments only through June 30, 1999 and then
balloon payment of full principal due on June 30, 1999............................. -- 250,000
Notes payable to seller of $2,900,000 and $600,000, related to Electrified
Companies, Inc. bearing interest at prime rate, interest payments only due through
February 1997, and then equal monthly installments from March 1997 through February
2000............................................................................... -- 3,500,000
Notes payable to sellers associated with 1995 and 1994 acquisitions, bearing
interest at rates ranging from 8-9% (certain non-interest bearing notes include
interest at rates reflecting the Company's incremental borrowing rate), due in
monthly installments through January 2001.......................................... 1,345,334 1,136,811
</TABLE>

F-11
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

7. LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C> <C>
STOCKHOLDER NOTES PAYABLE
Loan from stockholder, bearing interest at prime plus .75% due in equal monthly
installments commencing April 1997 through January 2001............................ $ 250,000 $ 250,000
Notes payable to former stockholders, non-interest bearing, due in three equal
installments of $33,333, through February 1997..................................... 66,667 --
OTHER
Other notes payable bearing interest at 9%, due in monthly varying installments
through January 1998............................................................... 9,883 6,462
------------ -------------
Total............................................................................... 2,920,865 9,068,315
Less: current portion............................................................... 415,775 1,380,726
------------ -------------
Long-term debt...................................................................... $2,505,090 $ 7,687,589
------------ -------------
------------ -------------
</TABLE>

Maturities of long-term debt over the next five years are as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C>
1996.................................................. $ 415,775
1997.................................................. 492,383
1998.................................................. 1,369,363
1999.................................................. 341,631
2000 and thereafter................................... 301,713
---------
$2,920,865
---------
---------
</TABLE>

8. INCOME TAXES
Components of the income tax provision for the year ended December 31, 1995
and from the period from inception (February 1, 1994) through December 31, 1994
are as follows:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
--------- ---------- ----------
<S> <C> <C> <C>
1995:
Federal......................................... $ 20,000 $ 152,000 $ 172,000
State and local................................. 24,000 35,000 59,000
--------- ---------- ----------
$ 44,000 $ 187,000 $ 231,000
--------- ---------- ----------
--------- ---------- ----------

1994:
Federal......................................... $ -- $ 149,000 $ 149,000
State and local................................. 19,000 36,000 55,000
--------- ---------- ----------
$ 19,000 $ 185,000 $ 204,000
--------- ---------- ----------
--------- ---------- ----------
</TABLE>

F-12
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

8. INCOME TAXES (CONTINUED)
The actual tax expense differed from the "expected" amounts by applying the U.S.
Federal income tax rate of 34% as follows:

<TABLE>
<CAPTION>
1995 1994
---- ----

<S> <C> <C>
Federal income tax at statutory rate............................................ 34% 34%
Purchase accounting............................................................. (3) --
State income taxes net of federal...............................................
income tax benefit.......................................................... 6 8
Other........................................................................... (1) 2
---- ----
Actual income tax provision................................................. 36% 44%
---- ----
---- ----
</TABLE>

The net deferred tax liability at December 31, 1995 primarily consists of the
differences between depreciation recorded for tax and book purposes.

9. STOCKHOLDERS' EQUITY
In October 1995, the Company entered into a Stock Purchase Agreement with
certain stockholders of the Company to purchase 394,272 shares of the Company's
stock for an aggregate purchase price of $2,000,000.

10. CAPITAL LEASE OBLIGATIONS
The Company is the lessee of certain fixed assets under capital leases
expiring through 1999. The assets and liabilities under capital leases are
recorded at the lower of the present value of minimum lease payments or the fair
market value of the asset. The assets are depreciated over their estimated
useful lives. Interest rates on capital leases vary from 3.5% to 7.0%.

Future minimum payments under these lease agreements for the next four years
are as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C>
1996.......................................... $ 188,363
1997.......................................... 188,363
1998.......................................... 144,237
1999.......................................... 10,868
---------
Total minimum lease payments.......................... 531,831

Less: Amount representing interest.................... 48,146
---------
Present value of net minimum lease payments....... $ 483,685
---------
---------
</TABLE>

11. BENEFIT PLANS
The Company's noncontributory pension plan provides benefits upon the death
or retirement of eligible employees. The Company's policy is to fund the annual
amount deductible for Federal income tax purposes. During 1995, the Company
elected to freeze the plan and, accordingly, no further contributions will be
made on behalf of the Company.

F-13
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

11. BENEFIT PLANS (CONTINUED)
The Company maintains a defined contribution pension plan for eligible
employees pursuant to Section 401(k) of the Internal Revenue Code ("IRC").
Pursuant to the plan, employees can contribute a maximum established by the IRC.
Although the Company is not obligated to contribute to the plan, for the year
ended December 31, 1995, the Company contributed approximately $2,300.

12. COMMITMENTS

LEASES

As of December 31, 1995, the Company had leased certain office and warehouse
space. Leases for this space expire through March 2001, and call for annual rent
with insignificant escalations through the end of the leases. The Company has
also entered into several operating leases for office equipment.

Future minimum payments for operating leases at December 31, 1995 are as
follows:

<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C>
1996............................................. $ 64,000
1997............................................. 64,533
1998............................................. 67,760
1999............................................. 71,148
2000 and thereafter.............................. 92,610
</TABLE>

Rental expense for the year ended December 31, 1995 and the period from
inception to December 31, 1994 was $139,660 and $42,381, respectively.

EMPLOYMENT AGREEMENTS

Prior to the consummation of the initial public offering (Note 13), the
Company will enter into employment agreements with its President and Chief
Executive Officer. The President's agreement will provide for an annual base
salary of $100,000 for a term of five years. The agreement may be extended at
the sole discretion of the Board of Directors upon the same terms and
conditions. In the event that the Board of Directors does not extend the term of
the agreement and a mutually acceptable alternative agreement cannot be
negotiated with the Board of Directors upon the expiration of this agreement,
the President will be entitled to a severance payment equal to two times his
annual base salary. The Chief Executive Officer's agreement will provide for an
annual base salary of $187,000 for a term of five years. The agreement may be
extended at the sole discretion of the Board of Directors upon the same terms
and conditions. In the event that the Board of Directors does not extend the
term of the agreement and a mutually acceptable alternative agreement cannot be
negotiated with the Board of Directors upon the expiration of this agreement,
the Chief Executive Officer will be entitled to a severance payment equal to
three times his annual base salary.

13. SUBSEQUENT EVENTS

ACQUISITION

On January 31, 1996, the Company acquired the net assets of Electrified
Companies, Inc., a company operating in the bottled water industry. The purchase
agreement called for total payments to be made to the seller in the aggregate
amount of $5,000,000, including payments totaling $437,801 to satisfy two bank
loans of the seller and certain consideration for other outstanding liabilities.
The $5,000,000 is to be paid through a cash payment of $1,000,000 at the
closing, a $500,000 note payable, which has been paid, and two notes

F-14
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

13. SUBSEQUENT EVENTS (CONTINUED)
payable for $2,900,000 and $600,000, respectively, bearing interest at the prime
rate. Interest payments only are due through February 1997, and then equal
monthly installments will be made from March 1997 through February 2000.

Summarized below is the unaudited pro forma results of operations of the
Company for the year ended December 31, 1995 as though this acquisition had
occurred on January 1, 1995. Adjustments have been made for pro forma income
taxes, amortization of intangible assets related to this acquisition and
interest expense as a result of this acquisition. Pro Forma results of
operations of the Company, for the nine months ended September 30, 1996, are not
provided as the information was not material to the Company's overall results of
operations.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
------------------
<S> <C>
Pro Forma:
Revenues................................................................ $ 10,659,418
Net income.............................................................. $ 7,000
Earnings per share...................................................... $ 0.00
</TABLE>

These pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition been
made at the beginning of 1995, or of results which may occur in the future.

On June 27, 1996, the Company entered into an agreement to acquire certain
assets of Mountain Spring Water Co., Inc., and White Mountain Company, Inc.,
(collectively "Mountainwood") both operating in the bottled water industry.
Under the terms of the agreement, the acquisition is effective as of July 1,
1996. The purchase agreement called for total payments to be made to the seller
in the aggregate amount of $1,250,000. The $1,250,000 purchase price is
comprised of a cash payment of $500,000 at the closing on June 27, 1996, and two
separate notes payable for $500,000 and $250,000 bearing interest at 8%. The
note of $500,000 will have interest payments only through July 1, 1999, at which
time a $125,000 principal payment will be made. Thereafter, through July 1,
2003, monthly principal payments of $10,000 will be paid. The principal and
interest on the $250,000 note shall be paid through monthly payments of interest
only through June 30, 1999, at which time the entire unpaid principal and
interest is due. The $500,000 cash payment was borrowed from the Company's
majority shareholder and is included in short-term borrowings in the
accompanying balance sheet (unaudited) as of September 30, 1996.

In connection with these two acquisitions, the Company incurred certain
non-recurring expenses of approximately $47,000, which have been reflected in
the Company's unaudited Statement of Operations for the nine months ended
September 30, 1996.

INITIAL PUBLIC OFFERING

The Company is pursuing an initial public offering of its securities. The
proposed offering presently contemplates the sale of 1,350,000 shares of common
stock at $6.00 per share. The Company plans to use a portion of the proceeds of
the proposed offering to repay approximately $5,500,000 of the acquisition and
bank financing, described in Note 7, outstanding at September 30, 1996. The
supplementary earnings per share for the nine months ended September 30, 1996
(unaudited), which follows, gives supplemental effect to the issuance of 586,359
shares of common stock for the entire period during which the acquisition and
bank financing was outstanding, which is the number of shares to be issued in
the proposed initial public offering, the proceeds of which would be used to
repay approximately $5,500,000 of debt outstanding at

F-15
<PAGE>
PURO WATER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

13. SUBSEQUENT EVENTS (CONTINUED)
September 30, 1996, as well as to effect the reduction of related interest
expense in that period. These shares are presumed outstanding for supplementary
purposes only, and were neither issued nor outstanding for any purpose during
the nine months ended September 30, 1996.

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996
------------------------
<S> <C>
(UNAUDITED)
Supplementary earnings per share............................... $ 0.29
-----------
-----------
Supplementary weighted average common shares
outstanding.................................................. 2,824,038
-----------
-----------
</TABLE>

STOCK SPLIT

In April 1996, the Company approved an increase in the amount of authorized
common stock from 2,000,000 to 10,000,000 shares and a change in the Common
Stock par value from $.01 to $.003125. Immediately thereafter, the Company
authorized a 3.2 for 1 stock split on all common stock outstanding. All
information in the accompanying financial statements has been retroactvely
restated to give effect to the stock split.

SALE OF COMMON STOCK

In May, 1996, a third party investor purchased 98,568 shares of Common Stock
for an aggregate purchase price of $500,000. In November 1996, the investor was
also granted options to purchase 49,284 shares of the Company's Common Stock at
the IPO price less underwriting discounts and commissions in the event of an
initial public offering. These options are still outstanding.

EXERCISE OF STOCK WARRANTS

In October 1996, certain entities, under the control of the Chairman of the
Board of Directors and a principal stockholder of the Company, exercised stock
warrants for an aggregate 2.5% of the outstanding Common Stock and stock options
of the Company, immediately after said exercise, for a total of $1,000. Said
warrants were issued on January 28, 1994, in connection with the initial
capitalization of the Company and the investment in the Company by the holder.
The fair market value of the stock underlying the warrants was $31,000 at the
time of issuance. The warrants were not subject to any restrictions. Pursuant to
the exercise of the aforementioned warrants, the stockholder received a total of
56,860 shares of Common Stock.

STOCK OPTION GRANTS

In November 1996, the Company granted options to purchase 49,284 shares of
Common Stock and 24,642 shares of Common Stock, respectively, to the Chairman of
the Board of Directors and a principal stockholder of the Company and entities
controlled by him. These options may be exercised over fifty-four and
fifty-seven month periods from the grant date and are exercisable at the IPO
price per share of the Company's Common Stock less underwriter's discounts and
commissions. All of these options are still outstanding.

REVERSE STOCK SPLIT AND RECAPITALIZATION

In connection with the pending initial public offering described above, the
Company will effect a recapitalization whereby the presently outstanding Common
Stock will be converted to shares of Common Stock on a .4928 to 1 share basis
and the common stock par value will be converted from $.003125 to $.0063. All
information contained in the accompanying financial statements and footnotes has
been retroactively restated to give effect to these transactions.

F-16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of Electrified Companies, Inc.:

We have audited the accompanying balance sheet of Electrified Companies,
Inc. (a New Jersey corporation) as of December 31, 1995, and the related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1995 and 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Electrified Companies, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for the years ended December 31, 1995 and 1994 in conformity with generally
accepted accounting principles.

New York, New York /s/ Arthur Andersen LLP

May 1, 1996

F-17
<PAGE>
ELECTRIFIED COMPANIES, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1995

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash.......................................................................... $ 10,459
Accounts receivable, less allowance for doubtful accounts of $116,112......... 361,420
Inventory..................................................................... 112,240
Note receivable, current portion.............................................. 37,308
Other current assets.......................................................... 7,495
---------
Total current assets...................................................... 528,922

PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $4,463,494 (Note 4)........................................... 1,444,527
NOTE RECEIVABLE, net of current portion......................................... 112,151
OTHER ASSETS.................................................................... 4,736
---------
TOTAL ASSETS.............................................................. $2,090,336
---------
---------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable.............................................................. $ 208,426
Accrued expenses and other current liabilities................................ 28,284
Deferred income............................................................... 144,982
Short-term borrowings (Note 5)................................................ 5,000
Current portion of long-term debt (Note 6).................................... 189,125
---------
Total current liabilities................................................. 575,817

OTHER LIABILITIES:
Long-term debt (Note 6)....................................................... 262,218
Other liabilities............................................................. 81,607
---------

Total liabilities..................................................... 919,642

COMMITMENTS (Note 9)

STOCKHOLDERS' EQUITY:
Common stock, $100 par value; 2,000 shares authorized; 1,860 shares
issued and outstanding...................................................... 186,000
Retained earnings............................................................. 984,694
---------
Total stockholders' equity................................................ 1,170,694
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................ $2,090,336
---------
---------
</TABLE>

The accompanying notes are an integral part of this balance sheet.

F-18
<PAGE>
ELECTRIFIED COMPANIES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
REVENUE:
Bottled water sales and other revenue............................................... $ 4,339,486 $ 4,425,501
Rental revenue...................................................................... 691,656 732,753
------------ ------------
5,031,142 5,158,254
COST OF GOODS SOLD.................................................................... 2,500,949 2,615,267
------------ ------------
GROSS PROFIT.......................................................................... 2,530,193 2,542,987

OPERATING EXPENSES:
Operating expenses.................................................................. 1,381,882 1,478,912
General and administrative expenses................................................. 994,872 883,160
Depreciation and amortization....................................................... 448,128 447,118
------------ ------------
Total operating expenses.......................................................... 2,824,882 2,809,190
------------ ------------
Loss from operations.................................................................. (294,689) (266,203)

OTHER INCOME (EXPENSE)
Other income........................................................................ 165,888 310,023
Interest expense.................................................................... (54,433) (53,116)
------------ ------------
111,455 256,907
------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAX.................................................. (183,234) (9,296)
PROVISION FOR INCOME TAXES............................................................ 1,332 9,366
------------ ------------
NET LOSS.............................................................................. $ (184,566) $ (18,662)
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-19
<PAGE>
ELECTRIFIED COMPANIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
COMMON STOCK
-----------------------
<S> <C> <C> <C> <C>
NUMBER OF
SHARES PAR VALUE RETAINED EARNINGS TOTAL
----------- ---------- ----------------- ------------
BALANCE, January 1, 1994................................ 1,860 $ 186,000 $ 1,210,547 $ 1,396,547
Net (loss)............................................ -- -- (184,566) (184,566)
----- ---------- ----------------- ------------
BALANCE, December 31, 1994.............................. 1,860 186,000 1,025,981 1,211,981
Dividend distribution................................. -- -- (22,625) (22,625)
Net (loss)............................................ -- -- (18,662) (18,662)
----- ---------- ----------------- ------------
BALANCE, December 31, 1995.............................. 1,860 $ 186,000 $ 984,694 $ 1,170,694
----- ---------- ----------------- ------------
----- ---------- ----------------- ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-20
<PAGE>
ELECTRIFIED COMPANIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................................................. $ (184,566) $ (18,662)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization......................................................... 448,128 447,118
Provision for allowance for doubtful accounts......................................... 133,329 (17,217)
Gain on sale of fixed assets.......................................................... (153,000) --
Changes in assets and liabilities:
Decrease in accounts receivable....................................................... 28,095 82,649
Decrease in inventory................................................................. 40,155 297
(Increase) decrease in other current assets........................................... (3,415) 115
Decrease in accounts payable.......................................................... (74,404) (57,261)
Decrease in accrued expenses and other current liabilities............................ (83,261) (18,143)
Increase in other liabilities......................................................... 57,334 3,445
Increase (decrease) in deferred income................................................ 160,050 (15,068)
----------- -----------
Net cash provided by operating activities....................................... 368,445 407,273
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment, net........................................ (721,619) (217,739)
Payments received on note receivable.................................................. 11,687 38,854
----------- -----------
Net cash used in investing activities........................................... (709,932) (178,885)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net............................................................ 35,000 (35,000)
Repayment of long-term debt........................................................... (382,782) (189,125)
Proceeds from long-term debt.......................................................... 686,500 --
Dividend distributions................................................................ -- (22,625)
----------- -----------
Net cash (used in) provided by financing activities............................. 338,718 (246,750)
----------- -----------
NET DECREASE IN CASH.................................................................... (2,769) (18,362)

CASH, BEGINNING OF YEAR................................................................. 31,590 28,821
----------- -----------

CASH, END OF YEAR....................................................................... $ 28,821 $ 10,459
----------- -----------
----------- -----------

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest............................................................................ $ 54,433 $ 53,115
Taxes............................................................................... -- --
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
In 1994, the Company sold the fixed assets associated with its ice machine business in
exchange for a note receivable in the amount of $200,000.
</TABLE>

The accompanying notes are an integral part of these statements.

F-21
<PAGE>
ELECTRIFIED COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995

1. ORGANIZATION AND BUSINESS:
Electrified Companies, Inc. (the "Company") is engaged in the sale of
purified bottled water and related activities including sales and rentals of
water coolers and sales of coffee and office refreshment supplies throughout the
New Jersey - New York metropolitan area. The Company's sales and rentals are
divided among residential and corporate customers.

2. SIGNIFICANT ACCOUNTING POLICIES:

MANAGEMENT ESTIMATES

INVENTORY

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at historical cost and is
depreciated on the straight-line basis and accelerated methods based on the
estimated useful lives.

REVENUE RECOGNITION

Revenue on sales of bottled water and coolers is recognized upon delivery.

Leases of water coolers and filters are accounted for under the operating
method and, accordingly, rental income is reported over the terms of the leases.

INCOME TAXES

The Company accounts for its income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
requires recognition of deferred tax liabilities and assets for the estimated
future tax effects of events that have been recognized in the financial
statements or income tax returns. Under this method, deferred tax liabilities
and assets are determined based on differences between the financial accounting
and income tax bases of assets and liabilities, and the use of carry-forwards,
if any, using enacted tax rates in effect for the years in which the differences
and carry-forwards are expected to reverse and be utilized.

The Company operates under Subchapter S of the Internal Revenue Code and,
consequently, is not subject to Federal and certain state income taxes. The
stockholders include their pro rata share of the Company's income in their
personal income tax returns. It is the Company's policy to reimburse its
stockholders for any tax liability resulting from their inclusion of the
Company's income in their respective tax returns. The amounts distributed for
such purposes in 1995 and 1994 were $22,625 and $-0-, respectively.

NEW ACCOUNTING PRONOUNCEMENTS

During March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", which is effective for fiscal years
beginning after December 15, 1995. The Company does not expect the adoption of
this standard to have a material effect on its financial position or results of
operations.

F-22
<PAGE>
ELECTRIFIED COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

3. SALE OF ICE MACHINE BUSINESS:
On June 1, 1994, the Company sold the assets relating to its ice machine
business with a book value of approximately $41,000 for $200,000. The Company
received a promissory note for $200,000, payable monthly, plus interest at 2%
above the prime rate for a period of 60 months. The note is secured by the
assets sold and all other assets of the purchaser.

4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is comprised of the following as of December
31, 1995:

<TABLE>
<S> <C>
Leasehold improvements........................................... $ 136,279
Rental equipment................................................. 1,710,333
Vehicles......................................................... 1,017,078
Machinery and equipment.......................................... 2,649,752
Furniture and fixtures........................................... 394,579
----------
5,908,021
Less: Accumulated depreciation................................... 4,463,494
----------
Fixed assets, net.............................................. $1,444,527
----------
----------
</TABLE>

Depreciation aggregated $446,041 and $448,128, respectively, for the years
ended December 31, 1995 and 1994.

5. SHORT-TERM BORROWINGS:
The Company has a line of credit available with a bank for $100,000, as of
December 31, 1995. There were no outstanding amounts as of December 31, 1995.

The outstanding amounts on all other short-term borrowings as of December
31, 1995 are as follows:

<TABLE>
<S> <C>
Shareholder loan.................................................... $ 5,000
---------
---------
</TABLE>

The prime rate was 8.50% as of December 31, 1995.

6. LONG-TERM DEBT:
A summary of long-term debt follows as of December 31, 1995:

<TABLE>
<CAPTION>
DESCRIPTION INTEREST RATE
- -------------------------------------------------------------- -----------------
<S> <C> <C>
Installment note, payable monthly through September 1998 .5% over prime
($9,510 per month plus interest)............................ $ 313,843
Installment note, payable monthly through October, 1997 .5% over prime
($6,250 per month, plus interest) collateral-vehicles used
in business................................................. 137,500
----------
451,343
Less: current portion......................................... 189,125
----------
$ 262,218
----------
----------
</TABLE>

All of the bank obligations are guaranteed by the officers of the Company.

F-23
<PAGE>
ELECTRIFIED COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995

6. LONG-TERM DEBT: (CONTINUED)
Maturities of long-term debt over the next three years are as follows:

<TABLE>
<S> <C>
Year ending December 31,
1996............................................................ $ 189,125
1997............................................................ 176,625
1998............................................................ 85,593
---------
$ 451,343
---------
---------
</TABLE>

7. RELATED PARTY TRANSACTIONS:
The Company rents, on a year-to-year basis, its premises from a partnership,
the partners of which are the stockholders of the Company. Rent expense was
$60,000 and $64,000 for the years ended December 31, 1995 and 1994,
respectively.

8. BENEFIT PLANS:
The Company maintains a profit sharing plan which covers those employees not
covered by the union negotiated contract. Contributions to the plan are at the
discretion of the Board of Directors. Contributions to the plan for each of the
years ended December 31, 1995 and 1994 amounted to approximately $40,000,
respectively.

9. COMMITMENTS:
As of December 31, 1995, the Company had entered into operating leases for
warehouse space and office equipment.

Future minimum payments for operating leases at December 31, 1995 are as
follows:

<TABLE>
<S> <C>
Year Ended December 31,
1996............................................................ $ 110,000
1997............................................................ 120,000
1998............................................................ 120,000
1999............................................................ 120,000
2000 and thereafter............................................. 850,000
</TABLE>

Rent expense, excluding the amounts discussed in Note 7, for the years ended
December 31, 1995 and 1994 was $65,599 and $65,163, respectively.

10. SUBSEQUENT EVENTS:
On January 31, 1996, all of the Company's assets were acquired and certain
liabilities assumed by Puro Water Group, Inc. The purchase agreement called for
total payments to be made to the owners of the Company in the aggregate amount
of $5,000,000, payments totaling $437,801 to satisfy two bank loans of the
Company and certain consideration for other outstanding liabilities. The
$5,000,000 is to be paid via a cash payment of $1,000,000 at the closing and
three notes payable for $2,900,000, $600,000 and $500,000, respectively, bearing
interest at the prime rate, for which only interest payments are due through
February 1997 and then equal monthly installments commencing March 1997 through
February 2000.

F-24
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THE COMMON STOCK TO WHICH IT RELATES OR AN OFFER IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME AFTER THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 8
Use of Proceeds................................ 12
Dividend Policy................................ 12
Dilution....................................... 13
Capitalization................................. 14
Pro Forma Financial Information................ 15
Selected Financial Data........................ 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 19
Business....................................... 24
Management..................................... 33
Security Ownership of Management and Others.... 38
Certain Transactions........................... 39
Description of Securities...................... 39
Shares Eligible for Future Sale................ 40
Underwriting................................... 42
Legal Matters.................................. 44
Experts........................................ 44
Additional Information......................... 44
Index to Financial Statements.................. F-1
</TABLE>

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

UNTIL MARCH 4, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

[LOGO]

PURO WATER GROUP, INC.

1,350,000 SHARES OF
COMMON STOCK

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

PROSPECTUS
---------------------

LAIDLAW EQUITIES, INC.

GILFORD SECURITIES INCORPORATED

FEBRUARY 7, 1997

- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PURO WATER GROUP, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS

Section 145 of the Delaware General Corporation Law ("Section 145")
authorizes a court to award or a corporation's Board of Directors to grant
indemnification to directors and officers in terms sufficiently broad to permit
such indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article 7 of the Company's Certificate of
Incorporation provides as follows: "A director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit." This provisions does not
eliminate a director's fiduciary duty, and in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Company for acts and omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provisions also do not affect a director's responsibilities under any other law,
such as the federal securities laws or state or federal environmental laws. In
addition, the Company has obtained liability insurance for its officers and
directors.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses (other than underwriting
discounts and commissions) which will be paid by the Registrant in connection
with the issuance and distribution of the securities being registered. With the
exception of the SEC registration fee and the NASD filing fee, all amounts shown
are estimates.

<TABLE>
<CAPTION>
SEC registration fee........................................... $ 3,377.08
<S> <C>
NASD filing fee................................................ 1,614.44
American Stock Exchange listing expenses....................... 25,000.00
Blue Sky fees and expenses (including legal and filing fees)... 5,000.00
Printing expenses (other than stock certificates).............. 150,000.00
Printing and engraving of stock certificates................... 3,500.00
Transfer and Registrar fees and expenses....................... 1,500.00
Accounting fees and expenses................................... 240,000.00
Legal fees and expenses (other than Blue Sky).................. 110,000.00
Miscellaneous expenses......................................... 7,008.48
----------
Total.......................................................... $547,000.00
----------
----------
</TABLE>

II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

In the last three years, the Company has issued and sold the following
securities (as adjusted to reflect a 3.2 to 1 stock split effected as of April
29, 1996 and a .4928 to 1 stock split to be effected prior to the effectiveness
hereof):

1. On January 28, 1994, the Company issued to (i) The Trust Under Article 16
of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon 378,470 shares
of common stock, (ii) The Trust Under Article 16 of the Will of W. Palmer Dixon
for the benefit of Palmer Dixon 378,470 shares of common stock; (iii) Scott and
Beth Levy 425,779 shares of common stock, and (iv) Jack West 394,240 shares of
common voting stock. No underwriter was used for these transactions. The
foregoing transaction was exempt from registration under the Act based upon
section 4(2) thereof and Rule 152.

2. On October 16, 1995, the Company issued to (i) The Trust Under Article 16
of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon 98,560 shares
of common stock; (ii) The Trust Under Article 16 of the Will of W. Palmer Dixon
for the benefit of Palmer Dixon 19,712 shares of common stock; (iii) Peter T.
Dixon 78,848 shares of common stock. The consideration for this issuance was One
Million Dollars ($1,000,000). No underwriter was used for these transactions.
The foregoing transation was exempt from registration under the Act based upon
section 4(2) thereof and Rule 152.

3. On December 29, 1995, the Company issued to Thomas Limited Partnership
197,120 shares of common stock. The consideration for this issuance was One
Million Dollars ($1,000,000). No underwriter was used for this transaction. The
foregoing transaction was exempt from registration under the Act based upon
section 4(2) thereof and Rule 152.

4. On May 1, 1996, the Company issued to Edberg Associates Limited
Partnership 98,568 shares of common stock. The consideration for this issuance
was Five Hundred Thousand Dollars ($500,000). No underwriter was used for this
transaction. The foregoing transaction was exempt from registration under the
Act based upon section 4(2) thereof and Rule 152.

5. On October 1, 1996, the Company issued to (i) The Trust Under Article 16
of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon 28,430 shares
of common stock; and (ii) The Trust Under Article 16 of the Will of W. Palmer
Dixon for the benefit of Palmer Dixon 28,430 shares of common stock, each
issuance being pursuant to the exercise of Warrants issued on January 28, 1994.
The aggregate consideration for this issuance was One Thousand Dollars ($1,000).
No underwriter was used for these transactions. The foregoing transaction was
exempt from registration under the Act based upon section 4(2) thereof and Rule
152.

II-2
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL DATA SCHEDULES

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1. Form of Underwriting Agreement between the Company, Laidlaw Equities, Inc. and Gilford Securities
Incorporated.
1.2 Form of Selected Dealer Agreement.
3.1 Certificate of Incorporation of the Company, as amended.
3.2 Amended and Restated By-laws of the Company.
4.1 Specimen Certificate of the Company's Common Stock.
4.2 Form of Underwriter's Common Stock Purchase Warrant.
4.3 1996 Stock Option Plan.
4.4 Stockholders Agreement dated January 28, 1994, as amended by First Amendment to Stockholders
Agreement dated as of October 16, 1995, Second Amendment to Stockholders Agreement dated as of
December 29, 1995, Third Amendment to Stockholders Agreement dated as of May 1, 1996, and Fourth
Amendment to Stockholders Agreement dated as of November 11, 1996.
5.1 Opinion of Lev, Berlin & Dale, P.C.
10.1 Asset Purchase Agreement between the Company and Glenn Downing, Gary Downing and Downmorr Water
Corporation dated August 26, 1995.
10.2 Amendment to Asset Purchase Agreement by Glenn Downing and Gary Downing dated November 12, 1996.
10.3 Asset Purchase Agreement between the Company and Kenneth Gelber and Bark Water Company Ltd. d/b/a/
Nature's Way dated January 30, 1995.
10.4 Amendment to Asset Purchase Agreement by Kenneth Gelber and Bark Water Company Ltd. dated November
12, 1996.
10.5 Asset Purchase Agreement between the Company and Edward and Rita Worfler and National Ozone Water
Corp. dated April 28, 1995.
10.6 Asset Purchase Agreement between the Company and Peter Nicholas, Anthony Bonventure and Nature's
Best Water Company, Inc. dated April 28, 1995.
10.7 Waiver of right to convert debt issued in connection with the Asset Purchase Agreement by Nature's
Best Water Company, Inc. dated November 8, 1996.
10.8 Asset Purchase Agreement between the Company and Waters Filter & Cooler, Inc. and Transition
Agreement between Alan Waters and the Company, each dated October 31, 1995, as amended pursuant
to Amendment dated March 29, 1996, as revised pursuant to Revision dated May 23, 1996.
10.9 Asset Purchase Agreement between the Company and Rainbow Coffee Service Inc. d/b/a/ Rainbow Water
Service dated October 31, 1995, as amended by Amendment dated March 29, 1996.
10.10 Asset Purchase Agreement between the Company and Mountainwood Spring Water Co., Inc. and White
Mountain Co., Inc. dated as of June 30, 1995.
10.11 Waiver of option granted in connection with the Asset Purchase Agreement by Mountainwood Spring
Water Co., Inc. and White Mountain Co., Inc. dated November 7, 1996.
10.12 Asset Purchase Agreement between the Company and Robert Brundage, Lyle Brundage and Electrified
Companies, Inc. dated January 31, 1996.
10.13 Net Lease, dated January 31, 1996, between the Company and R&L Properties Company covering premises
in East Orange, New Jersey.
10.14 Employment Agreement between the Company and Jack West dated as of November 1, 1996.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>

10.15 Employment Agreement between the Company and Scott Levy dated as of November 1, 1996.
10.16 Employment Agreement between the Company and James Botti dated as of November 1, 1996.
10.17 Lease, dated October 9, 1995, between the Company and Stabal Realty Corp. covering 76-78 Mall
Drive, Commack, Long Island, New York facility, as modified by Lease Modification dated February
15, 1996.
10.18 Balloon Mortgage on the Maspeth, New York facility dated May 24, 1988, with Bond and Extension and
Consolidation Agreement of same date.
10.19 Supply Agreement dated June 27, 1996 between the Company and Mountainwood Spring Water Co., Inc.
10.20 Long-term Supply Agreement dated June 13, 1996 between the Company and Shawangunk Bulk Springwater
Corp.
10.21 Stock Purchase Agreement dated as of December 29, 1995 between the Company and Thomas Limited
Partnership.
10.22 Stock Purchase Agreement dated as of May 1, 1996 between the Company and Edberg Associates Limited
Partnership.
10.23 Stock Purchase Agreement dated as of October 16, 1995 between the Company and Peter T. Dixon and
the Trusts under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter and Palmer
Dixon.
10.24 Registration Rights Agreement dated as of December 29, 1995 between the Company and Thomas Limited
Partnership.
10.25 Registration Rights Agreement dated as of May 1, 1996 between the Company and Edberg Associates
Limited Partnership.
10.26 Registration Rights Agreement dated as of October 16, 1995 between the Company and Peter T. Dixon
and the Trusts Under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter and
Palmer Dixon.
10.27 Registration Rights Agreement dated January 28, 1994 between the Company and the Trusts Under
Article 16 of the Will of W. Palmer Dixon for the benefit of Peter and Palmer Dixon.
10.28 Registration Rights Agreement dated January 28, 1994 between the Company and Jack C. West and Scott
and Beth Levy.
10.29 Master Note in principal amount of $2 million with European American Bank dated September 13, 1996.
10.30 Commercial Note in the original principal amount of $1.5 million with European American Bank dated
September 13, 1996.
10.31 General Security Agreement with European American Bank dated July 31, 1996.
10.32 Agreement of Subordination and Assignment dated as of January 31, 1996 between the Trusts under
Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and Palmer Dixon, and
the Company in favor of European American Bank.
10.33 Pledge Agreement dated January 31, 1996 between the Trusts under the Will of W. Palmer Dixon for
the benefit of Peter T. Dixon and Palmer Dixon in favor of European American Bank.
10.34 Guaranty of All Liability dated as of February 5, 1996, by Peter T. Dixon in favor of European
American Bank.
10.35 Secured Note in original principal amount of $250,000 dated January 28, 1994 in favor of the Trusts
under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and Palmer
Dixon.
</TABLE>

II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.36 Standby Secured Note in orginal principal amount of $50,000 dated January 28, 1994 in favor of the
Trusts under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and
Palmer Dixon.
10.37 Letter of Credit in the amount of $500,000 with European American Bank dated June 27, 1996.
10.38 Letter of Credit in the amount of $4,000,000 with European American Bank dated January 31, 1996.
10.39 Consulting Agreement between the Company and Peter T. Dixon dated January 28, 1994.
10.40 Waiver of Transaction Fee by Peter T. Dixon dated November 14, 1996.
10.41 Option to Purchase Common Stock dated November 9, 1996 in favor of Edberg Associates Limited
Partnership.
10.42 Option to Purchase Common Stock dated November 9, 1996 in favor of Peter T. Dixon and the Trusts
under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and Palmer
Dixon.
10.43 Option to Purchase Common Stock dated November 9, 1996 in favor of Peter T. Dixon and the Trusts
under Article 16 of the Will of W. Palmer Dixon for the benefit of Peter T. Dixon and Palmer
Dixon.
11.1 Supplemental Earnings Per Share Computation.
23.1 Consent of Lev, Berlin & Dale, P.C.
*23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Dr. Stephen C. Edberg.
23.4 Consent of Leonard D. Rosinski.
24.1 Powers of Attorney (included on the signature page to this Registration Statement).
27.1 Financial Data Schedule.
</TABLE>

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

* Filed herewith.

ITEM 28. UNDERTAKINGS

The Company hereby undertakes that it will: 1. file, during any period in
which it offers or sells securities, a post-effective amendment to this
Registration Statement to:

(i) include any prospectus required by Section 10(a)(3) of the Securities
Act;

(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information on the registration
statement; and notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a Twenty Percent (20%)
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;

(iii) include any additional or changed material information on the plan of
distribution. 2. for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering. 3. file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering. 4. provide
to the underwriter at the closing specified in the underwriting agreement
certificates in such denominations and registered names as required by the
underwriter to permit prompt delivery to each purchaser.

II-5
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the By-laws of the Company, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for such indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
offered hereunder, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

The Company hereby undertakes that it will:

(i) for determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(i), or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective;

(ii) for determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in that registration
statement, and that offering such securities at that time as the initial bona
fide offering of these securities; and

(iii) provide to the Underwriter at the closing of the Offering certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser.

II-6
<PAGE>
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and authorized this
Amendment No. 4 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on this 6th day of February 1997.

PURO WATER GROUP, INC.

By: /s/ JACK C. WEST
------------------------------------------
Jack C. West
President

By: *
------------------------------------------
Scott Levy
Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, as
amended, Amendment No. 4 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- -------------------------------------------- -------------------------------------------- ----------------------

<S> <C> <C>
/s/ JACK C. WEST President and Director (principal executive
---------------------------------- officer) February 6, 1997
Jack C. West

*
---------------------------------- Chief Executive Officer and Director February 6, 1997
Scott Levy

*
---------------------------------- Chairman of the Board February 6, 1997
Peter T. Dixon

* Chief Financial Officer (principal financial
---------------------------------- and accounting officer) February 6, 1997
James G. Botti

*
---------------------------------- Director February 6, 1997
Wilmer J. Thomas

*By: /s/ JACK C. WEST
--------------------------------
Jack C. West
ATTORNEY-IN-FACT
</TABLE>

II-7

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports dated May 1, 1996 (except for the matters described in Note 13, as to
which the date is February 4, 1997) and May 1, 1996 and to all references to our
Firm included in or made a part of this registration statement.

/s/ Arthur Andersen LLP

New York, New York
February 4, 1997