In a large bowl mix ground beef, bread crumbs, egg, garlic, water, salt and pepper. Shape into approximately 16 meatballs, 1½ inch each.
Place meatballs on rack in broiler pan. Bake for 15 to 17 minutes or until the meatballs are no longer pink and an internal temperature of 160°F is reached on a meat thermometer. Reserve.
To make the sauce, heat the oil and butter in a large frying pan over medium-high and sauté onions until translucent.
Add the mushrooms and sauté until they begin to soften, 2-3 minutes.
Add sherry to the pan and bring to a boil.
Add the meatballs and heavy cream. Simmer until sauce has thickened.