SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
(Mark One)
(X) Quarterly report pursuant to section 13 or 15 (d) of the Securi ties
Exchange Act of 1934, for the quarterly period ended July 31, 1996.
( ) Transition report pursuant to section 13 or 15 (d) of the
Securities Exchange Act of 1934, for the transition period from
to .
Commission file number 33-30980
ECHO SPRINGS WATER CO., INC.
(Exact name of registrant as specified in its charter)
New York #16-1433379
(State of Incorporation) (I.R.S. Employer ID No.)
Building 100A
Hackensack Avenue
Kearny, New Jersey 07032
(201) 465-5151
(Address of Principal Executive Offices
and Principal Place of Business and Telephone Number)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1996
Common stock, $.0001 par value 50,499,910 shares
<PAGE>
ECHO SPRINGS WATER CO., INC.
Index to Form 10-Q
Page
Item Number
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements:
Consolidated balance sheets -
July 31, 1996 and October 31, 1995
3
Consolidated statements of operations -
Three months ended July 31, 1996 and 1995
4
Nine months ended July 31, 1996 and 1995 5
Consolidated statements of cash flows -
Nine months ended July 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ECHO SPRINGS WATER CO., INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
July 31, October 31,
1996 1995
Current assets:
Cash $ 13,368 $ 57,224
Accounts receivable - net of allowance
for doubtful accounts of $19,000 in
1996 and $35,000 in 1995 309,374 279,128
Notes receivable, current portion 27,691 22,380
Inventories 31,315 39,909
Prepaid expenses 46,186 27,406
--------- ---------
Total Current Assets 427,934 426,047
Notes receivable, net of current portion 166,517 157,857
Property, plant and equipment - net 1,329,894 1,395,090
Other assets 203,227 219,704
--------- ---------
TOTAL ASSETS $2,127,572 $2,198,698
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current portion of debt $ 859,628 $ 830,544
Debentures 1,325,000 1,325,000
Accounts payable and accrued expenses 2,196,839 2,242,578
Customer deposits 234,400 211,900
Unearned revenues 18,585 49,400
--------- ---------
Total Current Liabilities 4,634,452 4,659,422
Installment debt 5,577
TOTAL LIABILITIES 4,634,452 4,664,999
--------- ---------
Shareholders' equity (deficiency):
Common stock, $.0001 par, 75,000,000
shares authorized; issued and
outstanding 50,499,910 shares
in 1996 and 41,499,910 shares in 1995 5,050 4,150
Additional paid-in capital 6,073,080 5,893,980
Accumulated deficit (8,585,010) (8,364,431)
--------- ---------
Total Shareholders'
Equity (Deficiency) (2,506,880) (2,466,301)
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIENCY) $2,127,572 $2,198,698
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
- 3 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31,
(UNAUDITED)
1996 1995
---- ----
Revenues:
Gross sales $ 604,174 $ 716,539
Credits and allowances (2,528) (13,518)
Freight out (10,796) (12,843)
Other income 29,015 17,611
---------- ----------
619,865 707,789
---------- ----------
Costs and Expenses:
Cost of sales 222,780 260,785
Selling, general and
administrative 360,792 344,825
Interest 51,434 62,052
Amortization of other assets 1,219 1,219
Other (income) expenses - net (1,016) (3,705)
Gain on sale of assets (1,875) (1,187)
---------- ----------
Total Costs and Expenses 633,334 663,989
---------- ----------
Net income (loss) $ (13,469) $ 43,800
========== ==========
Net income (loss) per share $ (.00) $ .00
========== ==========
Weighted average shares
outstanding 49,499,910 41,499,910
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
- 4 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31,
(UNAUDITED)
1996 1995
---- ----
Revenues:
Gross sales $ 1,698,482 $ 1,938,666
Credits and allowances (9,203) (54,532)
Freight out (32,861) (37,280)
Other income 43,433 49,462
---------- ----------
1,699,851 1,896,316
---------- ----------
Costs and Expenses:
Cost of sales 661,714 733,873
Selling, general and
administrative 1,094,294 1,125,166
Interest 167,016 185,909
Amortization of other assets 3,657 3,657
Other (income) expenses - net (1,016) (3,705)
Gain on sale of assets (5,235) (1,187)
---------- ----------
Total Costs and Expenses 1,920,430 2,043,713
---------- ----------
Net loss $ (220,579) $ (147,397)
========== ==========
Net loss per share $ (.00) $ (.00)
========== ==========
Weighted average shares outstanding 44,499,910 41,499,910
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
- 5 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31,
(UNAUDITED)
1996 1995
---- ----
Operating Activities:
Net loss $(220,579) $(147,397)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 115,836 102,960
Gain on sale of assets (5,235) (1,187)
Provision for doubtful accounts (16,000) (5,000)
Changes in assets and liabilities:
Accounts receivable (36,996) (32,860)
Inventories 8,594 7,755
Prepaid expenses (18,780) (17,522)
Other assets 11,450 671
Accounts payable and
accrued expenses (45,739) (157,166)
Customer deposits 22,500 8,500
Unearned revenues (30,815) (8,000)
-------- --------
Net Cash Used by
Operating Activities (215,764) (249,246)
-------- --------
Investing Activities:
Capital expenditures (46,983) (49,122)
Collections on notes receivable 10,149 18,381
Proceeds from sale of assets 5,235 1,187
-------- --------
Net Cash Provided (Used)
by Investing Activities (31,599) (29,554)
-------- --------
Financing Activities:
Proceeds from issuance
of common stock 180,000
Repayment of debt (166,493) (72,861)
Increase in installment debt 190,000 83,000
-------- --------
Net Cash Provided by
Financing Activities 203,507 10,139
-------- --------
Net decrease in cash (43,856) (268,661)
Cash - beginning 57,224 247,824
-------- --------
CASH - ENDING $ 13,368 $ (20,837)
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 11,959 $ 11,526
Conversion of accounts receivable
to notes receivable 22,750
Conversion of other assets
to notes receivable 1,370
The accompanying notes are an integral part of these consolidated financial
statements.
- 6 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
BASIS OF PRESENTATION
The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10-Q. The October 31, 1995
balance sheet data was derived from audited finan cial
statements and together with the interim financial statements
and notes thereto should be read in conjunction with the
financial statements and notes included in the Company's
latest annual report on Form 10-K. In the opin ion of the
management, the interim financial statements reflect all
adjustments of a normal recurring nature neces sary for a fair
statement of the results for interim peri ods. The current
period results of operations are not necessarily indicative of
results which ultimately will be reported for the full fiscal
year.
BUSINESS
Echo Springs Water Co., Inc. (formerly Grudge Music Group,
Inc.) ("the Company"), through its subsidiaries, is engaged
principally in the distribution of bottled water and allied
products. The Company bottles water from its own natural
springs in Burlington, NY for direct distribution and sale
to business and residential customers as well as for whole
sale to supermarkets and other bottled water distributors.
REVENUE RECOGNITION
Revenue from equipment rental is recognized based on the
period in which it is earned and unearned revenue is re corded
for the portion billed in advance. Revenues from product sales
are recognized upon shipment to the wholesal er or delivery to
the customer, as applicable.
OTHER ASSETS
Financing costs are capitalized when incurred and amortized
over the term of the related indebtedness. Any unamortized
costs are charged to equity at the time of conversion of the
related debt to common stock. Deferred consulting costs and
intangible assets are amortized by the straight-line method
for the various asset groups as follows:
Water rights 40 years
Non-compete agreements 2 years
Deferred consulting costs 2 years
- 7 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-------------------------------------------
INCOME (LOSS) PER SHARE
Net income (loss) per share is based upon the weighted average
number of shares outstanding during the period.
NOTE 2 - INVENTORIES
-----------
Inventories are valued at the lower of cost or market on the
first-in first-out basis and at October 31, 1995 and July 31,
1996 consist of the following:
July October
31, 1996 31, 1995
Bottles $ 422 $ 2,094
Product held for sale 16,272 18,298
Supplies 14,621 19,517
------ ------
$31,315 $39,909
====== ======
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment are recorded at cost and
depreciated by the straight-line method over the estimated
useful lives of the assets of 4 - 40 years and consist of the
following:
July October
31, 1996 31, 1995
Land $ 150,000 $ 150,000
Buildings and improvements 362,298 362,298
Water coolers, bottles and
brewers 905,600 864,068
Machinery and equipment 376,773 373,588
Vehicles 60,850 60,850
Furniture and fixtures 127,128 124,862
--------- ---------
1,982,649 1,935,666
Less: accumulated depreciation
and amortization 652,755 540,576
--------- ---------
$1,329,894 $1,395,090
========= =========
- 8 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4 - OTHER ASSETS
------------
Other assets at October 31, 1995 and July 31, 1996 are
comprised of the following:
July October
31, 1996 31, 1995
Water rights $205,000 $205,000
Accumulated amortization 32,310 28,653
------- -------
Net deferred charges 172,690 176,347
Security deposits 30,537 43,357
------- -------
$203,227 $219,704
======= =======
NOTE 5 - INDEBTEDNESS
------------
Installment Debt
During fiscal 1993, $1,300,000 of a $1,500,000 mortgage was
converted to 5,200,000 shares of common stock on the basis of
four shares for each dollar of debt and $80,000 was repaid. In
addition, 500,000 shares of common stock were issued in
settlement of $71,143 of accrued interest and any additional
unpaid interest. The mortgagee has agreed to extend the
maturity until December 31, 1995.
July October
Debentures 31, 1996 31, 1995
---------- -------- --------
8% Series D convertible
subordinated debentures
maturing December 31, 1995 $ 85,000 $ 85,000
10% Series E debentures
maturing December 31, 1995 1,240,000 1,240,000
--------- ---------
$1,325,000 $1,325,000
========= =========
The Series E debentures consist of 1,240 units, with each unit
consisting of a $1,000 Series E debenture and 4,000 shares of
common stock which shares were issued during fiscal 1993.
The convertible subordinated debentures are convertible into
common stock at $.50 per share.
The Company is currently in default as to principal and
interest on its debt (Note 8).
NOTE 6 - INCOME TAXES
------------
The Company files a consolidated federal income tax return
with its subsidiaries. As of July 31, 1996, the Company had
net operating loss carryforwards in excess of $8,000,000 for
financial as well as State and Federal tax purposes which
expire in varying amounts beginning in 2004. All deferred tax
benefits from use of net operating loss carryforwards are
offset by valuation allowances.
- 9 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 7 - GOING CONCERN
-------------
The Company sustained a loss of $214,268 for the fiscal year
ended October 31, 1995 and $220,579 for the nine months ended
July 31, 1996. At October 31, 1995, the Company had a net
capital deficiency of $2,466,301 and $2,506,880 at July 31,
1996. These facts raise substantial doubt about the Company's
ability to continue as a going concern. Consider ations which
tend to mitigate the question of going concern include
management's successful efforts in raising funds through
private placements, the ability to renegotiate and restructure
long-term financing with major creditors, past and present
efforts to convert debt to equity and the abili ty to acquire,
restructure and develop the bottled water business which it
believes will be able to achieve profit able operations. The
Company believes that these factors provide meaningful
evidence as to the Company's ability to continue in operation
for the next fiscal year and support the going concern
presentation in the accompanying consoli dated financial
statements in favor of the liquidation basis. There can be no
assurance, however, that management will continue to be able
to raise sufficient capital or convert existing debt to equity
or to achieve profitable operations going forward.
NOTE 8 - SUBSEQUENT EVENTS
-----------------
In June 1996, the Company entered into negotiations to
consummate a public offering with minimum gross proceeds of
approximately $4,000,000. As part of the negotiations, the
Company has asked their lenders to convert outstanding debt
and unpaid interest thereon into shares of common stock of the
Company at a conversion ratio of ten cents per share. The
conversion would extend to $2,020,022 of outstanding principal
and unpaid interest of $571,576 through June 30, 1996 assuming
full conversion, which would be converted to 25,915,980 shares
of common stock. This transaction would reduce future interest
expense by approximately $204,000 per year.
Had this transaction been completed at July 31, 1996 the
proforma balance sheet would have been as follows:
Historical Adjustment Proforma
Current assets $ 427,934 $ $ 427,934
Other assets 1,699,638 1,699,638
--------- ---------- ---------
$2,127,572 $ $2,127,572
========= ========== =========
Current
liabilities $4,634,452 $(2,591,598) $2,042,854
Shareholders'
Equity
(Deficiency) (2,506,880) 2,591,598 84,718
--------- ---------- ---------
$2,127,572 $ $2,127,572
========= ========== =========
- 10 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 1996 COMPARED WITH THE
NINE MONTHS ENDED JULY 31, 1995
Net revenues decreased $196,465 (10.4%) to $1,699,851 for the nine months ended
July 31, 1996 ("1996") from $1,896,316 for the nine months ended July 31, 1995
("1995"). The $240,184 decrease in gross sales was due primarily to three
factors. First, the less profitable 2.5 gallon and one gallon sales decreased by
approximately $133,000 largely due to a discontinuance of service to three
customers, including one bankrupt cy. The second contributing factor was a
deliberate discontinuance of service to marginal customers as determined from a
customer-by-customer review in setting up the new corporate computer system. The
third factor was a much cooler summer in 1996 compared to 1995. The remaining
increase in net revenues related primarily to reduced credits and allowances of
approximately $45,000 and discounts earned, upon the negotiation and settlement
of a few older payables, of approximately $32,000, offset by a lower gain on
unclaimed or lost customer deposits of approximately $33,000.
Cost of sales for 1996 was $661,714 (39.0% of gross sales) as compared to
$733,873 (37.9% of gross sales) for 1995. This percentage increase was caused
primarily by small increases in freight in, labor costs and real estate taxes.
Selling, general and administrative expenses were $1,094,294 (64.4% of net
revenues) in 1996 as compared to $1,125,166 (59.3% of net revenues) in 1995.
$113,850 of the net $30,872 decrease represented a significant reduction in the
sales and marketing staff in an effort to better concentrate on the current
customer base. This was offset by increased costs in the delivery and warehouse
operation of $74,588 which resulted primarily from increased labor and vehicle
costs to improve the timeli ness of product deliveries. The remaining $8,390
decrease resulted from a streamlining of the administrative staff and expenses
and a reduction in third party commission, resulting from the discontinuance of
service to the above-noted three customers, offset by the start-up costs related
to the new corporate computer system of approximately $15,000 and increased
business development costs of approximately $16,000 to investigate new potential
business investments.
Interest expense decreased from $185,909 in 1995 to $167,016 in 1996 primarily
as a result of the $200,000 8% mortgage note payable under litigation being
eliminated at October 31, 1995 and the effect of the debt conversion described
in Note 8 to the consolidated financial statements. Amortization of other assets
of $3,657 in 1996 and 1995 related to the amortization of water rights. Other
income of $1,016 in 1996 and $3,705 in 1995 related to non-recurring operating
items.
The net loss for 1996 increased by $73,182 from $147,397 in 1995 to $220,579 in
1996.
- 11 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1996 COMPARED WITH THE
THREE MONTHS ENDED JULY 31, 1995
Net revenues decreased $87,924 (12.4%) to $619,865 for the three months ended
July 31, 1996 ("1996") from $707,789 for the three months ended July 31, 1995
("1995"). The $112,365 decrease in gross sales was due primarily to three
factors. First, the less profitable 2.5 gallon and one gallon sales decreased by
approximately $61,000 largely due to a discontinuance of service to two
customers, including one bankruptcy. The second contributing factor was a
deliberate discontinuance of service to marginal customers as determined from a
customer-by-customer review in setting up the new corporate computer system. The
third factor was a much cooler summer in 1996 compared to 1995. The remaining
increase in net revenue related primarily to reduced credits and allowances of
approximately $11,000 and discounts earned, upon the negotiation and settlement
of a few older payables, of approximately $24,000, offset by a lower gain on
unclaimed or lost customer deposits of approximately $11,000.
Cost of sales for 1996 was $222,780 (36.9% of gross sales) as compared to
$260,785 (36.4% of gross sales) for 1995. This percentage increase was caused
primarily by a small increase in real estate taxes.
Selling, general and administrative expenses were $360,792 (58.2% of net
revenues) in 1996 as compared to $344,825 (48.7% of net revenues) in 1995. A
$21,776 decrease, related to a reduction in the sales and marketing staff in
1995 in an effort to better concentrate on the current customer base, was
largely offset by increased administrative labor costs of $16,862 related to
improved customer service in 1996. The remaining $20,881 increase resulted from
increased costs in the delivery and warehouse operation of $33,077, which
resulted primarily from increased labor and vehicle costs to improve the
timeliness of product deliveries, offset by a reduction in third party
commissions, resulting from the discontinuance of service to the above-noted two
customers and a reduction in bad debt expense of approximately $9,000.
Interest expense decreased from $62,052 in 1995 to $51,434 in 1996 primarily as
a result of the $200,000 8% mortgage note payable under litigation being
eliminated at October 31, 1995 and the effect of the debt conversion described
in Note 8 to the consolidated financial statements. Amortization of other assets
of $1,219 in 1996 and 1995 related to the amortization of water rights. Other
income of $1,016 in 1996 and $3,705 in 1995 related to non-recurring operating
items.
The net loss for 1996 was $13,469 as compared to net income of $43,800 for 1995.
- 12 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have been the proceeds of its initial
public offering, cash generated from sales, issuance of common stock, debentures
and installment debt, and borrowings from its offi cers.
During the nine months ended July 31, 1996 and 1995, the Company had negative
cash flows from operating activities of $215,764 and $249,246, respectively.
Investing activities used cash of $31,599 in 1996 and $29,554 in 1995 primarily
for the acquisition of property and equipment. The Company has financed its
operating and investing activities during these periods primarily through the
issuance of common stock and installment debt.
At July 31, 1996, the Company had a working capital deficiency of $4,206,518.
Short-term credit sources are limited to trade credit on purchases and services.
The report issued by the Company's accountants that accompanies the Company's
consolidated financial statements for the year ended October 31, 1995 states
that there is a substantial doubt about the Company's ability to continue as a
going concern.
Considerations which tend to mitigate the question of going concern include
management's successful efforts in raising funds through private placements, the
ability to renegotiate and restructure long-term financ ing with major
creditors, past and present efforts to convert debt to equity and the ability to
acquire, restructure and develop the bottled water business which it believes
will be able to achieve profitable operations. The Company believes that these
factors provide meaningful evidence as to the Company's ability to continue in
operation for the next fiscal year and support the going concern presentation in
the accompanying consolidated financial statements in favor of the liquida tion
basis. There can be no assurance, however, that management will continue to be
able to raise sufficient capital or convert existing debt to equity or achieve
profitable operations going forward.
The Company has no plans or commitments for capital expenditures during the next
twelve months other than the ordinary equipment purchases which are expected to
be funded with additional installment debt.
The Company's business is subject to seasonal fluctuation, with summer being the
busiest season and winter the slowest. To date, seasonality has not had any
material effect on the Company's financial condition or results of operations.
- 13 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
There have been no new legal proceedings or material changes
to legal proceedings during the period from those reported in
the Company's Form 10-K for the year ended October 31, 1995.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K
None
- 14 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ECHO SPRINGS WATER CO., INC.
(Registrant)
By
Michael S. Rakusin
Chief Executive Officer &
Chief Financial Officer
Date: September 12, 1996
- 15 -
<PAGE>
ECHO SPRINGS WATER CO., INC.
FINANCIAL DATA SCHEDULE
FOR THE NINE MONTHS ENDED JULY 31, 1996
This schedule contains summary financial information extracted from the
financial statements for the nine months ended July 31, 1996 and is qualified in
its entirety by reference to such financial statements.
Item # Item Description Amount
5-02(1) Cash and cash items $ 13,368
5-02(2) Marketable securities - 0 -
5-02(3)(a)(1) Notes and accounts receivable-trade 328,374
5-02(4) Allowances for doubtful accounts 19,000
5-02(6) Inventory 31,315
5-02(9) Total current assets 427,934
5-02(13) Property, plant and equipment 1,982,649
5-02(14) Accumulated depreciation 652,755
5-02(18) Total assets 2,127,572
5-02(21) Total current liabilities 4,634,452
5-02(22) Bonds, mortgages and similar debt - 0 -
5-02(28) Preferred stock-mandatory redemption - 0 -
5-02(29) Preferred stock-no
mandatory redemption - 0 -
5-02(30) Common stock 5,050
5-02(31) Other stockholders' equity (2,511,930)
5-02(32) Total liabilities and
stockholders' equity 2,127,572
5-03(b)(1)(a) Net sales of tangible products 1,656,418
5-03(b)(1) Total revenues 1,699,851
5-03(b)(2)(a) Cost of tangible goods sold 661,714
5-03(b)(2) Total costs and expenses applicable
to sales and revenues 661,714
5-03(b)(3) Other costs and expenses - 0 -
5-03(b)(5) Provision for doubtful
accounts and notes - 0 -
5-03(b)(8) Interest and amortization
of debt discount 167,016
5-03(b)(10) Income before taxes and
other items (220,579)
5-03(b)(11) Income tax expense - 0 -
5-03(b)(14) Income/loss continuing operations - 0 -
5-03(b)(15) Discontinued operations - 0 -
5-03(b)(17) Extraordinary items - 0 -
5-03(b)(18) Cumulative effect-changes
in accounting principles - 0 -
5-03(b)(19) Net income or loss (220,579)
5-03(b)(20) Earnings per share-primary (.00)
5-03(b)(20) Earnings per share-fully diluted - 0 -
- 16 -
<PAGE>
McLaughlin & Stern, LLP
260 Madison Avenue
New York, New York 10016
September 11, 1996
Securities and Exchange Commission
Washington, DC
Re: Echo Springs Water Co., Inc.
Gentlemen:
On behalf of the above captioned corporation, we enclose herewith Form 10-Q for
ther period ended July 31, 1996.
Very truly yours,
David W. Sass
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