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

                                  FORM 10-KSB/A
(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                      For the Year Ended December 31, 2001

                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

         For the transition period from _______ to _______

         Commission file number:            0-30544
                                            -------

                                    WATERCHEF
        (Exact Name of Small Business Issuer as specified in its charter)
              Delaware                                           86-0515678
    (State or other jurisdiction of                           (I.R.S. Employer
     incorporation or organization)                          Identification No.)

                              1007 Glen Cove Avenue
                               Glen Head, NY 11545
                    (Address of principal executive offices)

                                  (516)656-0059
                           (Issuer's telephone number)

      Securities registered under section 12(b) of the Exchange Act: None.
         Securities registered under section 12 (g) of the Exchange Act:
                          Common stock, Par value $.001
                   Redeemable Common Stock Purchase Warrants.

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B is contained  in this form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

                  YES                            NO        X

      The issuer's net sales for the most recent fiscal year were $34,750.

The aggregate market value of the voting stock held by non-affiliates based upon
the last sale price on April 10, 2002 was approximately $ 7,000,000.

As of April 10, 2002,  the  Registrant  had  _86,614,286__  shares of its Common
Stock, $0.001 par value, issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE.

Portions  of  the  registrant's  definitive  Proxy  Statement  to be  issued  in
connection  with the 2001 annual meeting of  stockholders  are  incorporated  by
reference into Part III


<PAGE>


                                WATER CHEF, INC.

                          ANNUAL REPORT ON FORM 10-KSB

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

PART I                                                                                      PAGE

                                                                                          --------
<S>           <C>                                                                             <C>
         ITEM 1.  DESCRIPTION OF BUSINESS                                                     2
         ITEM 2.  DESCRIPTION OF PROPERTY                                                     7
         ITEM 3.  LEGAL PROCEEDINGS                                                           8
         ITEM 4.  SUBMISSION OF MATTERS TO A
                         VOTE OF SECURITY HOLDERS                                             8

PART II

         ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED
                               STOCKHOLDER MATTERS.                                           9
         ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR
                                PLAN OF OPERATION                                             9
         ITEM 7.  FINANCIAL STATEMENTS                                                        12
         ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH
                           ACCOUNTANTS ON ACCOUNTING AND
                           FINANCIAL DISCLOSURE.                                              13

PART III

         ITEM 9.   DIRECTORS, EXCEUTIVE OFFICERS,  PROMOTERS
                            AND CONTROL PERSONS; COMPLIANCE WITH
                            SECTION 16(a) OF THE EXCHANGE ACT                                 13
         ITEM 10.  EXECUTIVE COMPENSATION                                                     16
         ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                                  OWNERS AND MANAGEMENT.                                      17
         ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED
                           TRANSACTIONS                                                       18
         ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.                                          18


SIGNATURES                                                                                    19


</TABLE>




                                       1
<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

The Company


WaterChef,  Inc. (the  "Company")  manufactures  and markets water  purification
equipment.  Water coolers and filters were a  substantial  part of the Company's
business from 1993 until the fourth quarter of 2001, at which time this business
was  sold  so that  Waterchef  could  concentrate  on the  further  development,
manufacturing  and marketing of their patented line of "PureSafe" water systems.
The  accompanying  financial  statements have been prepared  assuming the
Company will continue as a going  concern.  To date,  the Company has shipped 19
PureSafe  units.  Revenue has been  recognized  only on one PureSafe  unit as 18
units that had been  shipped to the  country of Jordan had not met the  criteria
for revenue recognition due to no reasonable assurance of collectibility.


Background

The Company was  originally  incorporated  under  Arizona law in 1985 and merged
into a Delaware  corporation  in 1987.  In 1993 the Company,  then known as Auto
Swap,  U.S.A.,  entered  into a reverse  merger with  WaterChef,  Inc., a Nevada
corporation  which  manufactured  and marketed  water  coolers and filters.  The
financial  statements  prior to June 4,  1993 are those of  WaterChef  (Nevada),
which is considered to be the Predecessor Company.

In 1994 the  Company  established  a Joint  Venture  (the  "JV") in the  Peoples
Republic of China ("China") in which it held a 55% interest for an investment of
$475,000,  funded by cash, machinery and equipment,  and transferred technology.
The  Chinese  investment  provided  a  manufacturing  and  development  site for
WaterChef's  water  cooler  line.  Product was  shipped for further  assembly to
WaterChef's  leased facilities in Montana.  In the year ended December 31, 2000,
all  remaining  valuation  attributed to the joint venture was written off. With
the sale of the cooler, filter and accessory line in the fourth quarter of 2001,
WaterChef's  ownership  interest  in  the  joint  venture  was  assigned  to the
purchaser and the Montana facility was closed.

Products

Prior to the fourth  quarter  of 2001 when the  Company  decided to  concentrate
their efforts on the further  development,  manufacturing and marketing of their
PureSafe  Water  Station (the  "PureSafe"),  WaterChef  believed  that its water
dispensers and its wide variety of consumer  oriented water filtration  products
met or exceeded the design,  quality and  performance of  competitive  products.
Market considerations were such however as to limit the opportunities for profit
and  growth.   Management   determined  that  in  order  to  build  considerable
shareholder  value they would  transition  out of the  commodity  dispenser  and
filter  businesses  and  develop  products  that they  felt  were  unique to the
marketplace.


                                        2
<PAGE>



In  1998,  searching  for a  "killer  application",  management  focused  on the
worldwide  need for safe  drinking  water for  populations  who were unserved by
municipal  water  treatment  facilities.  The  result  of that  activity  is the
PureSafe,  a turn-key  unit that  converts  "grey",  or bathing grade water into
United States Environmental  Protection Agency ("EPA") grade drinking water. The
PureSafe effectively  eliminates all living pathogens that pollute non-processed
water - bacteria, cysts, viruses,  parasites and protozoa - at a affordable cost
for the emerging economies of the world.



The PureSafe Water Station was tested by H2M Labs, Inc., which performs drinking
water  testing for Nassau and Suffolk  counties of NY. The test  performed was a
total and fecal coliform  bacteria  test,  wherein the water storage tank fed to
the system was tested for the  presence  of total and fecal  coliform  bacteria,
with the presence of a total coliform  bacteria count of 50 detected.  The water
was then "spiked" with a three (3) liter  concentration  of laboratory grown and
cultured  bacteria,  and the  storage  tank  water was  measured  at  80,000,000
colonies of bacteria.  After being processed  through the PureSafe  system,  the
water was tested again,  and "fewer than 2" colonies of bacteria were  detected.
In addition to the  laboratory  test  conducted for  WaterChef by H2M Labs,  the
available literature clearly supports the statement that an ozone contact system
such as the one  utilized  in the  PureSafe  effectively  eliminates  all living
pathogens.  The Company has studied  other  products on the market and concluded
that the PureSafe  system is an affordable  alternative to other products on the
market.


The PureSafe is a  self-contained,  six stage water  purification  center. It is
housed in the equivalent of a small storage  container-  approximately four feet
wide,  seven  feet  long,  and six and  one-half  feet  high.  The  unit  weighs
approximately  eleven  hundred  pounds  (without  water) and was  configured for
portability,  durability,  and  easy  access  to its  essentially  off-the-shelf
components.  It is constructed with weather resistant  fiberglass,  aluminum and
steel, and is equipped with internal and external lighting.


The  PureSafe  can purify and  dispense at least  10,000  gallons per day for an
all-inclusive cost (labor,  power,  water,  amortization,  replacement media and
filters) at approximately one and one-half cents per gallon.  The process wastes
very little water, producing  approximately one gallon of water for every gallon
processed. The unit can be moved with a single fork-lift and is transportable by
truck or helicopter. Operating the unit is simple and straightforward.  Turn-key
in design,  minimum wage  personnel can be trained to operate the unit. A system
of fail-safes  is built into the  operation,  and aside from easily  installable
spares such as filters and  cartridges,  a  maintenance  and  oversight  program
established by WaterChef should maintain the operating  efficiencies  built into
the system. WaterChef warranties each unit for a period of one year as long as
the required  maintenance  as  prescribed  in the manual is adhered to. To date,
there is one unit that is still under warranty. WaterChef also has plans to have
periodic inspections by field agents.




                                        3
<PAGE>



While each unit is configured for the special water needs of a particular  site,
such as arsenic  removal,  seawater  desalination,  oil  separation,  etc.,  the
typical unit is made up of the following components:

a.   Inlet connection with macrofilter- strains input water, removes large
     particles and directs water into the system.
b.   Inlet pump- self- priming pump which maintains water pressure at 40psi
     throughout the system. c. Pre-depth media filter- a multi-media mixed bed
     to remove pollutants. Pressure gauges on the exterior front
     panel of the unit allow for visual monitoring of system performance.
d.   Ozone generator- provides a rich oxygen source that kills all living
     pathogens such as bacteria, viruses, cysts, and parasites. It is not
     hazardous to the environment.
e.   Ozone mixing tank- WaterChef's proprietary process for effectively mixing
     the water and ozone.
f.   Process pump- provides optimal operation of the ozone processing.
g.   Post-depth media filter- a redundant feature which adds additional
     filtering by removing remaining metals, organics and inorganics. A pressure
     gauge on the front panel will indicate when additional back-washing is
     necessary to maintain optimum performance.
h.   Ultraviolet treatment- provided by a UV lamp in the treatment process as a
     further precaution to eliminate any surviving pathogens or micro-organisms.
i.   KDF/carbon bed filter- a process that contains a proprietary ion-exchange
     media consisting of copper and zinc alloy. It safely filters and
     neutralizes chlorine and biological, inorganic and metallic contaminants
     (including lead and fluoride). The filter prevents bacteria growth while
     the carbon component removes organic compounds and improves water taste and
     eliminates odor.
j.   Mixer- sends ozone treated water to the bottle washing stations.
k.   Bottle washing stations- incorporated on the outside of the unit for easy
     access in order to effectively clean bottles used to carry water treated at
     the site.
l.   Dispensing stations- four individual dispensing lines, each with flow
     adjusting valves to help regulate a smooth, steady flow of water into the
     clean bottles.

Manufacturing-

Prior to the sale of its dispenser products,  the Company manufactured its water
coolers in Montana and through a Joint Venture ("JV") in China. With the sale of
this line  WaterChef  negotiated an early  termination of the Montana lease and,
with the consent of its JV partner,  transferred  its  interest in the JV to the
purchaser  of the water  cooler and filters  business  in the fourth  quarter of
2001.

In 2000  the  Company  entered  into a  subcontracting  arrangement  with  Davis
Aircraft  Products Inc.  ("Davis")  for the  manufacture  of the PureSafe  water
system. Based upon the experience and the resources of Davis, company management
believes  that Davis can provide the services  necessary  to supply  WaterChef's
requirements  over the foreseeable  future at a price,  and with the quality and
standards  necessary,  to meet the needs of the markets that the Company expects
to serve.




                                        4
<PAGE>



Raw materials-

The PureSafe  has been  designed to use,  for the most part,  readily  available
off-the-shelf  components,  sub-systems  and  equipment.  Inasmuch  as these are
available  from multiple  vendors,  the Company does not believe that  obtaining
these  for its  sub-contractor,  for  itself,  or for  others if it  chooses  to
manufacture  elsewhere,  will be a  problem.  WaterChef  has  also  incorporated
patented and proprietary technology in the PureSafe and is confident that it can
protect this intellectual  capital throughout the manufacturing and distribution
cycle.

Competition-

While the  Company  believed  that its coolers  and  filters  were  competitive,
substantial  competition  existed  in the  marketplace  with  almost  all of its
competitors  possessing  significantly greater financial resources.  Recognizing
that this would not allow the  revenues  and margins  required to give  adequate
value to its  shareholders,  the Company  wound-down the water cooler and filter
business, in the fourth quarter of 2001, and redirected their efforts to produce
a product that  addressed the needs of a substantial  marketplace  in which they
could be competitive.

While there are many excellent water purification  systems,  management believes
that the PureSafe is a unique product,  which  specifically  addresses the water
needs of those environs,  which are highly unlikely to enjoy access to municipal
water.  The Company has produced a turnkey solution which produces pure water to
meet U.S. EPA standards.  This is a far different  market than that addressed by
the industry today which has concentrated on the multi-billion  dollar municipal
water treatment sector or the equally large  residential  sector.  The municipal
solution  requires   significant   investment  for  infrastructure   development
(building a plant and laying pipe), and products for residential  markets do not
meet the needs of the underdeveloped nations of the world.

Management  does  recognize  that  its  potential   competitors  have  far  more
resources,  and that being first in the  marketplace is no assurance of success.
It must be assumed  that others are working on systems  which,  if  successfully
brought to market, could seriously impact the viability of the Company.

Marketing-

The market for the Pure Safe is substantial and is both world-wide and domestic.
Major  parts  of  Africa,   the  Middle  East,   Southeast   Asia,   the  Indian
sub-continent,  Latin and South  America,  the  Caribbean,  and much of  Eastern
Europe is in need of adequate  supplies  of pure  water,  just as is Florida and
other  regions in the United  States.  In part,  solving this problem has been a
question of appropriate  technology.  Secondarily,  but just as important,  in a
vast  portion of the world is the need to finance  this  activity  for the local
populace.

The Company believes it has proven that it possesses the technology. The Company
also  believes  that  financing is available  for third world  economies  from a
variety of sources.  The  challenge  for the Company,  a virtual  unknown in the
industry  and with  limited  capital,  is in getting  their  message in front of
decision  makers.  To this end,  WaterChef  has  enlisted the aid of some of the
world's most outstanding experts in water purification, especially as it relates
to the needs of underdeveloped countries.

                                        5
<PAGE>

The Company's  Scientific  Advisory Board is chaired by Dr. Ronald Hart,  former
director of The National Center for  Toxicological  Research and a U.S. Food and
Drug "Distinguished Scientist in Residence". The Board also includes Dr. Mohamed
M.  Salem,   Professor  of  Occupational  and  Environmental   Medicine,   Cairo
University;  Dr. Richard  Wilson,  Mallinckrodt  Research  Professor of Physics,
Harvard University; Dr. Mostafa K. Tolba, former  Under-Secretary-General of the
United Nations and Director of the U.N.'s  Environmental  Program; and Lord John
Gilbert, former Minister of State for Defence for the United Kingdom under three
Prime Ministers and Secretary/Treasurer of the Tri-Lateral Commission.

Not only have the members of the Scientific  Advisory Board given valuable input
to the Company with respect to systems  design,  technology  input,  remediation
approaches and a plethora of information  relative to the unique problems facing
many  areas of the  world,  but they also have been  active in  introducing  the
Company to commercial opportunities.

During  2000 the  Company  entered  into a  master  distributor  agreement  with
4CleanWaters  Ltd., a newly formed Hong Kong  corporation to market the PureSafe
internationally.  In addition to lending  the Company  money,  with an option to
convert to the Company's common stock,  4CleanWaters had certain threshold sales
requirements  necessary  to  retain  their  exclusivity.  In  addition  to  cash
incentives,  there were  provisions  that would allow  4CleanWaters  to purchase
additional shares in WaterChef from commissions earned. While there are a number
of sales initiatives that have been instituted  world-wide by 4CleanWaters,  and
the  relationship  has been  cooperative and ongoing,  4CleanWaters has not been
able to  produce  sales for the  Company as  anticipated  during the term of the
agreement.  Notwithstanding  the agreement  with  4CleanWaters,  the Company can
market the PureSafe Water Station itself, with the understanding that sales made
directly by WaterChef, with the exception of certain "grand-fathered"  accounts,
will count towards the minimum sales  required in the year for  4CleanWaters  to
retain their sales exclusivity.  The limited sales of the PureSafe thus far have
been a result of the Company's own marketing activities.

Until the September 11, 2001 attack on the World Trade Center and Pentagon,  the
Company had not considered the U.S.  market an important part of their marketing
strategy.  However, with the newly created Homeland Security Agency, focusing on
possible  terrorist  attacks in the U.S.  and  creating  programs  to ensure the
protection  and  preservation  of water  resources as part of their  initiative,
opportunities  have  opened  up for  our  products.  The  Company  has  been  in
discussion with political and  governmental  contacts to explore the sale of the
PureSafe as a back-up water system in case of damage to municipal water systems.
On the basis of these  discussions  and other  information  relative to homeland
security, the Company will be pursuing various options for sales to this market.

Patents-

Included  in the  disposal of assets from  discontinued  operations,  were eight
patents that related to the manufacture of its water  dispensers.  These patents
covered the design of a new water dispenser, dispensing carbonated water through
a water cooler,  and the use of ice as a thermal storage medium.  As of December
31, 2001, the Company attributes no value to these patents as they relate to the
business sold in November 2001. The water dispensing patents will be assigned to
the buyer of the water cooler  business,  upon the payment of the last scheduled
payment under the sale contract.

                                        6
<PAGE>


The Company filed for a patent on its Pure Safe Water Station in October of 1998
and received formal  notification that the patent was issued in March, 2002. The
Company feels that this patent upholds the claims that the PureSafe  system is a
unique product.  In addition to its U.S. patent,  WaterChef has filed for patent
protection in the countries of the European Union, and in Canada,  China, India,
Korea, Japan and Mexico.


There can be no assurance  that any  application  of the Company's  technologies
will not infringe patent or proprietary  rights of others or that licenses which
might be required for the Company's  processes or products would be available on
favorable terms. Furthermore, there can be no assurance that challenges will not
be  made  against  the  validity  of the  Company's  patent,  or  that  defenses
instituted to protect against patent violation will be successful.

Seasonality-

The  Company  does  not  expect  sales  of  the  PureSafe  to be  influenced  by
seasonality.

Research and Development-

Research and development takes place at the Company's office. Testing, modeling,
simulation and prototype  manufacturing  are outsourced with much of the ongoing
development  taking place at  facilities  under the  supervision  of Davis Water
Products.

Insurance-

The Company maintains a $1,000,000  umbrella policy, in addition to a $2,000,000
general and product liability policy, which covers the manufacture and marketing
of its products. The Company believes its insurance coverage to be adequate.

Employees-

As of December 31, 2001 the Company  employed  four  executive  personnel at its
headquarters.  All manufacturing and other personnel related to the water cooler
line have been terminated.  The Company has no collective  bargaining  agreement
with any of its employees.


ITEM 2.  DESCRIPTION OF PROPERTY

In the fourth quarter of 2001, the Company closed its manufacturing  facility in
Montana,  and sold it's water cooler and filer business and has  transferred its
relationship with its JV in China to the buyer of this  discontinued  operation.
It presently has no  manufacturing  facilities nor any plans to manufacture  for
itself. The Company manufactures its PureSafe under a contract with Davis.

The Company leases office space in Glen Head, New York.


                                        7
<PAGE>



ITEM 3.  LEGAL PROCEEDINGS

-        The Company is a defendant in an action brought by certain debenture
         holders ("Bridge Loans") in New Hampshire Superior Court seeking
         repayment of $375,000 of debenture principal together with interest
         from 1997, and the issuance of penalty shares for non payment of
         principal and interest. In addition, the plaintiff's claim that they
         have suffered by the Company's failure to register the shares issued
         under the debenture, the warrants issued under the debenture and the
         shares issuable under the warrant agreement.

         The Company has interposed defenses and counterclaims, which the
         Company and its legal counsel believe, have strong merit. In connection
         with the debentures, the Company issued 6,667 shares of common stock
         for every $1,000 of debt at a price of $0.15 per share. The Company
         claims that it is owed the $375,000 consideration for such shares. In
         addition, the Company issued warrants for the purchase of 2,500,000
         shares of common stock at an exercise price of $0.15 per share
         exercisable until April 2002. Furthermore, the Company issued another
         100,000 shares of common stock to each debenture holder, or 1,300,000
         shares, at a price of $0.15 per share. The Company claims that it is
         owed an additional $195,000 in consideration for such shares.

         The Company and the plaintiffs, in this dispute, have reached an
         agreement in principal to settle their differences. If the agreement is
         finalized, WaterChef will issue additional Company shares in lieu of
         the principal and interest owed to settle the dispute. Management does
         not expect total shares to be issued under the agreement to be less
         than 3,000,000, with the final number being dependent upon the trading
         price of WaterChef's shares, when the Company completes their next
         Registration Statement. Management does not believe that this
         settlement will have a material adverse effect upon the Company.

-        The Company is a defendant in an action,  brought by a customer,
         relating to a series of contracts  that the Company  entered into.  The
         customer  claims that the Company  breached these  contracts by
         shipping  certain goods that did not conform to the  contract.  Most of
         the damages  that the  customer  seeks  consist of lost business
         profits.  Company  management,  and legal counsel,  believe that the
         action is without  merit.  The Company has made a $5,000  settlement
         offer to the  customer,  for the nuisance  value of the  lawsuit.  The
         customer has rejected  such offer.  The Company has not made a
         provision  for this lawsuit as of December 31, 2001.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters other than the usual vote for directors and auditors were submitted
to the shareholders for vote during 2001.





                                        8
<PAGE>




                                     PART II

ITEM 5.  THE MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

The price range of common stock-


The Company's common stock is traded on the over-the-counter  ("OTC") Electronic
Bulletin board under the symbol WTER.OB.  This market is  characterized as being
"thin"  which  means that there is  generally a paucity of buyers and sellers as
found in the more  heavily  traded  Small Cap and NASDAQ  markets.  The Bulletin
Board stocks generally do not have the trading  characteristics of more seasoned
Companies as they lack the market-makers  that will make orderly markets as well
as the buyers and sellers that give depth,  liquidity and  orderliness  to those
markets.  In addition,  the solicitation of orders and/or the recommendation for
purchase of Bulletin Board stocks is restricted by in many  circumstances by the
National  Association  of  Securities  Dealers  (the  "NASD") and by  individual
brokerage firms as well.


The  chart  below  sets  forth  the  range  of high and low bid  prices  for the
Company's  common  stock based on closing  transactions  during  each  specified
period as reported by the National  Quotation  Bureau,  Inc. The prices  reflect
inter-dealer  prices without retail mark-up,  markdown,  quotation or commission
and do not necessarily represent actual transactions.

2000

First Quarter                                  .86                       .04
Second Quarter                                 .37                       .08
Third Quarter                                  .19                       .06
Fourth Quarter                                 .17                       .04

2001

First Quarter                                  .17                       .06
Second Quarter                                 .46                       .13
Third Quarter                                  .33                       .11
Fourth Quarter                                 .18                       .07


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

INTRODUCTION

Until the fourth  quarter of 2001 WaterChef was engaged in the  manufacture  and
marketing of water coolers and water purification and filtration  equipment.  In
the fourth quarter of 2001, the Company  negotiated the sale of this business in
order to focus its  activities on its PureSafe  business  line. The PureSafe had
been designed by the company to meet the needs of communities who either did not
have access to municipal water purification  systems,  or to those whose systems
had been  compromised,  either by  environmental  factors or by faulty design or
maintenance.

                                        9
<PAGE>

RESULTS OF OPERATIONS

During 2001 WaterChef  made the strategic  decision to exit the water cooler and
consumer  filter  segments of its business in order to concentrate its resources
on the  development of the market for the PureSafe Water Station.  With the sale
of these assets  consummated in December  2001,  the Company's  water cooler and
consumer filter businesses are reported as discontinued  operations for 2001 and
2000, resulting in a loss from discontinued  operations of $40,412 and $126,679,
respectively.  These losses are offset by an  extraordinary  item, a gain on the
early  extinguishment  of debt from  discontinued  operations  of  $213,747  and
$2,236,606  for the years ended December 31, 2001,  and 2000,  respectively.  In
addition,  a gain on the disposal of the  discontinued  assets in the year ended
December 31, 2001 resulted in a gain on disposal of  discontinued  operations of
$38,791.

Sales for the year ended  December 31, 2001 were $34,750,  as compared to $0 for
year ended December 31, 2000. The increase of $34,750,  or 100% for the year, is
attributed to a combination of a) the restatement of the prior year's  financial
statements  to reflect  the  discontinuance  of the  consumer  products  line of
operations,  and b) the  commencement of the PureSafe  business line under which
one sale of one PureSafe Water Station was recognized.

Cost of sales for the year ended December 31, 2001 were $28,000,  as compared to
$0 for the year ended December 31, 2000.  This increase of $28,000,  or 100% for
the  year,  is due to  the  discontinuances  of the  consumer  product  line  of
operation  as mentioned  above and the sale of one PureSafe  unit in the current
year.  The Company has recorded a loss  contingency  for 18 units shipped to the
country of Jordan. The sale of 18 PureSafe units to Jordan will be recognized if
and when the Company receives payment.

Selling,  general and  administrative  expenses were $804,230 for the year ended
December  31, 2001  compared to  $1,337,961  for the prior year,  a reduction of
$533,731,  or 40%. This  reduction is primarily  due to the Company's  effort to
reduce expenses, primarily in salaries and corporate overhead.

Interest  expense for the year ended  December 31, 2001 was $217,830 as compared
to $85,499 in the prior year,  an increase  of $132,331 or 155%.  This  increase
primarily  relates to the  increase in debt in 2001,  including  the issuance of
$400,000 in  promissory  notes,  with  500,000  shares of common stock issued as
consideration for such notes. Related to this transaction,  the Company recorded
a $74,000 debt  discount.  For the year ended December 31, 2001, the entire debt
discount has been amortized and recorded as interest expense.







                                       10
<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000 the Company had a  stockholders'  deficit of  approximately
$2,821,000  and a  working  capital  deficit  of  approximately  $2,439,000.  In
addition,  the  Company  has  incurred  losses  from  continuing  operations  of
$1,469,845  and  $1,457,275  for the years  ended  December  31,  2001 and 2000,
respectively.  The accompanying financial statements have been prepared assuming
that the  Company  will  continue as a going  concern.  These  conditions  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans with  respect to these  matters  include  restructuring  its
existing debt,  raising additional capital through future issuances of stock and
/ or debt. The accompanying  financial statements do not include any adjustments
that might be  necessary  should the  Company be unable to  continue  as a going
concern.

During the year ended  December 31, 2000 the Company  reduced their  outstanding
debt as it related to  discontinued  operations by  $2,650,606,  which  included
obligations   to  Bear  Paw   Development   Corp.  and  to  the  Small  Business
Administration, by payment of cash of $234,000, the issuance of 2,000,000 shares
of common stock with a value of $180,000,  and the  extinguishment of $2,236,606
of debt recorded as an extraordinary  item. Also, during the year ended December
31, 2000, the Company issued an aggregate of 1,614,550 shares of common stock to
settle  payables  and notes  payable  with  accrued  interest of $394,798  which
related to continuing operations.

In the year ended 2001,  management  continued it debt restructuring  activities
and issued  710,000  shares of common stock to settle  $58,595 in debt, of which
$$48,994 related to discontinued operations. In addition, trade payables related
to  discontinued  operations  of  $213,747,  were settled and  accounted  for as
extraordinary gain form extinguishment of debt.

The Company,  during 2001 and 2000,  raised $513,000 and $612,392,  respectively
through the sale of stock and the exercise of warrants.

Management is currently  attempting to settle or restructure the remaining debt,
as it  relates to the  discontinued  operations,  and plans to raise  additional
capital  through  future  issuances  of stock and/or  debentures  to finance the
growth of the Company.





                                       11

<PAGE>



ITEM 7.           FINANCIAL STATEMENTS

         The Company's financial statements for the fiscal year ended December
31, 2001 and 2000 are included herein and consist of:

         Independent Auditor's Report                                    F-1

         Balance Sheet                                                   F-2

         Statements of Operations                                        F-3

         Statement of Changes in Stockholders' Equity                    F-4

         Statements of Cash Flows                                        F-5

         Notes to Financial Statements                                   F-6-16



                                       12
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of Water Chef, Inc.
Glen Head, New York

We have  audited  the  accompanying  balance  sheet of Water Chef,  Inc.,  as of
December  31,  2001 and the  related  statements  of  operations,  stockholders'
deficit and cash flows for the years  ended  December  31, 2001 and 2000.  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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatements.  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 Water Chef Inc., as of December
31, 2001 and the results of their  operations and their cash flows for the years
ended  December  31,  2001 and 2000 in  conformity  with  accounting  principles
generally accepted in the United States of America.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue as a going  concern.  As discussed in Note 3(a) to the  financial
statements, the Company has suffered recurring losses, and has a working capital
and a total capital deficiency, which raises substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described in Note 3(a).  The  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.





                                         /s/Feldman Sherb & Co., P.C.
                                         -----------------------------
                                         Feldman Sherb & Co., P.C.
                                         Certified Public Accountants



New York, New York
April 12, 2002

                                       F-1



<PAGE>

                                 WATER CHEF INC.

                                  BALANCE SHEET

                                DECEMBER 31, 2001

<TABLE>
<CAPTION>

                                     ASSETS
<S>                                                                                <C>
CURRENT ASSETS:
     Cash                                                                          $       33,797
     Inventories                                                                          159,250
     Prepaid expenses and other current assets                                             59,662
                                                                                   --------------
        TOTAL CURRENT ASSETS                                                              252,709

PATENTS AND TRADEMARKS (net of
     accumulated amortization of $1,198)                                                   24,673
                                                                                   --------------

                                                                                   $      277,382
                                                                                   ==============

                                 LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
     Accounts payable                                                              $      407,195
     Accrued expenses and other current liabilities                                       404,790
     Notes payable (including accrued interest of $156,308)                             1,214,031
     Preferred dividends payable                                                          666,106
                                                                                   --------------
        TOTAL CURRENT LIABILITIES                                                       2,692,122
                                                                                   --------------

LONG-TERM LIABILITIES:
     Loans payable to shareholder (including accrued interest of $33,617)                 406,398
                                                                                   --------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
     Preferred stock, $.001 par value;
        10,000,000 shares authorized;
        145,500 shares issued and outstanding, (liquidation preference $990,000)              146
     Common stock, $.001 par value;
        90,000,000 shares authorized;
        86,614,286 shares issued and outstanding                                           86,614
     Additional paid in capital                                                        10,049,884
     Stock subscription receivable                                                        (67,500)
     Treasury stock, 4,400 common shares, at cost                                          (5,768)
     Accumulated deficit                                                              (12,884,514)
                                                                                   --------------
        TOTAL STOCKHOLDERS'  DEFICIT                                                   (2,821,138)
                                                                                   --------------

                                                                                   $      277,382
                                                                                   ==============
</TABLE>


                       See notes to financial statements.

                                      F-2

<PAGE>
                                WATER CHEF, INC.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                 Year Ended December 31,
                                                          ------------------------------------
                                                                 2001                2000
                                                          -----------------    ---------------
<S>                                                       <C>                  <C>
Sales                                                     $         34,750     $            -
                                                          -----------------    ---------------

Costs and Expenses:
     Cost of sales                                                  28,000                  -
     Selling, general and administrative                           804,230          1,337,961
     Research and development                                      212,500             33,815
     Interest expense                                              217,830             85,499
     Loss contingency                                              242,035                  -
                                                          -----------------    ---------------
                                                                 1,504,595          1,457,275
                                                          -----------------    ---------------

Loss from continuing operations                                 (1,469,845)        (1,457,275)
                                                          -----------------    ---------------

Discontinued operations:
     Loss from discontinued operations                             (40,412)          (126,679)
     Gain on disposal of discontinued operations                    38,791                  -
                                                          -----------------    ---------------
Loss from discontinued operations, net                              (1,621)          (126,679)
                                                          -----------------    ---------------

Loss before extraordinary items                                 (1,471,466)        (1,583,954)

     Extraordinary item - gain on early
         extinguishment of debt                                    213,747          2,236,606
                                                          -----------------    ---------------

Net (loss) income                                               (1,257,719)           652,652

Preferred stock dividends                                         (108,300)          (108,300)
                                                          -----------------    ---------------

Net (loss) income applicable to
     common stock                                         $     (1,366,019)    $      544,352
                                                          =================    ===============

Basic and Diluted (Loss) Income Per Common Share:
     Continuing operations                                $          (0.02) $           (0.03)
     Discontinued operations                                             -                  -
     Extraordinary gain                                                  -               0.04
                                                          -----------------    ---------------
                                                          $          (0.02) $            0.01
                                                          =================    ===============

Weighted Average Common Shares Outstanding -
     Basic and Diluted                                          80,657,519         55,044,957
                                                          =================    ===============

</TABLE>

                 See notes to financial statements.

                                      F-3

<PAGE>
                                WATER CHEF, INC.

                       STATEMENT OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>

                                                                                    Stock                                 Total
                                  Preferred Stock    Common Stock     Additional     Sub-                   Accum-        Stock-
                                ----------------- ------------------   Paid-in     scription   Treasury     ulated       holders'
                                  Shares   Amount   Shares    Amount   Capital     Receivable   Stock       Deficit      Deficit
                                --------- ------- ---------  ------- ------------ ----------- --------  ------------  -------------

<S>                <C> <C>      <C>       <C>     <C>        <C>     <C>          <C>         <C>       <C>           <C>
BALANCE - DECEMBER 31, 1999     8,082,166 $ 8,082 35,254,181 $35,254 $  7,266,138 $        -  $ (5,768) $(12,062,847) $  (4,759,141)

 Shares issued for:
  Cash                                            10,543,330  10,543      452,457                                           463,000
  Services                                         2,564,836   2,565      583,935                                           586,500
  Non dilution agreement                           8,931,390   8,932      142,902                                           151,834
  Conversion of debt                               3,614,550   3,615      571,183                                           574,798
  Exercise of Class "B" Warrants                     333,334     333       49,667                                            50,000
  Exchange of Preferred shares
    for Common shares           7,936,666) (7,936) 7,936,666   7,936          -                     -
  Preferred stock dividend                                                                                  (108,300)      (108,300)
  Net Income                           -                                                                     652,652        652,652
                                --------- ------- ---------- -------  ----------- ----------- --------  ------------  -------------

BALANCE - DECEMBER 31, 2000       145,500     146 69,178,287  69,178    9,066,282          -    (5,768)   11,518,495)    (2,388,657)

 Shares issued for:
  Cash                                            13,413,749  13,414      598,979                                           612,393
  Services                                         1,680,000   1,680      174,570                                           176,250
  Debt                                               600,000     600       85,700                                            86,300
  Conversion of debt                                 710,000     710       57,885                                            58,595
  Receivable                                       1,032,250   1,032       66,468     (67,500)                                  -
  Preferred stock dividend                                                                                  (108,300)      (108,300)
  Net loss                             -                                                                  (1,257,719)    (1,257,719)
                                ---------  ------ ---------- -------  -----------  ----------  -------  ------------  -------------

BALANCE - DECEMBER 31, 2001       145,500  $  146 86,614,286 $86,614  $10,049,884  $  (67,500) $(5,768) $(12,884,514) $  (2,821,138)
                                =========  ====== ========== =======  ===========  ==========  =======  ============  =============



</TABLE>



                       See notes to financial statements.

                                       F-4

<PAGE>
                                     WATER CHEF INC.

                                STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                               Years Ended December 31,
                                                                                             -----------------------------
                                                                                                 2001            2000
                                                                                             -------------   -------------
<S>                                                                                        <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net (loss) income                                                                        $  (1,257,719)  $     652,652
       Adjustments to reconcile net (loss) income to
         net cash used in operating activities
            Loss from discontinued operations                                                       40,412         126,679
            Extraordinary item - gain on early  extingiuishment
               of debt  from discontinued operations                                              (213,747)     (2,236,606)
            Gain on disposal of discontinued operations                                            (38,791)              -
            Depreciation and amortization                                                            1,264           9,319
            Non-cash compensation                                                                  176,250         738,334
            Amortization of debt discount                                                           74,000               -
            Common stock issued for non-payment
               of note and interest payable                                                         12,300               -
       Change in assets and liabilities
         Cash held in escrow                                                                             -         161,988
         Inventories                                                                              (159,250)              -
         Other current assets                                                                      (49,717)         (9,945)
         Accounts payable and accrued expenses                                                     585,928         185,012
                                                                                             -------------   -------------
       Net cash used in continuing operations                                                     (829,070)       (372,567)
       Net cash used in discontinued operations                                                   (307,574)       (136,354)
                                                                                             -------------   -------------
NET CASH USED IN OPERATING ACTIVITIES                                                           (1,136,644)       (508,921)
                                                                                             -------------   -------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of property and equipment                                                                (551)           (405)
    Purchase of patents                                                                            (24,500)              -
                                                                                             -------------   -------------
NET CASH USED IN INVESTING ACTIVITIES                                                              (25,051)           (405)
                                                                                             -------------   -------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from notes payable                                                                    450,000         150,000
    Repayment of note payable                                                                      (25,000)              -
    Proceeds from sale of common stock and exercise of warrants                                    612,392         513,000
                                                                                             -------------   -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                                        1,037,392         663,000
                                                                                             -------------   -------------

NET (DECREASE) INCREASE IN CASH                                                                   (124,303)        153,674

CASH AT BEGINNING OF YEAR                                                                          158,100           4,426

                                                                                             -------------   -------------
CASH AT END OF YEAR                                                                          $      33,797         158,100
                                                                                             =============   =============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid during the year for:
       Interest                                                                              $           -   $           -
                                                                                             =============   =============
       Income taxes                                                                          $           -   $           -
                                                                                             =============   =============

    Non-cash financing and investing activities:
       Common stock issued for debt                                                          $      48,994   $           -
                                                                                             =============   =============
       Common stock issued for debt - discontinued operations                                $       9,600   $     574,798
                                                                                             =============   =============
       Common stock issued with debt                                                         $      74,000   $           -
                                                                                             =============   =============
       Accounts payable converted to note payable                                            $      20,000   $           -
                                                                                             =============   =============

</TABLE>

                           See notes to financial statements.

                                       F-5

<PAGE>

                                WATER CHEF, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 and 2000


1.       THE COMPANY

         Water Chef, Inc. (the "Company"),  is a Delaware  Corporation
         currently  engaged in the design and marketing of water dispensers and
         purification equipment both in and outside the United States.

2.       DISCONTINUED OPERATIONS


         In November 2001, the Company's sold the assets of their water cooler
         and filter operations with a book value of $61,209 for $100,000,
         resulting in a gain of $38,791. As of December 31, 2001, $50,000 of the
         $100,000 sale price has been received. Accordingly, this segment of the
         Company's business is reported as discontinued operations for the year
         ended December 31, 2001. The year ended December 31, 2000 has been
         restated to reflect such operations as discontinued.


         The following assets were disposed of:
<TABLE>
<CAPTION>
<S>                                                                             <C>
                  Inventory                                                     $        20,000
                  Fixed assets (net of accumulated
                           depreciation of $281,612)                                     10,833
                  Patents and trademarks (net of
                           accumulated amortization of $46,251)                          30,376
                                                                                ---------------

                                                                                $        61,209
                                                                                ===============
</TABLE>

         Loss from discontinued operations consists of the following:
<TABLE>
<CAPTION>

                                                                           Year ended December 31,
                                                                    ------------------------------------
                                                                         2001                  2000
                                                                    ---------------       --------------
<S>                                                                 <C>                   <C>
         Net sales                                                  $       152,040       $      257,197
                                                                    ---------------       ---------------

         Cost of sales                                                      (84,029)            (169,163)
         Selling, general and administrative expenses                      (108,423)            (105,625)
         Write-down of investment in joint venture                                -              (52,184)
         Inventory write-down                                                     -              (56,904)
         Gain on disposal of discontinued operations                         38,791                    -
                                                                    ---------------       --------------
                                                                           (153,661)            (383,876)
                                                                    ---------------       --------------

         Loss from discontinued operations                          $        (1,621)      $     (126,679)
                                                                    ===============       ==============
</TABLE>

                                      F-6
<PAGE>

         Included in the disposed of assets of the discontinued operations, is
         the Company's fifty-five percent interest in a joint venture formed in
         February 1994, with the a Chinese manufacturer of water coolers and
         consumer filters. The Company also has a distribution agreement with
         this manufacturer, whereby the Company was the exclusive sales agent
         for products manufactured by the joint venture. The exclusive territory
         covered all parts of the world, except the People's Republic of China,
         Taiwan and Hong Kong. The Company was unable to exercise economic
         control over the joint venture's operations, and accordingly, the
         investment which was accounted for under the equity method of
         accounting, was fully written down in the year ended December 31, 2000.

         During the year ended December 31, 2000, the Company reduced their
         outstanding debt as it related to its discontinued operations by
         $2,650,606, which included obligations to Bear Paw Development Corp.
         and to the Small Business Administration, by payment of cash of
         $234,000, the issuance of 2,000,000 shares of common stock with a value
         of $180,000, and the extinguishment of $2,236,606 of debt recorded as
         an extraordinary item.

         During the year ended December 31, 2001, the Company reduced its
         outstanding debt through forgiveness by $213,747, as it related to its
         discontinued operations. Such amount has been recorded as an
         extraordinary item.


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         a.       Basis of Presentation - The accompanying financial statements
                  have been prepared assuming that the Company will continue as
                  a going concern. The Company incurred losses from continuing
                  operations of $1,469,845 and $1,457,275 for the years ended
                  December 31, 2001 and 2000, respectively. Additionally, the
                  Company has a working capital and total capital deficiencies
                  of $2,439,414 and $2,821,138 at December 31, 2001. These
                  conditions raise substantial doubt about the Company's ability
                  to continue as a going concern.

                  Management's plans with respect to these matters include
                  restructuring its existing debt, raising additional capital
                  through future issuances of stock and / or debt. The
                  accompanying financial statements do not include any
                  adjustments that might be necessary should the Company be
                  unable to continue as a going concern.

                                      F-7
<PAGE>

         b.       Inventories - Inventories are stated at the lower of cost
                  (average) or net realizable value.

         c.       Patents and Trademarks - Patents and trademarks are amortized
                  ratably over 9 to 14 years.

         d.       Research and Development - Research and development
                  expenditures are charged to operations as incurred.

         e.       Stock-Based Compensation - The Company accounts for stock
                  transactions in accordance with APB No. 25, "Accounting for
                  Stock Issued to Employees". In accordance with Statement of
                  Financial Accounting Standards No. 123 ("SFAS 123"),
                  "Accounting for Stock-Based Compensation", the Company adopted
                  the pro forma disclosure requirements of SFAS 123.

         f.       Revenue Recognition - Revenues are recognized when products
                  are shipped and collectibility is reasonably assured.
                  Allowances for estimated bad debts, sales allowance and
                  discounts are provided when the sales are recorded.

         g.       Income Taxes - Income taxes are accounted for under Statement
                  of Financial Accounting Standards No. 109, "Accounting for
                  Income Taxes", which is an asset and liability approach that
                  requires the recognition of deferred tax assets and
                  liabilities for the expected future tax consequences of events
                  that have been recognized in the Company's financial
                  statements or tax returns. Valuation allowances are
                  established when necessary to reduce deferred assets to the
                  amounts expected to be realized.


         h.       Income (Loss) Per Share - Basic loss per share was computed
                  using the weighted average number of outstanding common
                  shares. Diluted per share amounts when applicable include the
                  effect of dilutive common stock equivalents from the assumed
                  exercise of options and warrants. Diluted per share amounts
                  are computed excluding common stock equivalents of
                  approximately 6,450,000 shares since their inclusion would be
                  anti-dilutive.


         i.       Use of 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 revenues and expenses during the
                  reporting period. Actual results could differ from those
                  estimates.


                                      F-8
<PAGE>



         j.       Fair Value of Financial Instruments - The carrying amounts of
                  the financial instruments reported in the balance sheet
                  approximate their fair market value due to the short-term
                  maturity of these instruments.
         k.       Impairment of Long-Lived Assets - In the event that facts and
                  circumstances indicate that the cost of an asset may be
                  impaired, an evaluation of recoverability would be performed.
                  If an evaluation is required, the estimated future
                  undiscounted cash flows associated with the asset would be
                  compared to the asset's carrying amount to determine if a
                  write-down to market value is required. At December 31, 2001,
                  the Company does not believe that any impairment has occurred.

         l.       New-Accounting Standards

                  (i)      In July 2001,  the  Financial  Accounting  Standards
                           Board  issued  Statement of Financial Accounting
                           Standards  ("SFAS") No. 141 "Business  Combinations"
                           and SFAS No. 142 "Goodwill and  Intangible  Assets
                           ("SFAS  No.  142").  SFAS  No.  141  requires  that
                           all  business combinations  initiated  after June
                           30, 2001 be accounted for using the purchase  method
                           of accounting   and   prohibits   the  use  of  the
                           pooling-of-interests  method for  such transactions.
                           SFAS No. 142 applies to all goodwill  and  intangible
                           assets  acquired in a business  combination.  Under
                           the new standard,  all goodwill, including goodwill
                           acquired before initial application  of the standard,
                           should not be amortized but should be tested for
                           impairment  at least  annually at the  reporting
                           level,  as defined in the  standard. Intangible
                           assets  other than  goodwill  should be  amortized
                           over their useful lives and reviewed for impairment
                           in accordance  with SFAS no. 121. The new standard is
                           effective for fiscal years  beginning  after December
                           15, 2001.  The Company must adopt this standard on
                           December 29 2001. As of December 28, 2001, the
                           Company had no unamortized goodwill.

                  (ii)     In August  2001,  the FASB  issued  Statement  of
                           Financial  Accounting  Standards  No.  144  ("SFAS
                           144"), "accounting  for the  Impairment or Disposal
                           of  Long-lived  Assets".  SFAS 144  superceded
                           Statement of Financial Accounting Standards No. 121,
                           "accounting  for the  Impairment of Long-lived
                           Assets  and  Assets  to be  Disposed  of"  and  the
                           accounting  and  reporting provisions  of  Accounting
                           Principles  Board  Opinion  No. 30,  "reporting  the
                           Results of Operations  -  Reporting the Effects of
                           Disposal  of  a  Segment  of  a  Business,  and
                           Extraordinary,  Unusual and Infrequently  Occurring
                           Events and Transaction".  SFAS 144 also amends
                           Accounting  Research  Bulletin  No. 51,
                           "Consolidated  Financial  Statements,"  to eliminate
                           the exception to  consolidation  for a subsidiary
                           for which control is likely to be temporary.  The
                           provision of SFAS 144 will be effective for fiscal
                           years beginning after December 15, 2001.  The Company
                           has not yet determined the effect SFAS 144 will have
                           on its financial position or results of operations in
                           future periods.

                                      F-9
<PAGE>

3.       INVENTORIES

         At December 31, 2001, inventories consisted of 18 units of the
         Company's water purification units.

4.       NOTES PAYABLE

         Notes payable at December 31, 2001 consist of the following:

                  (a)           $     401,250
                  (b)                 130,248
                  (c)                 462,533
                  (d)                 220,000
                                -------------
                                $   1,214,031
                                =============

         (a)      Bridge loans - These loans, which originated in May 1997, are
                  unsecured and bear interest payable at 12% per annum. The
                  Company is currently in litigation with these note holders
                  (see Note 18). Amounts due on this note, inclusive of $26,250
                  in interest are $401,250, at December 31, 2001.

         (b)      Loans payable - other: These are unsecured notes bearing
                  interest ranging from 10% to 12% per annum, with no specific
                  due date for repayment. Amounts due on this note, inclusive of
                  $47,525 in interest are $130,248, at December 31, 2001.

         (c)      In April 2001,  the Company issued a $400,000  promissory
                  note at an interest rate of 2% per month. In  consideration
                  for the issuance of this note,  500,000 shares of the
                  Company's common stock were issued to the note holder and a
                  $74,000 debt  discount was recorded.  As of December 31, 2001,
                  the entire debt discount has been amortized.  The principal
                  balance and accrued interest were payable on September 1,
                  2001.  The Company  did not make such  payment  and was
                  required to issue  additional 100,000  shares of its common
                  stock to the note holder.  The Company  recorded  additional
                  interest expense of $12,300  related to the  issuance of the
                  shares.  Amounts due on this note,  inclusive of $62,533 in
                  interest are $462,533,  at December 31, 2001.  As of April 12,
                  2002,  the note holder has not demanded  payment,  although
                  there is no assurance  that the note holder will continue to
                  defer demand for repayment.

         (d)      In November 2000, the Company entered into a Convertible
                  Promissory Note agreement,  whereby the Company may be
                  advanced a maximum of  $300,000.  The Company was advanced
                  the  following:  $100,000 in November 2000,  $50,000 in
                  December 2000 and $50,000 in January  2002.  No further
                  advances were made to the Company.  The advances bear interest
                  at 10% per annum and were to have been repaid as of January
                  15, 2002.  Further,  if any payments due after the original
                  due date remain unpaid,  a late charge of 4% of the amount due
                  is  assessed. The note holder has the option to convert the
                  advances, accrued interest and late charges into the Company's
                  stock at $.05 per share. A maximum of 6,000,000  shares may be
                  issued  upon  conversion.  As of  December  31,  2001,  the
                  Company  owed  $220,000 on these advances,  inclusive of
                  $20,000 in interest.  The Company and the note  holder,
                  by mutual  consent, have  agreed to extend the due date of the
                  note to May 1, 2002.  All other terms and  provisions of the
                  note are unchanged.


                                      F-10
<PAGE>


5.       ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

         At December 31, 2001, accrued expenses and other current liabilities
         were as follows:

                   Payroll                               $         307,743
                   Consulting                                       36,333
                   Other                                            60,714
                                                         -----------------
                                                         $         404,790
                                                         =================

6.       LOAN PAYABLE - SHAREHOLDER

         At December 31, 2001, the Company is obligated to its Chief Executive
         Officer for loans and advances made to the Company totaling $372,781,
         plus accrued interest of $33,617. Such executive has agreed to not
         request repayment prior to January 1, 2003.

7.       PREFERRED STOCK

         The Company is authorized to issue 10,000,000 shares of preferred
         stock, issuable in series with rights, preferences, privileges and
         restrictions as determined by the board of directors.

         At December 31, 2001, outstanding preferred shares were as follows:

<TABLE>
<CAPTION>

                                                                                                  Current
                                                                                                  Dividend
                                                        Shares                Amount              Accrued
                                                   -----------------      ---------------      ---------------
<S>                                                          <C>          <C>                  <C>
          Series A                                           52,500       $            53      $        52,500
          Series D                                           93,000                    93               55,800
                                                   -----------------      ---------------      ---------------
                                                            145,500       $           146      $       108,300
                                                   =================      ===============      ===============
</TABLE>

         Series A:

         The Series A preferred stock provides for a 10% cumulative dividend,
         based on the $10 per share purchase price, payable annually in the
         Company's common stock or cash, at the Company's option. The Series A
         preferred stock is not convertible, and is callable by the Company at a
         price of $11 per share.

         Series D:

         The Series D preferred stock provides for a 12% cumulative dividend,
         based on the $5 per share purchase price, payable semi-annually in the
         Company's common stock or cash, at the Company's option. The Series D
         preferred stock is not convertible, and is redeemable at the Company's
         option.

         At December 31, 2001, dividends in arrears on the Series A and Series D
         preferred shares were $360,106 and $306,000, respectively.

                                      F-11
<PAGE>

         Series E:

         The Series E preferred stock is convertible into common stock on a one
         for one basis, at the option of the Company, and provides voting rights
         to its holders. No interest or dividends are payable to Series E
         holders. In May 1998, the Company issued 7,936,666 Series E preferred
         shares to an officer in exchange for a like number of common shares. In
         March 2000, the Company issued 7,936,666 common shares for all of the
         issued Series E preferred stock.

8.       COMMON STOCK

         During the years ended December 31, 2001 and 2000, the following common
         stock transactions occurred:

         a.       Cash -

                  In the year ended December 31, 2000, the Company sold an
                  aggregate of 10,543,330 shares of its common stock at prices
                  ranging from $.03 to $.15 depending on the market price on the
                  dates of issue. Net proceeds from such sales were $463,000. In
                  addition, warrants to purchase 333,334 shares of common stock
                  at $.15 per share were exercised for net proceeds of $50,000.

                  In the year ended December 31, 2001, the Company sold an
                  aggregate of 13,413,749 shares of its common stock at prices
                  ranging from $.04 to $.08 depending on the market price on the
                  dates of issue. Net proceeds from such sales were $612,392.

         b.       Services -

                  In the year ended December 31, 2000, the Company issued an
                  aggregate of 2,564,836 shares of its common stock for
                  consulting services provided to the Company, valued at
                  $586,500. Such shares were issued throughout the year at
                  prices ranging from $.03 to $.30 depending on market prices on
                  the dates of issue.


                  In the year ended December 31, 2001, the Company issued an
                  aggregate of 1,680,000 shares of its common stock for
                  consulting services provided to the Company, valued at
                  $176,250. Such shares were issued throughout the year at
                  prices ranging from $.06 to $.16 depending on market prices on
                  the dates of issue.

         c.       Debt -

                  In April 2001, the Company, in connection the issuance of a
                  $400,000 promissory note payable, was required to issue
                  500,000 shares of its common stock to the note holder. The
                  Company has recorded a debt discount of $74,000 for such
                  shares. In September 2001, the Company was to have repaid this
                  note payable, which did not occur. As a penalty for such non-
                  payment, the Company was required to issue 100,000 additional
                  shares of common stock. The Company has recorded a $12,000
                  charge for these shares.

                                      F-12
<PAGE>
         d.       Conversion of Debt -

                  The Company, during the year ended December 31, 2000, issued
                  an aggregate of 1,614,550 shares of common stock to settle
                  payables and notes payable with accrued interest of $394,798
                  for continuing operations, and 2,000,000 shares of common
                  stock were issued to settle notes and accrued interest of
                  $180,000.


                  The Company, during the year ended December 31, 2001, issued
                  an aggregate of 710,000 shares of common stock to settle notes
                  payable with accrued interest of $48,994 for continuing
                  operations, and 60,000 shares of common stock were issued to
                  settle payable of $9,600 for their discontinued operations.

         e.       Subscription Receivable -

                  During December 2001, the Company sold 1,032,250 shares of
                  common stock for $67,500. This has been recorded as a stock
                  subscription receivable as of December 31, 2001.

         f.       Non Dilution Agreement -

                  The Company, during June 2000, issued 8,931,390 shares of
                  common stock valued at $.017 per share, or $151,834 in
                  conjunction with a non-dilution agreement.


9.       Stock Option and WARRANT Grant Plan

         In 1994, the Company instituted a stock option plan, which is available
         to selected directors, officers, employees and consultants of the
         Company (the "Participants"). The term of each option is ten years from
         the date of grant or a shorter term as determined by the Stock Option
         Committee (the "Committee"). The exercise price is determined by the
         Committee and cannot be less than 110% of the fair market value of the
         shares on the date of the grant. The Committee as of the date of grant
         determines the terms, conditions and restrictions of the options.

         Prior to 1997, the Company granted options to purchase up to 50,000
         shares of common stock at $0.10 per share to one employee. Such options
         remain unexercised at December 31, 2001 and expire in the year 2002.

         In 1997, the Company, in connection with private placements, issued
         warrants to purchase 3,083,338 shares of common stock at $.15 per
         share. Of such warrants, 750,000 expired in June 1999, and 333,334 were
         exercised June 2000. The remaining 2,000,004 warrants expire in May
         2002.

                                      F-13
<PAGE>

         The following tables illustrates the Company's stock option and warrant
         issuances and balances outstanding for the years ended December 31,
         2001 and 2000.
<TABLE>
<CAPTION>

                                                                 OPTIONS                          WARRANTS
                                                      ------------------------------    ------------------------------
                                                                         Weighted                          Weighted
                                                         Shares           Average          Shares           Average
                                                       Underlying        Exercise        Underlying        Exercise
                                                        Options            Price          Warrants           Price
                                                      -------------     ------------    -------------     ------------
<S>                              <C> <C>                    <C>         <C>                 <C>           <C>
         Outstanding at December 31, 1999                   50,000      $        .10        2,333,338     $        .15
                  Exercised                                                                  (333,334)             .15
                                                      -------------     ------------    -------------     ------------
         Outstanding at December 31, 2000 and
         December 31, 2001                                  50,000      $        .10        2,000,004     $        .15
                                                      =============     ============    =============     ============
</TABLE>

10.      MAJOR CUSTOMERS

         Sales to one customer in 2001 accounted for all sales from continuing
         operations.

11.      LEASES

         The Company's lease for its administrative facilities located in Glen
         Head, New York expired in September 2001. The Company has been leasing
         such facilities since the expiration on a month to month basis.

         In November 1999, the Company entered into a new factory lease used in
         the Company's discontinued operations that was to operate through
         November 2002. The Company, in February 2002, was released from its
         remaining obligation. All lease payments, required subsequent to
         December 31, 2001, have been accrued in net liabilities of discontinued
         operations.

         Rent expense from continuing operations for the years ended December
         31, 2001 and 2000 was $22,320 and $21,156, respectively. Rent expense
         from discontinued operations for the years ended December 31, 2001 and
         2000 was $27,236 and $32,400, respectively.


12.      INCOME TAXES

         The Company accounts for income taxes under Statement of Financial
         Accounting  Standards No. 109, Accounting for Income  Taxes  ("SFAS No.
         109").  SFAS No. 109  requires  the  recognition  of  deferred  tax
         assets and liabilities  for both the expected  impact of differences
         between the financial  statements and tax basis of assets and
         liabilities,  and for the expected  future tax benefit to be derived
         from tax loss and tax credit carry forwards.  SFAS No. 109 additionally
         requires the  establishment  of a valuation  allowance to reflect the
         likelihood of realization of deferred tax assets.

                                      F-14

<PAGE>


         The income tax benefit differs from the amount computed by applying the
         statutory federal income tax rate to the loss before the income taxes
         income as follows:
<TABLE>
<CAPTION>

                                                                                  Year ended December 31,
                                                                              --------------- -- --------------
                                                                                   2001              2000
                                                                              ---------------    --------------
<S>                                                                           <C>                <C>
               Benefit (provision) computed at
                       the Federal statutory rate                             $       428,000    $     (222,000)
               Benefit of net operating losses                                            -             222,000
               Deductions for which no benefit is recognized                         (428,000)              -
                                                                              ---------------    --------------
                                                                              $           -      $          -
                                                                              ===============    ==============
</TABLE>

         The Company has a net operating loss carryforward for tax purposes
         totaling approximately $11,920,000 at December 31, 2001 expiring
         between the years 2009 through 2021. The resulting deferred tax asset
         of approximately $4,053,000 has been offset by a corresponding
         valuation allowance.

13.      COMMITMENTS AND CONTINGENCIES


         -        The Company is a defendant in an action brought by certain
                  debenture holders ("Bridge Loans") in New Hampshire Superior
                  Court seeking repayment of $300,000 of debenture principal
                  together with interest from 1997, and the issuance of penalty
                  shares for non payment of principal and interest. In addition,
                  the plaintiff's claim that they have suffered by the Company's
                  failure to register the shares issued under the debenture, the
                  warrants issued under the debenture and the shares issuable
                  under the warrant agreement.

                  The Company has interposed defenses and counterclaims, which
                  the Company and its legal counsel believe, have strong merit.
                  In connection with the debentures, the Company issued 6,667
                  shares of common stock for every $1,000 of debt at a price of
                  $0.15 per share. The Company claims that it is owed the
                  $300,000 consideration for such shares. In addition, the
                  Company issued warrants for the purchase of 2,500,000 shares
                  of common stock at an exercise price of $0.15 per share
                  exercisable until April 2002. Furthermore, the Company issued
                  another 100,000 shares of common stock to each debenture
                  holder, or 1,300,000 shares, at a price of $0.15 per share.

                  The Company and the plaintiffs, in this dispute, have reached
                  a tentative agreement in principal to settle their
                  differences. If the agreement is finalized, the Company will
                  issue additional shares of common stock in lieu of the
                  principal and interest owed to settle the dispute. Management
                  does not expect total shares to be issued under the agreement
                  to be less than 3,000,000, nor does it believe that this
                  settlement will have a material adverse effect upon the
                  Company. At this time, the Company has made no accrual for
                  any possible contingent loss, as the amount cannot yet be
                  reasonably estimated.

                                      F-15
<PAGE>

         -        The Company is a defendant in an action, brought by a
                  customer, relating to a series of contracts that the Company
                  entered into. The customer claims that the Company breached
                  these contracts by shipping certain goods that did not conform
                  to the contract. Most of the damages that the customer seeks
                  consist of lost business profits. Company management, and
                  legal counsel, believe that the action is without merit. The
                  Company has made a $5,000 settlement offer to the customer,
                  for the nuisance value of the lawsuit. The customer has
                  rejected such offer, and has proposed a $75,000 settlement.
                  The Company has not made a provision for this lawsuit as of
                  December 31, 2001.

         -        In May 2001, the Company entered a distribution agreement with
                  a company (the "Sub distributor") based in the State of
                  Jordan. The Sub distributor has agreed to purchase no fewer
                  than 100 units of the Company's "Pure Safe Water Station", in
                  the calendar year commencing January 1, 2001. A minimum
                  purchase of 50 units are required to be purchased in each of
                  the subsequent years commencing January 1, 2002 and 2003,
                  respectively. During the year ended December 31, 2001, 18
                  units have been shipped under this agreement. The sale will be
                  recognized when the Company receives payments. The Company has
                  recorded the costs of the inventory shipped in costs of sales,
                  since return of the items is uncertain.

         -        The Company entered into a three year master distribution
                  agreement for their "Pure Safe Water Station" with a
                  distributor based out of Hong Kong ("the distributor"). Under
                  this agreement, upon meeting minimum quantities of sales in
                  each of the years of agreement, the distributor will receive a
                  rebate of 20% of the total price for all products, parts and
                  supplies purchased from the Company. Furthermore, the
                  distributor, upon meeting these minimum sales quantities will
                  have the right to purchase up to 30,000,000 shares of the
                  Company's common stock at $0.20 per share.




                                      F-16


<PAGE>






ITEM 8.           CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURE

                  None

                                    PART III

ITEM 9.           DIRECTORS, EXCEUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                  COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

At year-end 2001 the Company's Directors, Executive Officers and Scientific
Advisory Board Members are:

<TABLE>
<CAPTION>
<S>                                                           <C>
Name                                                         Age                Position

David A. Conway                                              60                 Director Chairman President
                                                                                And Chief Executive Officer

Rudolf W. Schindler                                          49                 Executive Vice President
                                                                                and Chief Operating Officer

Martin Clare (1)                                             68                 Director

Richard P. Farkas (2)                                        78                 Director

Marshall S. Sterman  (3)                                     70                 Director

Dr. Ronald W. Hart (4)                                       59                 Chairman, Scientific
                                                                                Advisory Board

Dr. Mohamed M. Salem (4)                                     50                 Scientific Advisory Board

Dr. Richard Wilson (4)                                       76                 Scientific Advisory Board

Dr. Mostafa K. Tolba                                         79                 Scientific Advisory Board

Lord John Gilbert                                            75                 Scientific Advisory Board

</TABLE>

(1)  Member- Audit committee
(2)  Deceased, March 2002; Member- Audit committee
(3)  Member- Compensation committee
(4)  Members of the Scientific Advisory Board have received an initial grant of
     50,000 shares of common stock. In addition the Chairman receives $3,000 per
     month and each of the other members $1,500 per month for their services.


                                       13



<PAGE>


David A. Conway

Mr. Conway was elected to the board in 1997 and became President and Chief
Executive Officer in 1998. He had been the President and COO of a public
relations and marketing company, Director and officer of two New York exchange
companies (KDI and Keene), and was an executive with CBS and Goldman Sachs. Mr.
Conway, was an officer in the US Army, and has a BA and MBA from Fordham
University.

Martin Clare

Mr. Clare was elected to the Board in 2000. He is the Principal of M. Clare and
Company, a financial advisory company, and a former principal of Civilization
Communications, a financial and marketing consulting group. He previously
founded two NASD brokerage firms- Harris, Clare & Co. and Dougherty Clifford &
Wadsworth. Mr. Clare served in the U.S. Army and received his BA from Ithaca
College.

Richard P. Farkas

Mr. Farkas was deceased in March of 2002. He was elected to the Board in 1997
and had been an active participant in both the financial and manufacturing
aspects of the company. His wise guidance and experience will be sorely missed.

Mr. Farkas was the Chairman of IMC Corporation Inc., an international business
consultancy providing broad-based business services to multi-national
corporations. Previously he had held a number of executive positions with
multi-national corporations such as Illinois and ACF Industries, American
Standard and Westvaco. Mr. Farkas was a graduate of Princeton and Yale
Universities and attended New Jersey Law School. He served as an officer in the
US Navy.

Sir. John Gilbert

Lord Gilbert served as Minister of State for Transportation, Minister of State
for Finance, and as Minister of state for Defence in the United Kingdom under
three Prime Ministers. Lord Gilbert is Secretary/Treasurer of the Tri-Lateral
Commission and a member of the House of Lords. He was educated at Merchant
Taylors' School and St. John's College, Oxford, and holds a Ph.D. in
International Economics and Statistics from New York University.

Ronald W. Hart (Ph.D.)

Dr. Hart is Chairman of the Board of Scientific Advisors. He is an
internationally recognized scientist and scholar who was Director of the
National Center for Toxicological Research and was named "Distinguished
Scientist in Residence" by the US Food and Drug Administration in 1992.
Recognized for his pioneering work on aging and his studies on nutrition and
health, Dr. Hart is a visiting professor at Cairo University, Seoul National
University and Guangzhou University. He received his doctorate in physiology and
biophysics from the University of Illinois.


                                       14
<PAGE>


Mohamed M. Salem (MD/Ph.D.)

Dr. Salem joined the Scientific Advisory Board in early 2001. He is currently
Professor of Occupational and Environmental Medicine at Cairo University. An
internationally recognized expert on the health effects of environmental and
water contaminants, including pesticides, lead and other metals, Dr. Salem has
established infectious disease control programs at medical centers throughout
the Middle East. Dr. Salem is also a principal of Salem Industries, a leading
supplier of chemicals and oil field equipment in the Middle East. Dr. Salem
holds a M.D and Ph.D. from Cairo University.

Rudolf W. Schindler

Executive Vice President and Chief Operating Officer of the Company since 2000,
Mr. Schindler formerly was an executive of Stocko Connectors and Schenck. He
holds an MS in Mechanical Engineering from the Technical University, Darmstadt,
Germany, and an MBA from Adelphi University.

Marshall S. Sterman

Elected to the Board in 2000, Mr. Sterman is President of the Mayflower Group, a
Massachusetts based merchant bank holding company. Mr. Sterman has over 35 years
of merchant banking and corporate finance experience as principal investor and
consultant, including Managing Partner of Cheverie & Company and founding
principal of Sterman & Gowell Securities and M.S.Sterman & Associates. Mr.
Sterman served as an officer in the US Navy and received his BA from Brandeis
University and his MBA from Harvard University.

Mostafa K. Tolba (Ph.D.)

Dr. Tolba served as Under-Secretary-General of the United Nations, and Executive
Director of the United Nations Environmental Program from 1976 to 1992. Dr.
Tolba is currently President of the International Center for Environment and
Development headquartered in Geneva, Switzerland, and Emeritus Professor of
Science at the Kasr El-Aini School of Medicine at Cairo University. He received
his Ph.D. in Microbiology from Imperial College, London, England.

Richard Wilson (Ph.D.)

Dr. Wilson joined the Scientific Advisory Board in 2001. He is currently the
Professor, Energy Research Group, University of California, and is also the
Mallinckrodt Research Professor of Physics at Harvard University. Dr. Wilson is
one of the foremost scientific authorities in the fields of water quality
remediation and purification, is on the Advisory Board of the Atlantic Legal
Foundation, and is one of the principal scientists working on the water problems
in Chernobyl and Bangladesh where arsenic has contaminated the water supply. Dr.
Wilson holds his Ph.D. from Oxford University.



                                       15

<PAGE>


ITEM 10.          EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

                               ANNUAL COMPENSATION
<TABLE>
<CAPTION>

Name                        Year            Salary         Bonus          Non-Cash            Total
Principal Position                                                                        Compensation
Compensation
<S>                         <C>             <C>      <C>     <C>             <C>            <C>
David A.  Conway            2001            $165,000 (1)     0               0              $165,000
President/CEO
</TABLE>

(1) During 2001 the company was unable to make all payments due its officers and
is accruing these expenses.

DIRECTORS' AND SCIENTIFIC ADVISORY BOARD COMPENSATION

Directors of the Company do not receive cash compensation for serving as
members; they are reimbursed for their out of pocket expenses related to
meetings and any other Company related activity for which they are called upon.
In the past they have received common stock for service to the Company. It is
the intention of the company to adopt an option plan for Officers, Directors and
Scientific Advisory Board members during 2002.

As of January 1, 2002 Mr. Sterman has provided consulting services to the
Company at the rate of $6,000 per month. The company may pay for these services
in cash or in common stock and may terminate these services at its option.

Company Director's have been paid success fees for helping the Company in
various equity and debt financings over the years. These payments have been both
in cash and common stock, such payments being made based on industry-wide, third
party standards.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Amended and Restated Certificate of Incorporation and Bylaws
eliminate, in certain circumstances, the liability of Directors for breach of
their fiduciary duty. This provision does not eliminate the liability of a
Director (i) for breach of the Director's duty of loyalty to the Company or its
stockholders (ii) for acts of omissions by the Director not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
willful or negligent declaration of an unlawful dividend, stock purchase or
redemption; (iv) for transactions from which the Director derived an improper
personal benefit; or (v) for any act or omission occurring prior to the
effective date of the Amended and Restated Certificate of Incorporation.



                                       16

<PAGE>



The Company's Amended and Restated Certificate of Incorporation provides
generally for indemnification of the Directors and Officers to the full extent
permitted under Delaware law, and permits indemnification for all other persons
whom the Company is empowered to indemnify.

The Company's Bylaws provide that the Company may indemnify, to the fullest
extent permitted under Delaware law, any person, including officers and
directors, with regard to any action or proceeding.

The Company believes that it is the position of the Securities and Exchange
Commission that insofar as the foregoing provisions may be invoked to disclaim
liability for damages arising under the Securities Act, those provisions, if
against public policy as expressed in the Securities Act, will be unenforceable.


ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Set forth below is information as of December 31, 2001, concerning stock
ownership of all persons known by the Company to own beneficially 5% or more of
the issued and outstanding common stock of the Company. This includes all
Directors, Executive Officers and Scientific Advisory Board members, both
individually and as a group. For purposes of the Memorandum, beneficial
ownership is defined in accordance with the Rules of the Securities and Exchange
Commission and generally means the power to vote and/or dispose of the
securities regardless of any economic interest.
<TABLE>
<CAPTION>

Name and Address of                      Number of Shares of                            Percentage of
Beneficial Owner of Shares               Voting Stock Beneficially Owned (1)            Total Voting
--------------------------               -----------------------------------            -------------
<S>             <C> <C>                            <C>                                      <C>
David A. Conway (2) (3)                            19,201,390                               22.2%
WaterChef, Inc.
1007 Glen Cove Ave.
Glen Head, NY  11545

Martin Clare                                          499,999                                  ---
Civilization Communications Inc.
W. Hawthorne
Valley Stream, NY

Richard P. Farkas (4)                                 250,000                                  ---
IMC
33 Baruch Dr.
Long Branch, NJ  07740
</TABLE>



                                       17

<PAGE>

<TABLE>
<CAPTION>
<S>                                                 <C>                                      <C>
Rudolf W. Schindler                                 2,300,000                                2.7%
WaterChef, Inc.
1007 Glen Cove Ave.
Glen Head, NY  11545

Marshall S. Sterman                                   250,000                                 ---
The Mayflower Group
68 Phillips Beach Road
Swampscott, MA 01907

All executive officers and
Directors as a Group (5)                           22,501,289                                26.0%
                                         ============================================================
</TABLE>

(Five-5-Persons)

1.       Total Voting Shares are comprised of all common shares issued and
         outstanding.

2.       Includes 5,044,794 shares held by  affiliates  and 6,310,464  shares
         held in an IRA Trust.

3.       The shares held by Mr. Conway and his affiliates have anti-dilution
         provisions to insure 32.6% ownership of the voting shares. In February,
         2002 Mr. Conway voluntarily surrendered his anti-dilution rights.

4.       Deceased, March 2002.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                           None.

ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

                  (a)      Exhibits

                           Exhibit
                           Number   Description


                           3(ii) Amended and Restated By-Laws of Water Chef,
                                 Inc.

                           4.1   Certificate of Designation of Series A
                                 Preferred Stock of Water Chef, Inc.

                           4.2   Certificate of Designation of Series C
                                 Preferred Stock of Water Chef, Inc.




                                       18

<PAGE>



                           4.3   Certificate of Designation of Series D
                                 Preferred Stock of Water Chef, Inc.

                           4.4   Series B Warrant to Purchase Common Stock

                           4.5   2% Subordinated Debentures

                          10.1   Settlement Agreement

                          10.2   Subdistribution Agreement

                  (b)      Reports on Form 8-K

                           None











                                   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 thereunto duly authorized.


                                              WATER CHEF, INC.


February 26, 2003                             /s/David A. Conway
Date:                                         David A. Conway
                                              President, Chief Executive Officer
                                              (Principal Operating Officer)











                                       19

<PAGE>
                                                                   Exhibit 3(ii)

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

                              AMENDED AND RESTATED

                                     BY-LAWS

                                       OF

                                WATER CHEF, INC.,

                             a Delaware corporation

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

                                   ARTICLE I

                                  STOCKHOLDERS

     SECTION 1.1 Annual  Meetings.  An annual meeting of  stockholders  to elect
directors and transact  such other  business as may properly be presented to the
meeting may be held at such place,  within or without the State of Delaware,  as
may  be  designated  by  or  in  the  manner  provided  in  the  Certificate  of
Incorporation or the By-Laws, or if not so designated, as the Board of Directors
may from time to time determine. If pursuant to the Certificate of Incorporation
or the By-Laws, the Board of Directors is authorized to determine the place of a
meeting of  stockholders,  the Board of Directors  may, in its sole  discretion,
determine  that the meeting  shall not be held at any place,  but may instead be
held solely by means of remote  communication as authorized by the provisions of
the General Corporation Law of the State of Delaware (the "DGCL").

     If authorized by the Board of Directors in its sole discretion, and subject
to  such  guidelines  and  procedures  as the  Board  of  Directors  may  adopt,
stockholders  and   proxyholders   not  physically   present  at  a  meeting  of
stockholders may, by means of remote communication,  participate in a meeting of
stockholders  and  be  deemed  present  in  person  and  vote  at a  meeting  of
stockholders, whether such meeting is to be held at a designated place or solely
by means of remote communication.  If such means are authorized, the Corporation
shall  implement  reasonable  measures to verify that each person deemed present
and  permitted  to vote at the meeting by means of remote  communication  is, in
fact,  a  stockholder  or  proxyholder.  The  Corporation  shall also  implement
reasonable  measures to provide such  stockholders and proxyholders a reasonable
opportunity to  participate  in the meeting and to vote on matters  submitted to
the  stockholders,  including an opportunity to read or hear the  proceedings of
the meeting substantially  concurrently with such proceedings.  If a stockholder
or  proxyholder  votes or takes  other  action at the meeting by means of remote
communication,  a record of such vote or other action shall be maintained by the
Corporation.

                                       20
<PAGE>

     SECTION 1.2 Special  Meetings.  A special  meeting of  stockholders  may be
called at any time by two or more  directors or the Chairman of the Board or the
President and shall be called by any of them or by the Secretary upon receipt of
a written  request to do so specifying  the matter or matters,  appropriate  for
action at such a meeting,  proposed to be presented at the meeting and signed by
holders of record of a majority of the shares of stock that would be entitled to
be voted on such  matter or  matters  if the  meeting  were held on the day such
request is  received  and the  record  date for such  meeting  were the close of
business on the  preceding  day. Any such meeting shall be held at such time and
at such place,  within or without the State of Delaware,  as shall be determined
by the body or person  calling such meeting and as shall be stated in the notice
of such meeting.

     SECTION 1.3 Notice of Meeting; Notice to Stockholders.  For each meeting of
stockholders  written notice shall be given stating the place,  if any, date and
hour,  the means of remote  communication,  if any,  by which  stockholders  and
proxyholders may be deemed to be present in person and may vote at such meeting,
and, in the case of a special  meeting,  the  purpose or purposes  for which the
meeting is called.  Except as  otherwise  provided by Delaware  law, the written
notice  of any  meeting  shall be given  not less  than 10 nor more than 60 days
before the date of the  meeting  to each  stockholder  entitled  to vote at such
meeting.  If mailed,  notice  shall be deemed to be given when  deposited in the
United  States  mail,  postage  prepaid,  directed  to the  stockholder  at such
stockholder's address as it appears on the records of the Corporation.

     Any notice given to a  stockholder  under any  provision  of the DGCL,  the
Certificate of Incorporation or By-Laws shall be effective if given by a form of
electronic transmission consented to by such stockholder. Any such consent shall
be revocable by a stockholder by written notice to the  Corporation and shall be
deemed revoked under the  circumstances  described in the DGCL.  Notice given to
stockholders by electronic transmission shall be given as provided in the DGCL.

     SECTION  1.4  Quorum.  Except  as  otherwise  required  by the  DGCL or the
Certificate of Incorporation,  the holders of record of a majority of the shares
of stock  entitled to be voted  present in person or  represented  by proxy at a
meeting  shall  constitute  a quorum  for the  transaction  of  business  at the
meeting,  but in the  absence  of a quorum  the  holders  of record  present  or
represented  by proxy at such  meeting may vote to adjourn the meeting from time
to time,  without notice other than announcement at the meeting unless otherwise
provided in the DGCL or By-Laws, until a quorum is obtained.

     SECTION  1.5  Chairman  and  Secretary  at  Meeting.  At  each  meeting  of
stockholders  the Chairman of the Board, or in such person's  absence the person
designated  in  writing  by the  Chairman  of the  Board,  or if no person is so
designated, then a person designated by the Board of Directors, shall preside as
chairman of the meeting;  if no person is so designated,  then the meeting shall
choose a chairman by plurality vote. The Secretary,  or in such person's absence
a person  designated  by the chairman of the meeting,  shall act as secretary of
the meeting.

                                       21
<PAGE>

     SECTION 1.6 Voting;  Proxies.  Except as otherwise  provided by the DGCL or
the Certificate of Incorporation:

     (a) Each stockholder shall at every meeting of the stockholders be entitled
to one vote for each share of capital stock held by such stockholder.

     (b) Each  stockholder  entitled to vote at a meeting of  stockholders or to
express consent or dissent to corporate  action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy, but no
such proxy shall be voted or acted upon after three years from its date,  unless
the proxy  provides  for a longer  period.  A proxy shall be  irrevocable  if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest  sufficient in law to support an irrevocable  power. A stockholder  may
revoke any proxy that is not  irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or by delivering
a proxy in accordance  with applicable law bearing a later date to the Secretary
of the Corporation. A stockholder may authorize another person or persons to act
for such stockholder as proxy by transmitting or authorizing the transmission of
a telegram,  cablegram,  or other means of electronic transmission to the person
who will be the  holder  of the  proxy or to a proxy  solicitation  firm,  proxy
support  service  organization  or like agent duly  authorized by the person who
will be the holder of the proxy to receive such transmission,  provided that any
such telegram,  cablegram, or other means of electronic transmission must either
set forth or be submitted with  information from which it can be determined that
the  telegram,   cablegram,  or  other  means  of  electronic  transmission  was
authorized by the stockholder.

     (c) Directors shall be elected by a plurality vote.

     (d) Each matter,  other than election of directors,  properly  presented to
any meeting shall be decided by a majority of the votes cast on the matter.

     (e) Unless  otherwise  provided in the  Certificate of  Incorporation,  all
elections of directors shall be by written  ballot.  Voting on all other matters
need not be by written  ballot unless  ordered by the chairman of the meeting or
if so  requested  by any  stockholder  present  or  represented  by proxy at the
meeting and entitled to vote on such matter.

     (f) If authorized by the Board of Directors,  the  requirement of a written
ballot  may  be  satisfied  by a  ballot  submitted  by  electronic  submission,
accompanied by the information specified in the DGCL.

     SECTION 1.7 Adjourned Meetings.  A meeting of stockholders may be adjourned
to another time or place. Unless the Board of Directors fixes a new record date,
stockholders  of  record  for  an  adjourned  meeting  shall  be  as  originally
determined  for the  meeting  from which the  adjournment  was taken.  Except as
provided  in the  next  succeeding  sentence,  notice  need  not be given of the
adjourned  if the  time,  place,  if any,  thereof,  and  the  means  of  remote
communication,  if any, by which stockholders and proxy holders may be deemed to
be present in person and vote at such  adjourned  meeting are  announced  at the
meeting at which the  adjournment is taken.  If the adjournment is for more than
30  days,  or if after  the  adjournment  a new  record  date is  fixed  for the
adjourned  meeting,  a notice of the  adjourned  meeting  shall be given to each
stockholder of record entitled to vote. At the adjourned  meeting at which there
shall be present or represented the holders of record of the requisite number of
shares,  any business may be transacted  that might have been  transacted at the
meeting as originally called.

                                       22
<PAGE>

     SECTION 1.8 Consent of Stockholders in Lieu of Meeting. Any action that may
be taken at any annual or special meeting of stockholders may be taken without a
meeting,  without  prior  notice and  without a vote,  if a consent in  writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock  having not less than the minimum  number of votes that would be necessary
to  authorize  or take such action at a meeting at which all shares  entitled to
vote thereon were present and voted. A telegram,  cablegram or other  electronic
transmission  consenting  to action  shall be deemed to be  written,  signed and
dated  provided that it sets forth or is delivered with  information  from which
the  Corporation  can  determine  that it was  transmitted  by the  stockholder,
proxyholder or by a person  authorized to act for the stockholder or proxyholder
and the  date on  which  it was  transmitted.  No  consent  given  by  telegram,
cablegram  or  other  electronic  transmission  shall  be  deemed  to have  been
delivered until there shall have been  compliance with applicable  provisions of
the DGCL.  Notice of the taking of such action  shall be given  promptly to each
stockholder that did not consent thereto in writing to the extent such notice is
required by the provisions of the DGCL.

     SECTION 1.9 List of Stockholders  Entitled to Vote. At least 10 days before
every meeting of stockholders,  a complete list of the stockholders  entitled to
vote at the meeting,  arranged in alphabetical  order and showing the address of
each  stockholder  and the  number  of  shares  registered  in the  name of each
stockholder,  shall be prepared.  Such list shall be open to the  examination of
any stockholder (as defined in Section 220 of the DGCL or any successor statute)
for any proper  purpose,  for a period of at least 10 days prior to the meeting,
(a) on a reasonably accessible electronic network, provided that the information
required to gain  access to the list is provided  with the notice of the meeting
or, (b) during  ordinary  business  hours, at the principal place of business of
the  Corporation.  If the  meeting is to be held at a place,  such list shall be
produced  and kept at the time and place of the  meeting  during  the whole time
thereof and may be inspected by any stockholder  who is present.  If the meeting
is to be held solely by means of remote communication,  the such list shall also
be open to the  examination  of any  stockholder  during  the whole  time of the
meeting on a  reasonably  accessible  electronic  network,  and the  information
required to access such list shall be provided with the notice of the meeting.

     SECTION  1.10  Fixing of Record  Date.  In order that the  Corporation  may
determine  the  stockholders  entitled to notice of or to vote at any meeting of
stockholders  or any  adjournment  thereof,  or to express  consent to corporate
action in  writing  without a meeting,  or  entitled  to receive  payment of any
dividend  or other  distribution  or  allotment  of any  rights,  or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful  action,  the Board of Directors may fix, in
advance,  a record  date,  which shall not be more than 60 nor less than 10 days
before  the date of such  meeting,  nor  more  than 60 days  prior to any  other
action. If no record date is fixed, the record date for determining stockholders
entitled  to notice of or to vote at a meeting of  stockholders  shall be at the
close of business on the day next  preceding  the day on which  notice is given,
or, if notice is waived,  at the close of business on the day next preceding the
day on which the meeting is held; the record date for  determining  stockholders
entitled to express  consent to corporate  action in writing  without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed;  and the record date for any other
purpose  shall be at the  close of  business  on the day on which  the  Board of
Directors adopts the resolution relating thereto.

                                       23
<PAGE>

     SECTION 1.11  Shareholder  Proposals.  Any stockholder  wishing to submit a
proposal for  consideration at an annual meeting of  stockholders,  other than a
nomination  for election to the  corporation's  board of  directors,  shall give
notice to the  corporation  of such  proposal not less than 45 days prior to the
first  anniversary of the date of the last annual meeting of stockholders.  Such
notice shall be in writing,  delivered  or mailed by first class  United  States
mail,  postage  prepaid,  to the  Secretary  of the  Corporation,  and  shall be
received  by the  Secretary  conformity  with the  deadline  referred  to in the
previous sentence.  Each notice shall set forth (i) the name, age and address of
the stockholder who intends to make the proposal and a brief  description of the
proposal  itself;  (ii) a  representation  that the  stockholder  is a holder of
record of the Corporation  entitled to vote at the meeting and intends to appear
in person or by proxy at the meeting to present the  proposal  specified  in the
notice;  and (iii) such other  information  regarding the proposal as would have
been required to be included in a proxy  statement  filed  pursuant to the proxy
rules of the Securities  and Exchange  Commission had such proposal been made by
the Board of  Directors  of the  Corporation.  The  Chairman  of any  meeting of
stockholders  may, if the facts  warrant,  determine  and declare to the meeting
that a  stockholder  proposal  was not made in  accordance  with  the  foregoing
procedure,  and if he or she should so determine,  the Chairman shall so declare
to the meeting and the defective  proposal  shall be  disregarded.  In all other
respects, stockholder proposals shall conform to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended.

     Any  stockholder  wishing to submit a  proposal  for  consideration  at the
annual  meeting of  stockholders  for the  nomination  for the  election  to the
Corporation's  board of directors.  Such nominations  shall be made by notice in
writing, delivered or mailed by first class United States mail, postage prepaid,
to the  Secretary  of the  Corporation  not less than 45 days prior to the first
anniversary of the date of the last meeting of  stockholders  of the Corporation
called for the election of directors.  Each notice shall set forth (i) the name,
age and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (ii) a representation that the stockholder is
a holder  of record  of the  corporation  entitled  to vote at the  meeting  and
intends to appear in person or by proxy at the meeting to nominate the person or
persons  specified in the notice;  (iii) the name, age, business address and, if
known,  residence  address of each  nominee  proposed in such  notice;  (iv) the
principal  occupation or employment of each such nominee;  (v) a description  of
all arrangements or understandings between the stockholder and each such nominee
and any other  person or persons  (naming  such person or  persons)  pursuant to
which the nomination or nominations are to be made by the stockholder; (vi) such
other information  regarding each such nominee as would have been required to be
included  in a  proxy  statement  filed  pursuant  to  the  proxy  rules  of the
Securities and Exchange Commission had each nominee been nominated,  or intended
to be  nominated,  by the Board of Directors of the  corporation;  and (vii) the
consent of each such  nominee to serve as a director  of the  corporation  if so
elected.  The Chairman of any meeting of stockholders may, if the facts warrant,
determine  and  declare  to the  meeting  that a  nomination  was  not  made  in
accordance with the foregoing  procedure,  and if he or she should so determine,
the Chairman shall so declare to the meeting and the defective  nomination shall
be disregarded. Except as required in the By-Laws no election need be by written
ballot. In all other respects, stockholder proposals shall conform to Rule 14a-8
under the Securities Exchange Act of 1934, as amended.

                                       24
<PAGE>


                                   ARTICLE II

                                    DIRECTORS

     SECTION 2.1 Number; Term of Office;  Qualifications;  Vacancies. The number
of the directors constituting the entire Board of Directors shall be the number,
not less than one nor more than 15, fixed from time to time by a majority of the
total  number  of  directors  which the  Corporation  would  have,  prior to any
increase or decrease,  if there were no vacancies,  provided,  however,  that no
decrease shall shorten the term of an incumbent director.  Until otherwise fixed
by the directors, the number of directors constituting the entire Board shall be
three (3).  Directors  shall be elected at the annual meeting of stockholders to
hold office,  subject to Sections 2.2 and 2.3,  until the next annual meeting of
stockholders  and until their  respective  successors  are elected and  qualify.
Vacancies and newly  created  directorships  resulting  from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office,  although less than a quorum, or by the sole remaining director,  and
the  directors  so chosen  shall hold  office,  subject to Sections 2.2 and 2.3,
until  the next  annual  meeting  of  stockholders  and until  their  respective
successors are elected and qualify.

     SECTION 2.2 Resignation.  Any director of the Corporation may resign at any
time by giving written notice or by electronic  transmission,  as defined in the
DGCL,  of such  resignation  to the Board of Directors  or the  Secretary of the
Corporation.  Any such  resignation  shall  take  effect  at the time  specified
therein  or,  if no time be  specified,  upon  receipt  thereof  by the Board of
Directors or the Secretary;  and, unless  specified  therein,  the acceptance of
such resignation  shall not be necessary to make it effective.  When one or more
directors shall resign from the Board of Directors effective at a future date, a
majority of the directors then in office,  including those who have so resigned,
shall have power to fill such  vacancy or  vacancies,  the vote  thereon to take
effect when such resignation or resignations  shall become  effective,  and each
director so chosen shall hold office as provided in these By-Laws in the filling
of other vacancies.

     SECTION 2.3 Removal. Subject to the provisions of the DGCL, any one or more
directors may be removed,  with or without cause, by the vote or written consent
of the  holders of a majority  of the shares  entitled to vote at an election of
directors.

     SECTION 2.4 Regular and Annual  Meetings;  Notice.  Regular meetings of the
Board of  Directors  shall be held at such  time and at such  place,  within  or
without the State of Delaware,  as the Board of Directors  may from time to time
prescribe.  No notice need be given of any  regular  meeting,  and a notice,  if
given,  need not  specify  the  purposes  thereof.  A  meeting  of the  Board of
Directors  may be held without  notice  immediately  after an annual  meeting of
stockholders at the same place as that at which such meeting was held.

                                       25
<PAGE>

     SECTION 2.5 Special  Meetings;  Notice.  A special  meeting of the Board of
Directors may be called at any time by the Board of  Directors,  the Chairman of
the  Board or the  President  and  shall be  called by any one of them or by the
Secretary  upon receipt of a written  request to do so specifying  the matter or
matters,  appropriate for action at such a meeting,  proposed to be presented at
the meeting and signed by at least two directors. Any such meeting shall be held
at such time and at such  place,  within or without  the State of  Delaware,  as
shall be determined by the body or person  calling such meeting.  Notice of such
meeting  stating the time and place thereof shall be given (a) by deposit of the
notice in the United States mail, first class,  postage prepaid,  at least seven
days before the day fixed for the  meeting  addressed  to each  director at such
person's  address as it appears  on the  Corporation's  records or at such other
address as the director may have furnished the Corporation for that purpose,  or
(b) by delivery of the notice  similarly  addressed for dispatch by facsimile or
telegraph,  or by delivery of the notice by telephone or in person, in each case
at least 48 hours before the time fixed for the meeting.

     SECTION 2.6 Presiding  Officer and  Secretary at Meetings.  Each meeting of
the Board of Directors shall be presided over by the Chairman of the Board or in
such  person's  absence  by such  member of the Board of  Directors  as shall be
chosen at the meeting.  The Secretary,  or in such person's absence an Assistant
Secretary,  shall act as  secretary  of the  meeting,  or if no such  officer is
present,  a secretary of the meeting shall be designated by the person presiding
over the meeting.

     SECTION  2.7  Quorum.  A majority  of the  directors  then in office  shall
constitute a quorum for the  transaction  of  business,  but in the absence of a
quorum a majority of those  present  (or if only one be present,  then that one)
may adjourn the meeting,  without notice other than announcement at the meeting,
until  such  time as a  quorum  is  present.  The  vote of the  majority  of the
directors  present at a meeting at which a quorum is present shall be the act of
the Board of Directors.

     SECTION  2.8  Meeting by  Telephone.  Unless  otherwise  restricted  by the
Certificate of Incorporation or By-Laws, members of the Board of Directors or of
any committee  thereof may  participate in meetings of the Board of Directors or
of such  committee  by means of  conference  telephone  or other  communications
equipment  by means of which all persons  participating  in the meeting can hear
each other, and such participation  shall constitute  presence in person at such
meeting.

     SECTION 2.9 Action  Without  Meeting.  Unless  otherwise  restricted by the
Certificate of Incorporation or By-Laws,  any action required or permitted to be
taken at any meeting of the Board of Directors or of any  committee  thereof may
be taken  without a meeting if all members of the Board of  Directors or of such
committee,  as the case may be,  consent  thereto in  writing  or by  electronic
transmission  and the  writing  or  writings  are  filed  with  the  minutes  of
proceedings  of the Board of Directors  or of such  committee.  Such  electronic
transmission or  transmissions  filing shall be in paper form if the minutes are
maintained  in paper form and shall be in  electronic  form if such  minutes are
maintained in electronic form.
                                       26
<PAGE>

     SECTION  2.10  Committees  of the Board.  The Board of  Directors  may,  by
resolution  passed  by the  Board  of  Directors,  designate  one or more  other
committees,  each such committee to have such name and to consist of one or more
directors as the Board of Directors  may from time to time  determine.  Any such
committee, to the extent provided in such resolution or resolutions,  shall have
and may  exercise  the powers and  authority  of the Board of  Directors  in the
management of the business and affairs of the Corporation, but no such committee
shall have such power or authority in reference to (a) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (b) adopting,  amending or
repealing  any  By-Law.  In the  absence  or  disqualification  of a member of a
committee,  the  member  or  members  thereof  present  at any  meeting  and not
disqualified  from voting,  whether or not he or they  constitute a quorum,  may
unanimously  appoint  another  member  of the Board of  Directors  to act at the
meeting in the place of any such absent or disqualified member.

     SECTION 2.11 Compensation.  No director shall receive any stated salary for
such  person's  services as a director  or as a member of a committee  but shall
receive  such  sum,  if any,  as may from  time to time be fixed by the Board of
Directors.

                                  ARTICLE III

                                    OFFICERS

     SECTION 3.1 Election;  Qualification. The officers of the Corporation shall
consist of a  President,  a  Secretary  and a  Treasurer,  each of whom shall be
elected by the Board of  Directors.  The Board of Directors may elect a Chairman
of the Board, one or more Vice Presidents, or Controller,  one or more Assistant
Secretaries, one or more Assistant Treasurers, one or more Assistant Controllers
and such  other  officers  as it may from time to time  determine.  The Board of
Directors  shall also determine  which of the officers shall hold the offices of
Chief Executive Officer and Chief Financial Officer.  Any officer other than the
Chairman  of the  Board  may,  but is not  required  to,  be a  director  of the
Corporation. Two or more offices may be held by the same person.

     SECTION 3.2 Term of Office. Each officer shall hold office from the time of
such  person's  election and  qualification  to the time at which such  person's
successor  is elected and  qualified,  unless he shall die or resign or shall be
removed pursuant to Section 3.4 at any time sooner.

     SECTION 3.3  Resignation.  Any officer of the Corporation may resign at any
time by giving written notice of such resignation to the Board of Directors, the
Chairman of the Board,  the President or the Secretary of the  Corporation.  Any
such resignation  shall take effect at the time specified therein or, if no time
be  specified,  upon  receipt  thereof by the Board of  Directors  or one of the
above-named  officers;  and, unless  specified  therein,  the acceptance of such
resignation shall not be necessary to make it effective.

                                       27
<PAGE>

     SECTION  3.4  Removal.  Any  officer  may be removed  at any time,  with or
without cause, by the vote of the Board of Directors.

     SECTION  3.5  Vacancies.  Any vacancy  however  caused in any office of the
Corporation may be filled by the Board of Directors.

     SECTION 3.6 Compensation. The compensation of each officer shall be such as
the Board of Directors may from time to time determine.

     SECTION 3.7 Duties of Officers.  Officers of the Corporation shall,  unless
otherwise  determined by the Board of Directors,  have such powers and duties as
generally pertain to their respective offices, as well as such powers and duties
as may be set forth in the  By-Laws or as may from time to time be  specifically
conferred or imposed by the Board of Directors.

                                   ARTICLE IV

                                  CAPITAL STOCK

     SECTION 4.1 Stock Certificates. The interest of each holder of stock of the
Corporation  shall be evidenced by a certificate or certificates in such form as
the Board of Directors may from time to time prescribe.  Each certificate  shall
be signed by, or in the name of, the  Corporation  by the Chairman of the Board,
the President or a Vice President and by the Treasurer or an Assistant Treasurer
or the  Secretary  or an  Assistant  Secretary.  Any of or  all  the  signatures
appearing  on  such  certificate  or  certificates  may be a  facsimile.  If any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been  placed  upon a  certificate  shall  have  ceased  to be such  officer,
transfer agent or registrar before such certificate is issued,  it may be issued
by the  Corporation  with the same effect as if such  person were such  officer,
transfer agent or registrar at the date of issue.

     SECTION 4.2 Transfer of Stock. Shares of stock shall be transferable on the
books  of the  Corporation  pursuant  to  applicable  law  and  such  rules  and
regulations as the Board of Directors shall from time to time prescribe.

     SECTION 4.3  Redemption  of Stock.  Any stock of any class or series may be
made subject to redemption by the  Corporation at its option or at the option of
the  holders of such stock upon the  happening  of a specified  event;  provided
however,  that immediately  following any such redemption the Corporation  shall
have  outstanding  one or more shares of one or more classes or series of stock,
which share, or shares together, shall have full voting powers.

     SECTION 4.4 Holders of Record. Prior to due presentment for registration of
transfer the  Corporation may treat the holder of record of a share of its stock
as  the  complete  owner  thereof  exclusively  entitled  to  vote,  to  receive
notifications and otherwise  entitled to all the rights and powers of a complete
owner thereof, notwithstanding notice to the contrary.

                                       28
<PAGE>

     SECTION  4.5  Lost,  Stolen,  Destroyed  or  Mutilated  Certificates.   The
Corporation  shall  issue a new  certificate  of stock to replace a  certificate
theretofore  issued by it  alleged to have been lost,  destroyed  or  wrongfully
taken,  if  the  owner  or  such  owner's  legal   representative  (a)  requests
replacement,  before the Corporation  has notice that the stock  certificate has
been  acquired  by a bona fide  purchaser;  (b)  unless  the Board of  Directors
otherwise determines,  files with the Corporation a bond sufficient to indemnify
the Corporation  against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such stock certificate or the issuance
of any such new  stock  certificate;  and (c)  satisfies  such  other  terms and
conditions as the Board of Directors may from time to time prescribe.

                                   ARTICLE V

                                  MISCELLANEOUS

     SECTION 5.1  Indemnification.  The Corporation shall, to the fullest extent
permitted by the DGCL,  as the same may be amended and  supplemented,  indemnify
any and all persons  whom it shall have power to  indemnify  under said  statute
from and  against  any and all of the  expenses,  liabilities  or other  matters
referred to in or covered by said statute, and the indemnification  provided for
herein shall not be deemed exclusive of any other rights to which any person may
be  entitled  under  any  By-Law,  resolution  of  shareholders,  resolution  of
directors,  agreement,  or otherwise,  as permitted by said statute,  both as to
action in such person's  official  capacity and as to action in another capacity
while holding such office,  and shall  continue as to a person who has ceased to
be a director,  officer, employee or agent and shall inure to the benefit of the
heirs,  executors and  administrators of such person.  This Section 5.1 shall be
construed to give the Corporation the broadest power permissible by the DGCL, as
it now stands and as from time to time amended.

     SECTION  5.2  Waiver  of  Notice.   Whenever  notice  is  required  by  the
Certificate  of  Incorporation,  the  By-Laws or any  provision  of the DGCL,  a
written  or  electronically  transmitted  waiver  thereof,  signed by the person
entitled to notice,  whether  before or after the time required for such notice,
shall be deemed equivalent to notice.  Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting,  except when the person attends a
meeting for the express  purpose of objecting,  at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.  Neither  the  business to be  transacted  at, nor the purpose of, any
regular  or  special  meeting  of the  stockholders,  directors  or members of a
committee of directors need be specified in any written waiver of notice.

     SECTION 5.3 Fiscal Year. The fiscal year of the Corporation  shall start on
such date as the Board of Directors shall from time to time prescribe.

     SECTION 5.4 Corporate Seal. The corporate seal shall be in such form as the
Board of Directors may from time to time prescribe,  and the same may be used by
causing it or a  facsimile  thereof to be  impressed  or affixed or in any other
manner reproduced.

                                   ARTICLE VI

                              AMENDMENT OF BY-LAWS

     SECTION 6.1 Amendment.  The By-Laws may be altered,  amended or repealed by
the stockholders and, if permitted by the Certificate of  Incorporation,  by the
Board of Directors.




                                       29
<PAGE>
                                                                    Exhibit 4.1

                           CERTIFICATE OF DESIGNATION

                                       OF

                            SERIES A PREFERRED STOCK

                                       OF

                                WATER CHEF, INC.



     Pursuant to Section 141 (f) of the Delaware General  Corporation Law, Water
Chef, Inc., a Delaware corporation (the  "Corporation"),  does hereby certify as
follows:

     1.  The  following  resolution  was  duly  adopted  by a  majority  of  the
Shareholders of the Corporation on September 8, 1993:

         RESOLVED,  that there be created a series of the Preferred Stock, par
value $.001 per  share,  of this  Corporation  consisting  of  400,000  shares,
to be designated as the Series A Preferred  Stock  ("Series A Preferred
Stock"),  and that  the  holders  of such  shares  shall  have  the  rights,
preferences  and privileges set forth on Exhibit A to this Resolution; and it
was further

         RESOLVED, that the officers of the corporation be, and they hereby are,
authorized and empowered to execute and file with the Secretary of State of the
State of Delaware, a certificate of designation setting forth the rights,
preferences and privileges of the holders of the Series A Preferred Stock and to
make such other filings as may be required by any jurisdiction in which the
Corporation may be authorized to do business.

     2. Set forth as Exhibit A to this  Certificate of Designation is a true and
correct copy of the rights,  preferences  and  privileges  of the holders of the
Series A Preferred Stock.

         IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its Chairman and its Secretary this 11th day of January, 1994.



                                /s/ C. Gus Grant
                                C. Gus Grant, Chairman



ATTEST: /s/ August A. Perry
            August A. Perry, Secretary


                                       30
<PAGE>



                                    EXHIBIT A

     The  designation  of, the number of shares  constituting,  and the  rights,
preferences,  privileges  and  restrictions  relating  to the Series A Preferred
Stock are as follows:

     1.  Designation  and Number of Shares.  The  designation  of this series of
400,000  shares of Preferred  Stock,  par value $.001 per share,  created by the
Board of Directors of the Corporation pursuant to the authority granted to it by
the  Certificate of  Incorporation  of the  Corporation,  is "Series A Preferred
Stock." In the event that the  Corporation  does not issue the maximum number of
shares of Series A Preferred  Stock,  the corporation may, from time to time, by
resolution  of the Board of  Directors,  reduce the number of shares of Series A
Preferred Stock  authorized,  provided,  that no such reduction shall reduce the
number of authorized  shares to a number which is less than the number of shares
of Series A  Preferred  Stock  then  issued.  The  number of shares by which the
Series A  Preferred  Stock is reduced  shall have the status of  authorized  but
unissued shares of Preferred Stock,  without designation as to series until such
stock  is  once  more  designated  as  part  of  a  particular   series  by  the
Corporation's Board of Directors.

     2. Dividend Rights.

     (a)  Holders of shares of Series A  Preferred  Stock  shall be  entitled to
receive, when and as declared by the Board of Directors,  dividends at an annual
rate of one Dollar ($1.00) per share (equal to 10% of the $10.00  purchase price
per  Series A  Preferred  Share on  original  issuance)  (i) out of funds of the
Corporation  legally available  therefor,  or (ii) in the whole number of Shares
based on the "current  market price" per share of the Common stock.  The current
market  price shall be deemed to be the average of the daily  closing bid prices
for the five (5)  consecutive  trading days commencing such number of days prior
to  (but  not  including)  the  dividend  payment  date,  computed  pursuant  to
4(d)(iii)(B),  as if such shares had been  purchased for cash using the dividend
amount per share payable to the holder of the Preferred  Stock on the applicable
dividend payment date. If less than one (1) whole share is issuable based on the
foregoing  computation,  the dividend  shall be paid in cash.  Any  fractions of
shares in excess of whole shares shall be paid in cash. No fractional  shares or
scrip  shall be issued,  subject to the  provisions  of  Paragraph  2(c) of this
Certificate of  Designation.  The  Corporation  may retain a firm of independent
public  accountants  of recognized  standing  selected by the Board of Directors
(who may be the regular  accountants  employed by the  Corporation)  to make any
calculation  required by this paragraph  2(a), and a certificate  signed by such
firm  shall be  conclusive  evidence  of the  correctness  of such  calculation.
Dividends shall be payable as follows:  For the period ending December 31, 1994,
the dividend payment date shall be December 31, 1994; dividends thereafter shall
be paid in quarterly  installments  on the dividend  payment  dates  hereinafter
redefined. Dividend payment dates subsequent to December 31, 1994 shall be March
31, June 30,  September 30, and December 31, of each year  commencing  March 31,
1995.  Dividends  shall be payable on the dividend  payment  dates to holders of
Series A  Preferred  stock of record on the first day of the month in which such
dividend payment date occurs. Each quarterly period ending on a dividend payment
date is referred to as a "dividend  period." Dividends on the Series A Preferred
Stock shall be fully cumulative and accrue, with respect to each share of Series
A  Preferred  Stock,  from the date such  share of Series A  Preferred  Stock is
originally issued.

                                       31
<PAGE>

     (b) The  amount  of any  dividends  "accrued"  on any  share  of  Series  A
Preferred Stock at any,  dividend  payment date shall be deemed to be the amount
of any unpaid  dividends  accumulated  thereon to and  including  such  dividend
payment  date,  whether or not earned or declared,  and the account of dividends
"accrued"  on any share of Series A  Preferred  Stock at any date  other  than a
dividend  payment date shall be calculated as the amount of any unpaid dividends
accumulated  thereon to and including the last preceding  dividend payment date,
whether or not earned or declared, plus an amount calculated on the basis of the
annual  dividend  rate set forth in  paragraph 2 (a),  above,  per share for the
period after such last preceding dividend payment date to and including the date
as of which the  calculation  is made,  based on a three hundred sixty (360) day
year of twelve (12) months, each having thirty (30) days.

     (c) So long as any shares of Series A Preferred Stock shall be outstanding,
no class or series of capital stock shall be established that ranks senior to or
on a parity  with,  the Series A Preferred  Stock with respect to the payment of
dividends.  Except as provided in this Certificate of Designation,  no dividends
shall be declared or paid or set aside for payment on any shares of Common Stock
or any other classes or series of capital  stock ranking  junior to the Series A
Preferred  Stock as to dividends for any dividend  period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for payment thereof is set aside for such payment on the Series A
Preferred Stock for all dividend periods terminating on or prior to the dividend
payment date of such dividends on any such aeries or class. Holders of shares of
Series A Preferred  Stock shall not be entitled to  dividends  thereon,  whether
payable in cash,  property or stock, in excess of the full cumulative  dividends
thereon, as provided in this Certificate of Designation.

     (d) So long as any shares of Series A Preferred Stock shall be outstanding,
no class or series of capital stock shall be established  that rank senior to or
on a parity  with,  the Series A Preferred  Stock in the event of  voluntary  or
involuntary dissolution, liquidation or winding up, and no distribution shall be
declared or made upon any junior  series or class of capital  stock in the event
of voluntary and  involuntary  dissolution,  liquidation  or winding up shall be
redeemed,   purchased  or  otherwise  acquired  for  any  consideration  by  the
Corporation  or by any subsidiary  (which shall mean any  corporation or entity,
the  majority of voting power to elect  directors  of which is held  directly or
indirectly by the  Corporation),  except by conversion  into or exchange for any
such junior series or class of capital  stock;  unless,  in each case,  the full
cumulative dividends on all outstanding shares of Series A Preferred Stock shall
have been paid in full for all past dividend  periods or unless the holders of a
majority of the Series A Preferred Stock then outstanding shall consent thereto.

     3. Voting Rights.

     (a)  Holders  of shares of Series A  Preferred  Stock  shall  have the same
voting rights in respect  thereof as are accorded to the holders of common Stock
of  the  Corporation  pursuant  to  the  Amended  and  Restated  Certificate  of
Incorporation  of the  Corporation  and by law and shall  exercise  such  voting
rights with the holders of such Common  Stock and not as a class,  except as set
forth in Paragraph 3(b) below.

                                       32
<PAGE>

     (b) Unless the vote of the holders of a greater  number of shares of Series
A Preferred Stock shall be then required by law, the consent of the holders of a
majority  of the  shares of Series A  Preferred  Stock at the time  outstanding,
given in person or by proxy by a vote at a meeting  called  for such  purpose or
given by written consent signed by the holders of the number of shares of Series
A Preferred  Stock  required for approval,  voting or giving consent as a single
class,  shall  be  necessary  for  authorizing,   effecting  or  validating  the
amendment,  alteration  or repeal of any of the  provisions  of the  Amended and
Restated  Certificate of Incorporation  or any amendment  thereto or restatement
thereof  (including any Certificate of Designation or similar document  relating
to the Series A Preferred  Stock) which  affects or would affect  adversely  the
preferences,  rights,  powers or privileges of the holders of shares of Series A
Preferred Stock. The Corporation is not restricted from creating other series of
Preferred  Stock which may be senior or junior to or on a parity with the Series
A  Preferred   stock  as  to  dividends   and/or  on  voluntary  or  involuntary
dissolution, liquidation or winding up without the consent of the holders of the
Series A Preferred Stock.

     4. Right of Corporation to Redeem or Call the Series A Preferred Stock.

     (a) Anything  contained in this  Certificate of Designation to the contrary
notwithstanding,  the  Corporation  shall  have the  right to redeem or call the
Series A Preferred Stock then  outstanding,  at any time, and from time to time,
following three years from January 17, 1994, at a price of $11.00 cash per share
called or redeemed,  together with any accrued but unpaid  dividends  thereon to
and including the date of redemption (the "Redemption Price").

     (b) The  Directors of the  Corporation  shall have the right in their sole,
exclusive and absolute  discretion to determine  which,  if any, and whether pro
rata or by lot, of the shares of Series A Preferred  Stock should be redeemed or
called.

     (c)  The  Directors  of the  Corporation  shall  cause  written  notice  of
redemption to be given as set forth in (d) below, to each  registered  holder of
Series A Preferred Stock to be called or redeemed, at their respective addresses
as they appear on the records of the  Corporation,  specifying  the  certificate
numbers) of the shares to be  redeemed,  the name and address of the  Redemption
Agent, as defined below,  and the name and address of the transfer agent for the
Series A Preferred Stock. Such notice shall be mailed to said registered holders
by first class,  postage prepaid mail no later than the thirtieth day before the
date fixed for  redemption  (the  "Redemption  pate").  The notice of redemption
shall set forth the redemption  price, the date set for redemption and the place
where certificates for Series A Preferred Stock shall be delivered.

     (d) The Corporation shall appoint as its agent for the purpose of acting as
redemption  agent for the Series A  Preferred  Stock a bank or trust  company in
good standing,  organized  under the laws of the United States of America or any
jurisdiction  thereof,  and  having  capital,   surplus  and  undivided  profits
aggregating at least Twenty Million Dollars  ($20,000,000),  and may appoint any
one or more  additional  such agents which shall in each case be a bank or trust
company  in good  standing  organized  under  the laws of the  United  States of
America or of any jurisdiction thereof,  having an office or offices in the City
of  Phoenix,  or  such  other  place  as  shall  have  been  designated  by  the
Corporation,  and having capital,  surplus and undivided profits  aggregating at
least  Twenty  Million  Dollars  ($20,000,000).  Such bank or trust  company  is
hereinafter  referred to as the "Redemption  Agent."  Following such appointment
and prior to any  redemption,  the  Corporation  shall deliver to the Redemption
Agent  irrevocable  written  instructions  authorizing the Redemption  Agent, on
behalf and et the expense of the Corporation, to cause such notice of redemption
to be duly mailed as above provided as soon as practicable after receipt of such
irrevocable instructions and in accordance with the above provisions.  All funds
necessary for the redemption  shall be deposited  with the  Redemption  Agent in
trust at least two business days prior to the Redemption  Date, for the pro rata
benefit of the holders of the shares so called for  redemption,  so as to be and
continue to be available  therefor.  Neither  failure to mail any such notice to
one or  more  such  holders  nor any  defect  in any  notice  shall  affect  the
sufficiency of the proceedings for redemption as to other holders.

                                       33
<PAGE>

     (e) If notice of redemption shall have been given as hereinbefore provided,
and the  Corporation  shall not default in the payment of the Redemption  Price,
then each  holder of shares  called  for  redemption  shall be  entitled  to all
preferences and relative and other rights accorded by this resolution  until and
including  the date  prior to the  Redemption  Date.  If the  Corporation  shall
default in making payment or delivery as aforesaid on the Redemption  Date, then
each  holder of the  shares  called  for  redemption  shall be  entitled  to all
preferences and relative and other rights accorded by this resolution  until and
including  the date prior to the date (the  "Final  Redemption  Date")  when the
corporation  makes  payment  or  delivery  as  aforesaid  to the  holders of the
Preferred Stock. From and after the Redemption Date or, if the Corporation shall
default in making payment or delivery as aforesaid,  the final  Redemption Date,
the shares called for  redemption  shall no longer be deemed to be  outstanding,
and all rights of the holders of such shares shall cease and  terminate,  except
the  right  of the  holders  of such  shares,  upon  surrender  of  certificates
therefor,  to receive  amounts to be paid  hereunder.  The deposits of monies in
trust  with  the  Redemption  Agent.   shall  be  irrevocable  except  that  the
Corporation  shall be entitled to receive from the Redemption Agent the interest
or other earnings,  if any, earned on any monies so deposited in trust,  and the
holders of any shares  redeemed  shall have no claim to such  interest  or other
earnings, if any, earned on any monies so deposited in trust, and the holders of
any shares redeemed shall have no claim to such interest or other earnings,  and
any balance of monies so  deposited  by the  Corporation  and  unclaimed  by the
holders of the Preferred  stock  entitled  thereto at the  expiration of two (2)
years from the  Redemption  Date (or the Final  Redemption  Date, as applicable)
shall be repaid,  together with any interest or other earnings  thereon,  to the
Corporation, and after any such repayment, the holders of the shares entitled to
the funds so repaid to the  Corporation  shall look only to the  Corporation for
such payment, without interest.

     5. Liquidation Rights.

     (a) In the  event of the  liquidation,  dissolution  or  winding  up of the
Corporation, whether voluntary or involuntary, holders of the Series A Preferred
Stock shall be entitled to receive out of the assets of the  Corporation the sum
of $10.00 per share of Series A  Preferred  Stock then  outstanding,  plus a sum
equal to all  dividends  (whether  or not  earned or  declared)  on such  shares
accrued and unpaid thereon to the date of final payment or distribution,  before
any payment or distribution upon dissolution, liquidation or winding up shall be
made on any  series  or  class of  capital  stock  ranking  junior  to  series A
Preferred Stock as to such payment or distribution.

                                       34
<PAGE>

     (b) The sale, conveyance,  exchange or transfer (for cash, shares of stock,
securities or other  consideration)  of all or substantially all of the property
and  assets  of  the  Corporation  shall  be  deemed  a  voluntary  dissolution,
liquidation or winding up of the  corporation  for purposes of this Paragraph 5.
The  merger  or  consolidation  of  the  Corporation  into  or  with  any  other
corporation or the merger or consolidation of any other corporation into or with
the Corporation, shall not be deemed to be a dissolution, liquidation or winding
up,  voluntary or  involuntary,  for the purposes of this Paragraph 5; provided,
however,  that the  merger or  consolidation  of the  Corporation  into  another
corporation  shall be  deemed  to be a  voluntary  dissolution,  liquidation  or
winding up of the  Corporation  for the  purposes  of this  Paragraph  5, unless
either (i) the  holders of all shares of Series A  Preferred  Stock  outstanding
upon the  effectiveness  of such merger or  consolidation  shall have the right,
upon such  effectiveness,  to receive for each share of Series A Preferred stock
held by them  upon  such  effectiveness,  one  share of  Preferred  Stock of the
resulting  or  surviving  corporation,  which share  shall  have,  to the extent
practicable, dividend and voting rights and rights upon dissolution, liquidation
or winding up reasonably equivalent to those of such share of Series A Preferred
Stock,  and shall have the right to convert such share of  Preferred  Stock into
the number of shares of stock or other  securities or property  receivable  upon
such merger or  consolidation,  as the case may be, by a holder of the number of
shares of Common  Stock into which  such share of Series A  Preferred  Stock was
convertible  immediately  prior to such  merger  or  consolidation,  or (ii) the
merger or consolidation  was approved by the holders of a majority of the shares
of Series A  Preferred  Stock  then  outstanding  either  at a  meeting  of such
stockholders or by a written consent in lieu of a meeting.

     (c) After the payment in cash to the holders of Series A Preferred Stock of
the full  preferential  amounts in the amounts  which have been fixed hereby for
the shares of Series A Preferred Stock, such holders as such shall have no right
or claim to any of the remaining assets of the Corporation.

     (d) In the event the assets of the Corporation  available for  distribution
to the  holders  of  shares  of  Series  A  Preferred  Stock  upon  dissolution,
liquidation or winding up of the Corporation,  whether voluntary or involuntary,
shall be  insufficient  to pay in full all  amounts  to which such  holders  are
entitled pursuant to Paragraph 5(a) of this certificate of Designation,  no such
distribution shall be made on account of any shares of any other class or series
of  capital  stock of the  Corporation  ranking  on a parity  with the shares of
Series A Preferred Stock upon such dissolution, liquidation or winding up unless
proportionate  distributive  amounts  shall be paid on  account of the shares of
Series A Preferred  Stock,  ratably,  in  proportion  to the full  distributable
amounts for which  holders of all such parity shares are  respectively  entitled
upon such dissolution, liquidation or winding up.

     (e) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of Series A Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the  Corporation  available for  distribution to
its  stockholders  all amounts to which such  holders are  entitled  pursuant to
Paragraph 4(a) of this  Certificate  of Designation  before any payment shall be
made to the  holders of any class of capital  stock of the  corporation  ranking
junior upon liquidation to Series A Preferred Stock.

     6. Bank of Series.  For purposes of this  certificate of  Designation,  any
stock of any series or class of the  Corporation  shall be deemed to rank junior
to shares of  Series A  Preferred  Stock as to  dividends  or upon  liquidation,
dissolution  car winding up, as applicable,  if such class shall be Common Stock
or if the  holders of shares of Series A  Preferred  Stock  shall be entitled to
receipt of dividends or of amounts  distributable upon dissolution,  liquidation
or winding up of the  Corporation,  as applicable,  in preference or priority to
the holders of shares of such class or classes.

                                       35
<PAGE>

     7. No Preemptive  Rights.  No holder of the Series A Preferred Stock shall,
as such holder,  be entitled as of right to purchase or subscribe for any shares
of  stock  of the  Corporation  of any  class  or any  series  now or  hereafter
authorized or any securities  convertible into or exchangeable for any shares or
any  warrants,  options,  rights  or  other  instruments  evidencing  rights  to
subscribe  for or purchase  any such shares,  whether  such shares,  securities,
warrants,  options,  rights or other  instruments  be  unissued  or  issued  and
thereafter acquired by the Corporation.

     8. "Piggy-back" Registration Rights.

     (a) When the Corporation files its first  registration  statement  (defined
herein to include a Notification  under  Regulation A and the Offering  Circular
included  therein)  under the Act at any time  after  January  17,  1994,  which
relates  to a current  offering  of  securities  of the  Corporation  (except in
connection  with an offering to  employees,  a stock option or employee  benefit
plan,  an  exchange  offer or an  offer to  acquire  assets)  such  registration
statement and the prospectus included therein shall also, at the written request
to the Corporation by the holder(s) of Common Stock of the Corporation  received
as dividends on the Series A Preferred Stock (hereinafter referred to as "Common
Stock"),  include such Common Stock in such registration  statement and meet the
requirements of the Act with respect to the public offering of such Common Stock
so as to permit the public  sale.  of such Common Stock in  compliance  with the
Act. The  Corporation  shall give written notice to the holder(s) of such Common
Stock  (hereinafter  referred to collectively as "Holder(s)" of its intention to
file a registration  statement  under the Act relating to a current  offering of
the Common Stock of the Corporation, sixty (60) or more days prior to the filing
of such  registration  statement,  and the written  request  provided for in the
first sentence of this subsection  shall be made by the Holder(s) thirty (30) or
more days prior to the date  specified  in the notice as the date on which it is
intended to file such  registration  statement.  Any such  request by  Holder(s)
shall  include  only shares of Common stock into which such  Holder(s)  Series A
Preferred Stock received or were then accrued and payable as a dividend thereon.
Neither the  delivery of such notice by the  corporation  nor of such request by
the  Holder(s)   shall  in  any  way  obligate  the  Corporation  to  file  such
registration  statement  and  notwithstanding  the  filing of such  registration
statement, the Corporation may, at any time prior to the effective date thereof,
determine  not to offer the  securities  to which  such  registration  statement
relates,  without liability to the Holder(s),  except that the Corporation shall
pay such expenses as are  contemplated to be paid by it under  subsection (d) of
this Section.

     Notwithstanding  anything contained in this subsection (a) to the contrary,
if any  underwriter  who is proposing  to offer to the public the  Corporation's
Common Stock should object to and fail to proceed with the offering  because all
of the Common  Stock is proposed to be included in the  registration  statement,
the  Corporation  may proceed with the offering  either  including the number of
shares which the  underwriter  will agree to include pro rata among those shares
of Common Stock for which  registration  is requested or none if the underwriter
refuses to proceed if any such  shares are  included,  without  registering  the
Common Stock; provided,  however, the Corporation can legally file and does file
a post-effective  amendment to such registration statement,  with the consent of
said  underwriter,  within  ninety  (90)  days  of the  effective  date  of such
registration statement,  allowing the selling stockholders to sell the remaining
balance,  or all,  as the case may be, of their  Common  Stock  pursuant to such
registration statement.

                                       36
<PAGE>

     (b) In each instance in which  pursuant to subsection  (a) of this Section,
the  Corporation  shall take any action to permit a public  offering  or sale or
other distribution of the Common Stock, the Corporation shall:

         (1) Supply to the Holder(s) desiring to make a public distribution of
their Common Stock and to John MaGee and Co., two executed copies of each
registration statement or Notification and a reasonable number of copies of the
preliminary, final and other prospectus or offering circular in conformity with
requirements of the Act and the Rules and Regulations promulgated thereunder and
such other documents as the Holder(s) or their representative shall reasonably
request.

         (2) Cooperate in taking such action as may be necessary to register or
qualify the Common Stock under such other securities laws or blue sky laws of
such jurisdictions as the Holder(s) or their representative shall reasonably
request and to do any and all other acts and things which may be necessary or
advisable to enable the Holder(s) of such Common Stock to consummate such
proposed sale or other disposition of the common Stock in any such jurisdiction;
provided, however, the Corporation shall not be required to qualify or register
in any state or jurisdiction which would obligate any present security holder to
subject their shares of the Corporation's Common Stock to any escrow other than
such escrow as may be in effect as of the date hereof, or which would extend or
enlarge upon, any current escrow; provided, further, that in no event shall the
Corporation be obligated, in connection therewith, to quality to do business or
to file a general consent to service of process in any jurisdiction where it
shall not then be qualified.

         (3) Keep effective for a period of twenty-four (24) months after the
initial effectiveness thereof all such registrations or Notifications under the
Act and cooperate in taking such action as may be necessary to keep effective
such other registrations and qualifications, and do any and all other acts and
things for such period - not to exceed said twenty-four (24) months - as may be
necessary to permit the public sale or other disposition of such Common Stock by
such Holder(s).

         (4) Indemnify and hold harmless each such Holder(s) and each
underwriter, within the meaning of the Act, who may purchase from or sell for
any such Holder(s), any Common Stock, from and against any and all losses,
claims, damages, and liabilities (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing, defending
or settling any claim) arising from (i) any untrue or alleged untrue statement
of a material fact contained in any registration statement or Notification
furnished pursuant to clause (A) of this subsection, or any prospectus or
offering circular included therein or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (unless such untrue statement or omission
or such alleged untrue statement or omission was based upon information
furnished or required to be furnished in writing to the Corporation by such
Holder(s) or underwriter expressly for use therein), which indemnification shall
include each person, if any, who controls any such Holder (s) or underwriter
within the meaning of the Act; provided, however, each such holder, underwriter
or controlling person shall at the same time indemnify the Corporation, its
directors, each officer signing any registration statement or Notification or

                                       37
<PAGE>

any amendment to any registration statement or Notification and each person, if
any, who controls the Corporation within the meaning of the Act, from and
against any and all losses, claims, damages and liabilities (including, but not
limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing, defending or settling any claim) arising from (iii)
any untrue or alleged untrue statement of a material fact contained in any
registration statement or Notification or any amendment to any registration
statement or Notification or prospectus or offering circular furnished pursuant
to clause (1) of this subsection, or (iv) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but the indemnity of such holder,
underwriter or controlling person shall be limited to liability based upon
information furnished, or required to be furnished, in writing to the
Corporation by such holder or underwriter or controlling person expressly for
use therein. The indemnity agreement of the Corporation herein shall not inure
to the benefit of any such underwriter (or to the benefit of any person who
controls such underwriter) on account of any losses, claims, damages,
liabilities (or actions or proceedings in respect therefor) arising from the
sale of any of such Common Stock by such underwriter to any parson if such
underwriter failed to send or give a copy of the prospectus or offering circular
furnished pursuant to clause (1) of this subsection, as the same may then be
supplemented or amended (if such supplement or amendment shall have been
furnished pursuant to said clause (1)) , to such person with or prior to the
written confirmation of the sale involved.

         (c) The Corporation shall comply with the requirements of subsection
(a) of this Section and shall pay all of the expenses of the offering set forth
in subsection (a). Expenses of the offering for purposes of-this Section are
defined to be and shall include all legal, accounting, engineering, printing,
filing (including blue-sky filings) and NASD fees, out-of-pocket expenses
incurred by Corporation-retained counsel, accountants, and engineers, and
miscellaneous identified expenses. The Holder(s) selling shares of Common Stock
in the offering shall, however, pay the cost of any separate counsel engaged to
review the registration statement on behalf of or to advise the selling
shareholders and any underwriting commissions, transfer taxes and underwriter's
expense allowance attributable to the Common Stock being sold by the Holder(s),
all of which shall be borne by the Common Holder(s) selling such shares of
Common Stock.

         The Corporation's obligation under said subsection (a) hereof shall be
conditioned as to each such public offering, upon a timely receipt by the
Corporation in writing such information as the corporation may reasonably
require from such Holder(s), or any underwriter for any of them, for inclusion
in such registration statement or Notification or post-effective amendment.

                                       38
<PAGE>

         (d) The Corporation's agreements with respect to the Series A Preferred
Stock or the Common Stock in this Section will continue in effect regardless of
the payment of dividends in Common Stock on the Series A Preferred Stock.

         (e) Any notices or certificates by the Corporation to the Holder and by
the Holder to the Corporation shall be deemed delivered if in writing and sent
by certified mail, to the Holder(s) at their addresses shown on the records of
the Corporation for such Holder(s), and, if to the Corporation, addressed to it
at:

                           14555 North Scottsdale Road
                                    Suite 220
                            Scottsdale, Arizona 85254
                          Attn: C. Gus Grant, Chairman

     The Corporation may change its address by written notice to the Holder (a).

     9. Transfer Agent and  Registrar.  The  Corporation  may appoint a transfer
agent and  registrar  for the  issuance  and  transfer of the Series A Preferred
Stock and for the payment of  dividends to the holders of the Series A Preferred
Stock.

                                       39
<PAGE>


                                                                     Exhibit 4.2

                           CERTIFICATE OF DESIGNATION

                                       OF

                            SERIES C PREFERRED STOCK

                                       OF

                                 WATERCHEF, INC.


     Pursuant  to  Section  141 (f) of the  Delaware  General  Corporation  Law,
WaterChef, Inc., a Delaware corporation (the "Corporation"), does hereby certify
as follows:

     1.       The following resolution was duly adopted by the Board of
              Directors of the Corporation on September 24, 2002 :

              RESOLVED, that there be created a series of One Year 15%
              Convertible Preferred Stock, par value $.001 per share, of this
              Corporation consisting of 400,000 shares, to be designated as the
              Series C Preferred Stock ("Series C Preferred Stock"), and that
              the holders of such shares shall have the rights, preferences and
              privileges set forth on Exhibit 1 to this Resolution; and it was
              further

              RESOLVED, that the officers of the Corporation be, and they hereby
              are, authorized and empowered to execute and file with the
              Secretary of State of the State of Delaware, a certificate of
              designation setting forth the rights, preferences, and privileges
              of the Series C Preferred Stock and to make such filings as may be
              required by any jurisdiction in which the Corporation may be
              authorized to do business.

     2.       Set forth as Exhibit 1 to this Certificate of Designation is a
              true and correct copy of the rights, preferences and privileges of
              the holders of the Series C Preferred Stock.

              IN WITNESS WHEREOF, the Corporation has caused this Certificate to
              be signed by its Chairman this 24th day of September, 2002.

              --------------------
              David A. Conway, Chairman


                                       40

<PAGE>

                                                                    Exhibit 4.3



                           CERTIFICATE OF DESIGNATION

                                       OF

                            SERIES D PREFERRED STOCK

                                       OF

                                 WATERCHEF, INC.


     Pursuant  to  Section  141 (f) of the  Delaware  General  Corporation  Law,
WaterChef, Inc., a Delaware corporation (the "Corporation"), does hereby certify
as follows:

1.   The following resolution was duly adopted by the Board of Directors on
     April 15, 1996;

     RESOLVED,  that there be created a series of the Preferred Stock, par value
$.001 per  share,  of this  Corporation  consisting  of  400,000  shares,  to be
designated as the Series D Preferred  Stock  ("Series D Preferred  Stock"),  and
that  the  holders  of such  shares  shall  have  the  rights,  preferences  and
privileges set forth on Exhibit 1 to this Resolution; and it was further

     RESOLVED,  that the  officers of the  Corporation  be, and they hereby are,
authorized  and empowered to execute and file with the Secretary of State of the
State of  Delaware,  a  certificate  of  designation  setting  forth the rights,
preferences and privileges of the holders of the Series D Preferred Stock and to
make such  other  filings as may be  required  by as  jurisdiction  in which the
Corporation may be authorized to do business.

2.   Set forth as Exhibit 1 to this Certificate of Designation is a true and
     correct copy of the rights, preferences and privileges of the holders
     of the Series D Preferred Stock.

     IN WITNESS  WHEREOF,  the  Corporation  has caused this  Certificate  to be
signed by its Chairman and its Secretary this ____day of _____, 1996.


-------------------------------------
C. Gus Grant

ATTEST:
       ------------------------------

                                       41
<PAGE>



For a minimum  purchase of 3,000 units an  additional 5 shares of the  Company's
stock will be issued as  incentive  shares.  These  shares  will be subject to a
"put"  provision  whereby  between  the 20th and the end of the 23rd  month  the
shareholder  may at his/her option sell the shares back to the Company for $0.50
per share (date based on closing of the private  placement  estimated at July 1,
1996).

     RESOLVED,  that the  Corporation  reserve from the  authorized and unissued
shares of Common Stock the number of shares required to be reserved for issuance
on sale of the units;

     RESOLVED,  that the  appropriate  officers are  authorized and empowered to
execute such consents to service,  Notice on Form D under  Regulation D, and any
other instruments  required by reason of the sale of Units as aforesaid,  and to
file the same on behalf of the Corporation; and

     RESOLVED,  that the  appropriate  officers of the Corporation be and hereby
are  authorized  and  empowered  to  negotiate  and  effectuate  any  changes or
amendments to any of the forms of  instruments  attached  hereto as Exhibits and
such other and collateral documents as may be required or necessitated  pursuant
to such  Exhibits,  and to execute any and all of such  instruments on behalf of
the Corporation,  such execution to constitute the binding  agreement thereto by
the Corporation.

     IN WITNESS  WHEREOF,  the  undersigned,  being all of the  Directors of the
Corporation,  have executed this action by Unanimous  Written  Consent as of the
day of ______, 1996.

DIRECTORS:

---------------------------                          -----------------------
C. Gus Grant                                         John D. Reynolds


                                       42
<PAGE>


                                    EXHIBIT 1

The  designation  of,  the  number  of  shares  constituting,  and  the  rights,
preferences,  privileges  and  restrictions  relating  to the Series D Preferred
Stock are as follows:

1.   Designation and Number of Shares.

     The  designation of this series of 400,004 shares of Preferred  Stock,  par
value  $.00l per share,  created by the Board of  Directors  of the  Corporation
pursuant to the authority  granted to it by the Certificate of  Incorporation of
the  Corporation,  is  "Series  D  Preferred  Stock."  In the  event  that  the.
Corporation  does not issue the  maximum  number of shares of Series D Preferred
Stock,  the  Corporation  may,  from time to time, by resolution of the Board of
Directors,  reduce the number of shares of Series D Preferred Stock  authorized,
provided, that no such reduction shall reduce the number of authorized shares to
a number  which is less than the  number of shares of Series D  Preferred  Stock
then  issued.  The  number of shares by which the  Series D  Preferred  Stock is
reduced  shall have the status of  authorized  but unissued  shares of Preferred
Stock, without designation as to series until such stock is once more designated
as part of a particular series by the Corporation's Board of Directors.

2.   Dividend Rights.

     (a)  Holders of shares of Series D  Preferred  Stock  shall be  entitled to
receive, when and as declared by the Board of Directors,  dividends at an annual
rate of 0.60 per share  (equal to 12% of the 5.00  purchase  price per  Series D
Preferred  Share on  original  issuance)  (i) out of  funds  of the  Corporation
legally available therefore,  or (ii) in the whole number of Shares based on the
"current  market price" per share of the Common Stock.  The current market price
shall be deemed to be the  average of the daily  closing bid prices for the five
(5)  consecutive  trading days  commencing such number of days prior to (but not
including) the dividend payment date, computed pursuant to 4(d) (iii) (B), as if
such  shares had been  purchased  for cash using the  dividend  amount per share
payable to the holder of the Preferred Stock on the applicable  dividend payment
date.  If less  than one (1)  whole  share is  issuable  based on the  foregoing
computation,  the dividend shall be paid in cash. No fractional  shares or scrip
shall  be  issued,  subject  to  the  provisions  of  Paragraph  2 (c)  of  this
Certificate of  Designation.  The  Corporation  may retain a firm of independent
public  accountants  of recognized  standing  selected by the Board of Directors
(who may be the regular  accountants  employed by the  Corporation)  to make any
calculation  required by this paragraph 2 (a), and a certificate  signed by such
firm  shall be  conclusive  evidence  of the  correctness  of such  calculation.
Dividends shall be payable as follows:  For the period ending December 31, 1996,
the dividend payment date shall be December 31, 1996; dividends thereafter shall
be paid in semi-annual  installments on the dividend  payment dates  hereinafter
defined.  Dividend  payment dates  subsequent to December 31, 1996 shall be June
30, and December 31, of each year commencing December 31, 1996.  Dividends shall
be payable on the dividend  payment dates to holders of Series D Preferred Stock
of record on the first day of the  month in which  such  dividend  payment  date
occurs. Each semi-annual period ending on a dividend payment date is referred to
as a "dividend period." Dividends on the Series D Preferred Stock shall be fully
cumulative and accrue,  with respect to each share of Series D Preferred  Stock,
from the date such share of Series D Preferred Stock is originally issued.

     (b) The  amount  of any  dividends  "accrued"  on any  share  of  Series  D
Preferred Stock at any dividend payment date shall be deemed to be the amount of
any unpaid dividends  accumulated thereon to and including such dividend payment
date, whether or not earned or declared,  and the amount of dividends  "accrued"
on any share of  Series D  Preferred  Stock at any date  other  than a  dividend
payment  date  shall  be  calculated  as  the  amount  of any  unpaid  dividends
accumulated  thereon to and including the last preceding  dividend payment date,
whether or not earned or declared, plus an amount calculated on the basis of the
annual  dividend  rate set forth in  paragraph 2 (a),  above,  per share for the
period after such last preceding dividend payment date to and including the date
as of which the  calculation  is made,  based on a three hundred sixty (364) day
year of twelve (12) months, each having thirty (30) days.

                                       43
<PAGE>

     (c) Except as provided in this  Certificate  of  Designation,  no dividends
shall be declared or paid or set aside for payment on any shares of Common Stock
or any other classes or series of capital  stock ranking  junior to the Series D
Preferred Stock as to dividends have been or contemporaneously  are declared and
paid or declared and a sum sufficient for payment  thereof is set aside for such
payment on the Series D Preferred Stock for all dividend periods  terminating on
or prior to the dividend  payment  date of such  dividends on any such series or
class.  Holders of shares of Series D  Preferred  Stock shall not be entitled to
dividends  thereon,  whether payable in cash property or stock, in excess of the
full  cumulative   dividends  thereon,   as  provided  in  this  Certificate  of
Designation.

     (d) So long as any shares of Series D Preferred Stock shall be outstanding,
no  distribution  shall be declared  or made upon any junior  series or class of
capital stock in the event of voluntary and involuntary dissolution, liquidation
or  winding  up shall be  redeemed,  purchased  or  otherwise  acquired  for any
consideration  by the  Corporation  or by any  subsidiary  (which shall mean any
corporation or entity,  the majority of voting power to elect directors of which
is held directly or indirectly by the Corporation), except by conversion into or
exchange for any such junior series or class of capital stock;  unless,  in each
case,  the full  cumulative  dividends  on all  outstanding  shares  of Series D
Preferred  Stock shall have been paid in full for all past  dividend  periods or
unless  the  holders  of a  majority  of  the  Series  D  Preferred  Stock  then
outstanding shall consent thereto.

3.   Voting Rights

     (a)  Holders  of shares of Series D  Preferred  Stock  shall  have the same
voting rights in respect  thereof as are accorded to the holders of Common Stock
of  the  Corporation  pursuant  to  the  Amended  and  Restated  Certificate  of
Incorporation  of the  Corporation  and by law and shall  exercise  such  voting
rights with the holders of such Common  Stock and not as a class,  except as set
forth in Paragraph 3(b) below.

     (b) Unless the vote of the holders of a greater  number of shares of Series
D Preferred Stock shall be then required by law, the consent of the holders of a
majority  of the  shares of Series D  Preferred  Stock at the time  outstanding,
given in person or by proxy by a vote at a meeting  called  for such  purpose or
given by written consent signed by the holders of the number of shares of Series
D Preferred  Stock  required for approval,  voting or giving consent as a single
class shall be necessary for authorizing,  effecting or validating the amendment
alteration  or repeal  of any of the  provisions  of the  Amended  and  Restated
Certificate of  Incorporation  or any amendment  thereto or restatement  thereof
(including any  Certificate of Designation or similar  document  relating to the
Series  D  Preferred   Stock)  which  affects  or  would  affect  adversely  the
preferences,  rights,  powers or privileges of the holders of shares of Series A
Preferred Stock. The Corporation is not restricted from creating other series of
Preferred  Stock which may be senior or junior to or on a parity with the Series
D  Preferred   Stock  as  to  dividends   and/or  on  voluntary  or  involuntary
dissolution, liquidation or winding up without the consent of the holders of the
Series D Preferred Stock.

                                       44
<PAGE>

4.   Right of Corporation to Redeem or Call the Series D Preferred Stock.

     (a) Anything  contained in this  Certificate of Designation to the contrary
notwithstanding,  the  Corporation  shall  have the  right to redeem or call the
Series D Preferred Stock then  outstanding,  at any time, and from time to time,
following two years from July 1, 1996, at a price of $5.75 cash per share called
or  redeemed,  together  with any  accrued but unpaid  dividends  thereon to and
including the date of redemption (the "Redemption Price").

     (b) The  Directors of the  Corporation  shall have the right in their sole,
exclusive and absolute  discretion to determine  which,  if any, and whether pro
rata or by lot, of the shares of Series D Preferred  Stock should be redeemed or
called.

     (c)  The  Directors  of the  Corporation  shall  cause  written  notice  of
redemption to be given as set forth in (d) below, to each  registered  holder of
Series D Preferred Stock to be called or redeemed, at their respective addresses
as they appear on the records of the  Corporation,  specifying  the  certificate
number(s)  of the shares to be  redeemed,  the name and address of the  transfer
agent for the Series D  Preferred  Stock.  Such  notice  shall be mailed to said
registered  holders  by first  class,  postage  prepaid  mail no later  than the
thirteenth day before the date fixed for redemption (the "Redemption Date"). The
notice of  redemption  shall set forth the  redemption  price,  the date set for
redemption and the place where  certificates  for Series D Preferred Stock shall
be delivered.

     (d) If  notice  of  redemption  shall  have  been  given as  herein  before
provided, and the Corporation shall not default in the payment of the redemption
shall be entitled to all  preferences  and relative and other rights accorded by
this  resolution  until and including the date prior to the Redemption  Date. If
the Corporation  shall default in making payment or delivery as aforesaid on the
Redemption  Date, then each holder of the shares called for redemption  shall be
entitled to all  preferences  and  relative  and other  rights  accorded by this
resolution until and including the date prior to the date (the "Final Redemption
Date")  when the  Corporation  makes  payment or delivery  as  aforesaid  to the
holders of the Preferred  Stock.  From and after the Redemption  Date or, if the
Corporation shall default in making payment or delivery as aforesaid,  the Final
Redemption  Date, the shares called for redemption  shall no longer be deemed to
be  outstanding,  and all rights of the holders of such  shares  shall cease and
terminate,  except the right of the holders of such  shares,  upon  surrender of
certificates therefore, to receive amounts to be paid hereunder. The deposits of
moneys in trust with the Redemption  Agent shall be irrevocable  except that the
Corporation  shall be entitled to receive from the Redemption Agent the interest
or other earnings,  if any, earned on any moneys so deposited in trust,  and the
holders of any shares  redeemed  shall have no claim to such  interest  or other
earnings, if any, earned on any moneys so deposited in trust; and the holders of
any shares redeemed shall have no claim to such interest or other earnings,  and
any balance of moneys so  deposited  by the  Corporation  and  unclaimed  by the
holders of the Preferred  Stock  entitled  thereto at the  expiration of two (2)
years from the  Redemption  Date (or the Final  Redemption  Date, as applicable)
shall be repaid,  together with any interest or other earnings  thereon,  to the
Corporation, and after any such repayment, the holders of the shares entitled to
the funds so repaid to the  Corporation  shall look only to the  Corporation for
such payment, without interest,

                                       45
<PAGE>



5.   Liquidation Rights.

     (a) In the  event of the  liquidation,  dissolution  or  winding  up of the
Corporation, whether voluntary or involuntary, holders of the Series D Preferred
Stock shall have no stated rights in the assets of the  corporation.  Holders of
the Series D Preferred Stock shall be entitled to all dividends  (whether or not
earned or  declared)  on such shares  accrued and unpaid  thereon to the date of
final  payment  of  distribution,   before  any  payment  or  distribution  upon
dissolution,  liquidation  or winding up shall be made on any series or class of
capital stock ranking  junior to Series D Preferred  Stock as to such payment or
distribution.

     (b) The sale,  conveyance,  exchange or transfer (for cash shares of stock,
securities or other  consideration)  of all or substantially all of the property
and  assets  of  the  Corporation  shall  be  deemed  a  voluntary  dissolution,
liquidation or winding up of the  Corporation  for purposes of this Paragraph 5.
The  merger  or  consolidation  of  the  Corporation  into  or  with  any  other
corporation or the merger or consolidation of any other corporation into or with
the Corporation, shall not be deemed to be a dissolution, liquidation or winding
up,  voluntary or  involuntary,  for the purposes of this Paragraph 5; provided,
however,  that the  merger or  consolidation  of the  Corporation  into  another
corporation  shall be  deemed  to be a  voluntary  dissolution,  liquidation  or
winding up of the  Corporation  for the  purposes  of this  Paragraph  5, unless
either (i) the  holders of all shares of Series D  Preferred  Stock  outstanding
upon the  effectiveness  of such merger or  consolidation  shall have the right,
upon such  effectiveness,  to receive for each share of Series D Preferred Stock
held by them  upon  such  effectiveness,  one  share of  Preferred  Stock of the
resulting  or  surviving  corporation,  which share  shall  have,  to the extent
practicable, dividend and voting rights and rights upon dissolution, liquidation
or winding up reasonably equivalent to those of such share of Series D Preferred
Stock,  or (ii) the merger or  consolidation  was  approved  by the holders of a
majority of the shares of Series D Preferred Stock then outstanding  either at a
meeting of such stockholders or by a written consent in lieu of a meeting.

     (c) In the event the assets of the Corporation  available for  distribution
to the  holders  of  shares  of  Series  D  Preferred  Stock  upon  dissolution,
liquidation or winding up of the Corporation,  whether voluntary or involuntary,
shall be  insufficient  to pay in full all  amounts  to which such  holders  are
entitled pursuant to Paragraph 5(a) of thus Certificate of Designation,  no such
distribution shall be made on account of any shares of any other class or series
of  capital  stock of the  Corporation  ranking  on a parity  with the shares of
Series D Preferred Stock upon such dissolution, liquidation or winding up unless
proportionate  distributive  amounts  shall be paid on  account of the shares of
Series D Preferred  Stock,  ratably,  in  proportion  to the full  distributable
amounts for which  holders of all such parity shares are  respectively  entitled
upon such dissolution, liquidation or winding up.

     (d) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of Series D Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation  available for such distribution
to its stockholders  all amounts to which such holders are entitled  pursuant to
Paragraph 4(a) of this  Certificate  of Designation  before any payment shall be
made to the  holders of any class of capital  stock of the  corporation  ranking
junior upon liquidation to Series D Preferred Stock.

                                       46
<PAGE>



6.   Rank of Series

For  purposes of this  Certificate  of  Designation,  any stock of any series or
class of the  Corporation  shall be deemed to rank  junior to shares of Series D
Preferred Stock as to dividends or upon liquidation,  dissolution or winding up,
as  applicable,  if such class shall be Common Stock or if the holders of shares
of Series D Preferred  Stock shall be  entitled  to receipt of  dividends  or of
amounts  distributable  upon  dissolution,  liquidation  or  winding  up of  the
Corporation,  as applicable,  in preference or priority to the holders of shares
of such class or classes.

7.   No Preemptive Rights.

No holder of the Series D Preferred Stock shall, as such holder,  be entitled as
of right to purchase or subscribe for any shares of stock of the  Corporation of
any  class  or  any  series  now  or  hereafter  authorized  or  any  securities
convertible into or exchangeable for any shares or any warrants, options, rights
or other  instruments  evidencing  rights to subscribe  for or purchase any such
shares,  whether such shares,  securities,  warrants,  options,  rights or other
instruments be unissued or issued and thereafter acquired by the Corporation.

8.   "Piggy-back" Registration Rights.

     (a) When the Corporation files its first  registration  statement  (defined
herein to include a Notification  under  Regulation A and the Offering  Circular
included  therein) under the Act at any time after March 31, 1996, which relates
to a current  offering of  securities of the  Corporation  (except in connection
with an offering to  employees,  a stock  option or employee  benefit  plan,  an
exchange offer or an offer to acquire  assets) such  registration  statement and
the  prospectus  included  therein  shall also,  at the  written  request to the
Corporation  by the  holder(s)  of Common Stock of the  Corporation  received as
dividends on the Series D Preferred  Stock  (hereinafter  referred to as "Common
Stock"),  include such Common Stock in such registration  statement and meet the
requirements of the Act with respect to the public offering of such Common Stock
in compliance  with the Act. The  Corporation  shall give written  notice to the
holder(s)  of  such  Common  Stock  (hereinafter  referred  to  collectively  as
"Holder(s)"  of its  intention to file a  registration  statement  under the Act
relating to a current  offering of the Common  Stock of the  Corporation,  sixty
(60) or more days prior to the filing of such  registration  statement,  and the
written request  provided for in the first sentence of this subsection  shall be
made by the  Holder(s)  thirty (30) or more days prior to the date  specified in
the  notices  the  date  on  which  it is  intended  to file  such  registration
statement.  Any such  request by Holder(s)  shall  include only shares of Common
Stock into which such Holder(s)  Series A Preferred  Stock received or were then
accrued and payable as a dividend  thereon.  Neither the delivery of such notice
by the  Corporation  nor of  such  request  by the  Holder(s)  shall  in any way
obligate the Corporation to file such registration statement and notwithstanding
the filing of such  registration  statement,  the  Corporation  may, at any time
prior to the effective  date thereof,  determine not to offer the  securities to
which such registration  statement relates,  without liability to the Holder(s),
except that the  Corporation  shall pay such expenses as are  contemplated to be
paid by it under subsection (d) of this Section.

     Notwithstanding  anything contained in this subsection (a) to the contrary,
if any  underwriter  who is proposing  to offer to the public the  Corporation's
Common Stock should object to and fail to proceed with the offering  because all
of the Common  Stock is proposed to be included in the  registration  statement,
the  Corporation  may proceed with the offering  either  including the number of
shares which the  underwriter  will agree to include pro rata among those shares
of Common Stock for which  registration  is requested or none o the  underwriter
refuses to proceed if any such  shares are  included,  without  registering  the
Common Stock; provided,  however, the Corporation can legally file and does file
a post-effective  amendment to such registration statement,  with the consent of
said  underwriter,  within  ninety  (90)  days  of the  effective  date  of such
registration statement,  allowing the selling stockholders to sell the remaining
balance,  or all, as the case may be, of their.  Common  Stock  pursuant to such
registration statement.

                                       47
<PAGE>


     (b) In each instance in which  pursuant to subsection  (a) of this Section,
the  Corporation  shall take any action to permit a public  offering  or sale or
other distribution of the Common Stock, the Corporation shall:

         (1)  Cooperate in taking such action as may be necessary to register or
qualify the Common  Stock under such other  securities  laws or blue sky laws of
such  jurisdiction  as the  Holders) or their  representative  shall  reasonably
request and to do any and all other acts and things  which may be  necessary  or
advisable  to enable the  Holder(s)  of such  Common  Stock to  consummate  such
proposed sale or other disposition of the Common Stock in any such jurisdiction;
provided,  however, the Corporation shall not be required to qualify or register
in any state or subject  their shares of the  Corporation's  Common Stock to any
escrow  other  than such  escrow as may be in effect as of the date  hereof,  or
which would extend or enlarge upon any current escrow;  provided,  further, that
in no event shall the Corporation be obligation connection therewith, to qualify
to do  business  or to file a general  consent  to  service  of  process  in any
jurisdiction where it shall not then be qualified.

         (3) Keep effective for a period of twenty-four (24)  months  after the
initial  effectiveness thereof all such registrations or Notifications under the
Act and  cooperate in taking such action as may be  necessary to keep  effective
such other registrations and  qualifications,  and do any and all other acts and
things for such period - not to exceed said  twenty-four (24) months - as may be
necessary to permit the public sale or other disposition of such Common Stock by
such Holder(s).

         (4) Indemnify and hold harmless each such Holder(s) and each under-
writer, within  the  meaning  of the  Act,  who may  purchase  from or sell for
any such Holder(s),  any Common  Stock,  from and  against  any and all  losses,
claims, damages,  and liabilities  (including,  but not limited to, any and all
expenses whatsoever  reasonably  incurred  in  investigating,   preparing,
defending or settling any claim) arising from (i) any untrue or alleged untrue
statement of a material fact contained in any registration  statement or
Notification furnished pursuant  to  clause  (A) of this  subsection,  or any
prospectus  or  offering circular  included  therein or (ii) any  omission  or
alleged  omission to state therein a material fact  required to be stated
therein or necessary to make the statements  therein not misleading  (unless
such untrue statement or omission or such alleged untrue statement or omission
was based upon  information  furnished or required to be furnished in writing to
the  Corporation  by such Holder(s) or underwriter expressly for use therein),
which indemnification shall include each person,  if any, who controls any such
Holder(s) or  underwriter or controlling person shall at the same time
indemnify the  Corporation,  its  directors,  each officer signing any
registration  statement of Notification or any amendment to any registration
statement or Notification and each person, if any who controls the  Corporation
within the  meaning of the Act,  from and  against any and all losses, claims,
damages and liabilities (including,  but not limited to, any and all  expenses
whatsoever  reasonably  incurred  in  investigating,   preparing, defending or
settling any claim) arising from (iii) any untrue or alleged untrue statement
of a  material  fact  contained  in  any  registration  statement  or
Notification or any amendment to any  registration  statement or Notification or
prospectus  or  offering  circular  furnished  pursuant  to  clause  (1) of this
subsection, or (iv) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the  statements  therein
not  misleading,  but the indemnity of such holder,  underwriter  or controlling
person  shall be  limited to  liability  based upon  information  furnished,  or
required  to be  furnished,  in writing  to the  Corporation  by such  holder or
underwriter  or  controlling  person  expressly  for use therein.  The indemnity
agreement of the  Corporation  herein shall not inure to the benefit of any such
underwriter  (or to the benefit of any person who controls such  underwriter) on
account of any losses, claims,  damages,  liabilities (or actions or proceedings
in respect  therefore) arising from the sale of any of such Common Stock by such
underwriter to any person if such  underwriter  failed to send or give a copy of
the  prospectus or offering  circular  furnished  pursuant to clause (1) of this
subsection,  as the same may then be supplemented or amended (if such supplement
or amendment  shall have been  furnished  pursuant to said clause (1)),  to such
person with or prior to the written confirmation of the sale involved.

                                       48
<PAGE>

     (c) The Corporation shall comply with the requirements of subsection (a) of
this  Section  and shall pay all of the  expenses of the  offering  set forth in
subjection  (a).  Expenses of the  offering  for  purposes  of this  Section are
defined to be and shall include all legal,  accounting,  engineering,  printing,
filing  (including  blue-sky  filings)  and NASD  fees,  out-of-pocket  expenses
incurred  by  Corporation-retained  counsel,  accountants,  and  engineers,  and
miscellaneous  identified expenses. The Holder(s) selling shares of Common Stock
in the offering shall,  however, pay the cost of any separate counsel engaged to
review  the  registration  statement  on  behalf  of or to  advise  the  selling
shareholders and any underwriting commissions,  transfer taxes and underwriter's
expense allowance  attributable to the Common Stock being sold by the Holder(s),
all of which  shall be borne by the  Common  Holder(s)  selling  such  shares of
Common Stock.

         The Corporation's obligation undersaid subsection  (a) hereof shall be
conditioned  as to each  such  public  offering,  upon a timely  receipt  by the
Corporation  as to each  such  public  offering,  upon a timely  receipt  by the
Corporation  in writing  such  information  as the  Corporation  may  reasonably
require from such  Holder(s),  or any underwriter for any of them, for inclusion
in such registration statement or Notification or post-effective amendment.

     (d) The  Corporation's  agreements  with  respect to the Series B Preferred
Stock or the Common Stock in this Section will continue in effect  regardless of
the payment of dividends in Common Stock on the Series D Preferred Stock.

     (e) Any notices or certificates by the Corporation to the Holder and by the
Holder to the  Corporation  shall be deemed  delivered if in writing and sent by
certified  mail, to the Holder(s) at their addresses shown on the records of the
Corporation for such Holder(s) and, if to the Corporation, addressed to it at:

                             6625 N. Scottsdale Road
                                     Suite 2
                            Scottsdale, Arizona 85250
                           Att: C. Gus Grant, Chairman

The Corporation may change its address by written notice to the Holder(s).

         9. Transfer Agent and Registration.

         The Corporation may appoint a transfer agent and registrar for the
issuance and transfer of the Series D Preferred Stock and for the payment of
dividends to the holders of the Series D Preferred Stock.


                                       49
<PAGE>

                                                                    Exhibit 4.4

                                WARRANT NO. ____

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION STATEMENT
FILED UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  ("THE  ACT"),  SUCH STATE
SECURITIES  LAWS  AS  MAY  BE  APPLICABLE,  OR  PURSUANT  TO AN  EXEMPTION  FROM
REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.

Void after 5:00 p.m., Phoenix, Arizona March 27, 2002.

                                          Warrant to Purchase _______ Shares of
                                                                   Common Stock

                                    SERIES B

                        WARRANT TO PURCHASE COMMON STOCK

                                WATER CHEF, INC.

                  This is to Certify That, FOR VALUE RECEIVED,

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

or  registered  assigns  ("Holder"),  is  entitled to  purchase,  subject to the
provisions o(pound) this Warrant,  from WATER CHEF, INC., a Delaware corporation
("Company"),  at any time on or after  March 27,  1997,  and not later than 5:00
p.m.,  Phoenix,  Arizona,  time,  on March 27, 2002,  ________  shares of Common
Stock, $.001 par value per share, of the Company ("Common Stock"), at a purchase
price per share of $0.15.  The number of shares of Common  Stock to be  received
upon the exercise of this Warrant and the price to be paid for a share of Common
Stock may be adjusted from time to time as hereinafter  set forth.  This Warrant
may also be  redeemed  or called by the Company as  hereinafter  set forth.  The
shares of the Common Stock deliverable upon such exercise,  and as adjusted from
time to time, are hereinafter  sometimes  referred to as "Warrant Stock" and the
exercise  price of a share of Common Stock in effect at any time and as adjusted
from time to time is hereinafter  sometimes referred to as the "Exercise Price."
The price at which  this  Warrant  may be  redeemed  or  called  is  hereinafter
sometimes referred to as the "Call Price".

     (a) Exercise of Warrant.  Subject to the  provisions of Section (1) hereof,
this  Warrant may be  exercised  in whole or in part at any time or from time to
time on or after the date  hereof',  unless  the date of  exercise  is a date on
which banking  institutions  are  authorized  by law to close,  then on the next
succeeding day which shall not be such a day, by  presentation  and surrender of
this Warrant  Certificate  to the Company with the Purchase Form annexed  hereto
duly executed and accompanied by payment of the Exercise Price for the number of
shares  specified  in such  form,  together  with all  federal  and state  taxes
applicable upon such exercise. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation,  execute and
deliver a new Warrant evidencing the right of the holder to purchase the balance
of the shares purchasable hereunder. Upon receipt by the Company of this Warrant
at the office of the  Company,  in proper  form for  exercise,  and upon  proper
tender of  payment  therefor,  the  Holder  shall be deemed to be the  holder of
record  of  the   shares  of  Common   Stock   issuable   upon  such   exercise,
notwithstanding  that the stock  transfer  books of the  Company  shall  then be
closed or that  certificates  representing such shares of Common Stock shall not
then be actually delivered to the Holder.

                                       50
<PAGE>

     (b)  Reservation  of Shares.  The Company  hereby  agrees that at all times
there shall be reserved  for  issuance  and/or  delivery  upon  exercise of this
Warrant  such  number of shares of its  Common  Stock as shall be  required  for
issuance or delivery upon exercise of this Warrant.

     (c)  Fractional   Shares.  No  fractional  shares  or  scrip   representing
fractional  shares  shall be issued  upon the  exercise  of this  Warrant.  With
respect to any  fraction of a share  called for upon any  exercise  hereof,  the
Company  shall  pay to the  Holder  an  amount  in cash  equal to such  fraction
multiplied by the current market value of such fractional  share,  determined as
follows:

         (1) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange, the current value
shall be the last reported sale price of the Common Stock on such exchange on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average closing bid and asked prices for such
day on such exchange; or

         (2) If the Common stock is not so listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last reported bid
and asked prices reported by the National Association of Securities Dealers
Quotation System ("NASDAQ") (or, if not so quoted on NASDAQ, by the National
Quotation Bureau, Inc. ("NASD") on the last business day prior to the date of
the exercise of this Warrant; or

         (3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value, determined in such
reasonable manner as may be prescribed in good faith by the Board of Directors
of the Company.

     (d) Exchange,  Assignment or Loss of Warrant. This Warrant is exchangeable,
without expense,  at the option of the Holder,  upon  presentation and surrender
hereof to the Company for other  Warrants of different  denominations  entitling
the holder  thereof to  purchase in the  aggregate  the same number of shares of
Common  Stock  purchasable   hereunder.   This  Warrant  is  not  assignable  or
transferable  except that it may be  transferred by operation of law as a result
of the death of any transferee to whom this Warrant may be transferred. Any such
assignment  shall be made by  surrender  of this Warrant to the Company with the
Assignment  For annexed  hereto duly  executed and funds  sufficient  to pay any
transfer tax; whereupon the Company shall, without charge, execute and deliver a
new Warrant in the name of the assignee  named in such  instrument of assignment
and this  Warrant  shall  promptly be  canceled.  This Warrant may be divided or
combined  with other  Warrants  which carry the same  rights  upon  presentation
hereof  at the  office of the  Company  or at the  office of its stock  transfer
agent,  if  any,  together  with a  written  notice  specifying  the  names  and
denominations  in which new  Warrants  are to be issued and signed by the Holder
hereof.  The term  "Warrant"  as used herein  includes  any  Warrants  issued in
substitution for or replacement of this Warrant,  or into which this Warrant may
be divided or exchanged. Upon receipt by the Company of evidence satisfactory to
it of the loss,  theft,  destruction or mutilation of this Warrant,  and (in the
case of loss, theft or destruction) of reasonably  satisfactory  indemnification
including a surety bond, and upon surrender and cancellation of this Warrant, if
mutilated,  the Company will execute and deliver a new Warrant of like tenor and
date, Any such new Warrant executed and delivered shall constitute an additional
contractual  obligation on the part of the Company,  whether or not this Warrant
so lost,  stolen,  destroyed,  or mutilated shall be at any time  enforceable by
anyone.

                                       51
<PAGE>

     (e) Rights of the  Holder.  The  Holder  shall not,  by virtue  hereof,  be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those  expressed  in the Warrant and
are not enforceable against the Company except to the extent set forth herein.

     (f) Anti-Dilution Provisions.

         (1) Adjustment of Number of Shares. Anything in this Section (f) to the
contrary notwithstanding, in case the Company shall at any time issue shares of
Common Stock, or securities convertible into shares of Common Stock, by way of
dividend or other distribution on any stock of the Company, which convertible
securities are both (i) issued without payment of consideration and (ii)
convertible without payment of consideration, or subdivide or combine the
outstanding shares of Common Stock, the Exercise Price shall be proportionately
decreased in the case of such issuance (on the day following the date fixed for
determining shareholders entitled to receive such dividend or other
distribution) or decreased in the case of such subdivision or increased in the
case of such combination (on the date that such subdivision or combination shall
become effective).

         (2) No Adjustment for Small Amounts. Anything in this Section (f) to
the contrary notwithstanding, the Company shall not be required to give effect
to any adjustment in the Exercise Price unless and until the net effect of one
or more adjustments, determined as above provided, shall have required a change
of the Exercise Price by at least three cents, but when the cumulative net
effect of more than one adjustment so determined shall be to change the actual
Exercise Price by at least six cents, such change in the Exercise Price shall
thereupon be given effect.

         (3) Number of Shares Adjusted. Upon any adjustment of the Exercise
Price, the holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of this Warrant by
the Exercise Price in effect on the date hereof and dividing the product so
obtained by the new Exercise Price.

                                       52
<PAGE>

         (4) Common Stock Defined. Whenever reference is made in this Section
(f) to the issue or sale of shares of Common Stock, the term "Common Stock"
shall mean the Common Stock of the Company of the class authorized as of the
date hereof and any other class of stock ranking on a parity with such Common
Stock. However, subject to the provisions of Section (i) hereof, shares issuable
upon exercise hereof shall include only shares of the class designated as Common
Stock of the Company as of the date hereof.

     (g) Officer's Certificate. Whenever the Exercise Price shall be adjusted as
required by the  provisions of Section (f) hereof;  the Company shall  forthwith
file in the custody of its Secretary or an Assistant  Secretary at its principal
office an officer's  certificate  showing the adjusted Exercise Price determined
as herein  provided and setting forth in reasonable  detail the facts  requiring
such adjustment.  Each such officer's certificate shall be made available at all
reasonable  times for inspection by the Holder and the Company shall,  forthwith
after each such  adjustment,  deliver a copy of such  certificate to the Holder.
Such certificate shall be conclusive as to the correctness of such adjustment.

     (h)  Notices  to  Warrant  Holders.  So  long  as  this  Warrant  shall  be
outstanding  and  unexercised  (i) if the Company shall pay any dividend or make
any distribution upon the Common Stock or (ii) if the Company shall offer to the
holders of Common stock for subscription or purchase by them any shares of stock
of any class or any other rights or (iii) if a spin-off of assets of the Company
is to be  effected,  then,  in any such  case,  the  Company  shall  cause to be
delivered to the Holder, at least ten days prior to the date specified in (x) or
(y) below,  as the case may be, a notice  containing a brief  description of the
proposed  action and  stating  the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y) such spin-off is to
take place and the date, if any,  fixed, as of which the holders of Common Stock
of record shall be entitled to receive securities or other property  deliverable
upon such spin-off.

     (i)   Reclassification,   Reorganization   or   Merger.   In  case  of  any
reclassification,  capital  reorganization or other change of outstanding shares
of Common  Stock of the Company  (other than a change in par value,  or from par
value to no par value,  or from no par value to par value,  or as a result of an
issuance  of  Common  Stock by way of  dividend  or other  distribution  or of a
subdivision or  combination),  or in case of any  consolidation or merger of the
Company with or into another  corporation (other than a merger with a subsidiary
in which  merger the Company is the  continuing  corporation  and which does not
result  in any  reclassification,  capital  reorganization  or other  change  of
outstanding  shares of Common Stock of the class  issuable upon exercise of this
Warrant) or in the case of any sale or conveyance to another  corporation of the
property  of the Company as an entirety or  substantially  as an  entirety,  the
Holder(s)  of this  Warrant  shall be given  notice of such  proposed  action at
approximately  the same  time and in  substantially  the same  manner  as notice
thereof is given to the holders of the Company's  Common Stock.  If the proposed
action is approved by the  shareholders  of all  corporations  or other entities
constituent  to the proposed  action,  the Holder(s) of this Warrant shall be so
notified in writing by the Company by registered  or certified  mail and if this
Warrant is thereupon  exercised,  the Holder(s)  shall receive the same property
and  securities as are received by other holders of Common Stock of the Company.
Thereupon, if not otherwise exercisable, this Warrant shall automatically become
immediately  exercisable.  This Warrant  shall become null and void if it is not
exercised on or before the  twentieth day following the dispatch of such notice,
except that if such day is a Saturday, Sunday or legal holiday, then on the next
business day following.

                                       53
<PAGE>

     (j) Dissolution. If at any time prior to the expiration of this Warrant and
prior to the exercise thereof, any dissolution, liquidation or winding up of the
Company  shall be proposed,  the Company shall cause at least 30 days' notice to
be mailed by certified mail to the registered Holder of this Warrant Certificate
at his  address as it appears on the books of the  Company.  Such  notice  shall
specify the date as of which holders of record of Common Stock shall participate
in any  distribution  or shall be entitled to exchange  their  Common  Stock for
securities or other property, deliverable upon such dissolution,  liquidation or
winding up, as the case may be; to the end that,  during such period of 30 days,
the  Holder(s) of this  Warranty may exercise  this Warrant and purchase  Common
Stock (or other stock  substituted  therefor as  hereinbefore  provided)  and be
entitled  in  respect of shares so  purchased  to all of the rights of the other
holders of Common Stock of the Company. In case of a dissolution, liquidation or
winding  up of the  Company,  all  purchase  rights  under  this  Warrant  shall
terminate at the close of business on the date as of which  holders of record of
the Common  Stock shall be  entitled to  participate  in a  distribution  of the
assets of the  Company  in  connection  with such  dissolution,  liquidation  or
winding up (provided that in no event shall said date be less than 30 days after
completion of service by certified mail of notice as aforesaid). Any Warrant not
exercised  prior to such time shall be null and void and no rights  shall  exist
thereunder.  In any such case of  termination  of purchase  rights,  a statement
thereof shall be included in the notice provided for herein.

     (k)  Spin-Offs.  If the  Company  spins-off a  subsidiary  or stock held in
another  corporation as an investment by distributing to the shareholders of the
Company  as a  dividend  or  otherwise  the  stock  of the  subsidiary  or other
corporation,  the Holder(s) of this Warrant shall be given notice  o(pound) such
proposed action at  approximately  the same time and in  substantially  the same
manner as notice thereof is given to the holders of the Company's  Common Stock.
If the proposed action is approved by the  shareholders  of all  corporations or
other entities constituent to the proposed action, the Holder(s) of this Warrant
shall be so notified in writing by the Company by registered  or certified  mail
and if this Warrant is thereupon exercised, the Holder(s) shall receive the same
property and  securities as are received by other holders of Common Stock of the
Company.   Thereupon,   if  not  otherwise   exercisable,   this  Warrant  shall
automatically become immediately exercisable. This Warrant shall become null and
void if it is not  exercised  on or  before  the  twentieth  day  following  the
dispatch of such notice, except that if such day is a Saturday,  Sunday or legal
holiday, then on the next business day following.

     (l) Registration under the Securities Act of 1933.

         (1) If the Company files a registration statement  (defined  herein  to
include a Notification  under  Regulation A) under the Act at any time after the
date of this Warrant, and on or before 5:00 p.m. Phoenix, Arizona time on May 5,
2002,  which relates to a current  offering of securities of the Company (except
in connection with an offering to employees,  a stock option or employee benefit
plan,  an  exchange  offer,  or an offer to acquire  assets)  such  registration
statement and the prospectus included therein shall also, at the written request
to the Company by the  Holder(s) of Warrants,  or Warrant  Stock  acquired  upon
exercise  of the  Warrants  and/or  which may be acquired  upon  exercise of the
Warrants and/or which may be acquired upon exercise of the Warrants, include and
relate  to, and meet the  requirements  of the Act with  respect  to, any public
offering  o(pound) the Warrant  Stock so as to permit the public sale thereof in
compliance  with the Act. The Company shall give written notice to the Holder(s)

                                       54
<PAGE>

of Series D Warrants  and Common  Stock issued on exercise of Series D Warrants,
of its intention to file a  registration  statement  under the Act relating to a
current offering of the aforesaid securities of the Company,  sixty (60) or more
days prior to the filing of such registration statement, and the written request
provided  for in the  first  sentence  of this  subsection  shall be made by the
Holder(s) of such Warrants and Warrant Stock,  thirty (30) or more days prior to
the date  specified  in the notice,  as the date on which it is intended to file
such registration statement.  Neither the delivery of such notice by the Company
nor of such  request by the  Holder(s)  shall in any way obligate the Company to
file  such  registration  statement  and  notwithstanding  the  filing  of  such
registration statement, the Company may, at any time prior to the effective date
thereof,  determine  not to offer  the  securities  to which  such  registration
statement relates,  without liability to the Holder(s),  except that the Company
shall pay such expenses as are  contemplated  to be paid by it under  subsection
(4) of this Section.

     Notwithstanding  anything contained in this subsection (1) to the contrary,
if any underwriter  who is proposed to offer to the public the Company's  Common
Stock should object to and fail to proceed with the offering because the Warrant
Stock is proposed to be included in the registration statement,  the Company may
proceed with the offering  either  including the number of Warrant  shares which
the  underwriter  will agree to include  pro rata among the  Warrant  shares for
which  registration is sought or none if the  underwriter  refuses to proceed if
any such  shares  included  without  registering  the Warrant  Stock;  provided,
however,  the Company can legally file and does file a post-effective  amendment
to such registration  statement,  with the consent of said  underwriter,  within
ninety (90) days of the effective date of such registration statement,  allowing
the selling  stockholders to sell the remaining balance, or all, as the case may
be, of their Warrant Stock pursuant to such registration statement.

         (2) In each instance in which pursuant to subsection (1) of this
Section, the Company shall take any action to permit a public offering or sale
or other distribution of the Warrant Stock, the Company shall:

             (A) Supply to the Holder(s) intending to make a public distribution
of their Warrant Stock, two executed copies of each registration statement or
Notification and a reasonable number of copies of the preliminary, final and
other prospectus or offering circular in conformity with requirements of the Act
and the Rules and Regulations promulgated thereunder and such other documents as
Water Chef, Inc. shall reasonably request.

             (B) Cooperate in taking such action as may be necessary to register
or qualify the Warrant Stock under such other securities laws or blue sky laws
of such jurisdictions as Water Chef, Inc. and the Holder(s) shall reasonably
request and to do any and all other acts and things which may be necessary or
advisable to enable the holders of such Warrant Stock to consummate such
proposed sale or other disposition of the Warrant Stock in any such
jurisdiction; provided, however, the Company shall not be required to qualify or
register in any state or jurisdiction which would obligate any present security
holder to subject their shares of the Company's Common Stock to any escrow other
than such escrow as may be in effect as of the date hereof, or which would
extend or enlarge upon any current escrow; provided, further, that in no event
shall the Company be obligated, in connection therewith, to qualify to do
business or to file a general consent to service of process in any jurisdiction
where it shall not then be qualified.

                                       55
<PAGE>

             (C) Keep effective for a period of thirty-six (36) months after the
initial effectiveness thereof all such registrations or Notifications under the
Act and cooperate in taking such action as may be necessary to keep effective
such other registrations and qualifications, and do any and all other acts and
things for such period not to exceed said thirty-six (36) months - as may be
necessary to permit the public sale or other disposition of such Warrant Stock
by such holders.

             (D) Indemnify and hold harmless each such holder and each
underwriter, within the meaning of the Act, who may purchase from or sell for
any such holder, any Warrant Stock, from and against any and all losses, claims,
damages, and liabilities (including, but no limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing, defending or
settling any claim) arising from (i) any untrue or alleged untrue statement of a
material fact contained in any registration statement or Notification furnished
pursuant to clause (A) of this subsection, or any prospectus or offering
circular included therein or (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading (unless such untrue statement or omission or
such alleged untrue statement or omission was based upon information furnished
or required to be furnished in writing to the Company by such holder or
underwriter expressly for use therein), which indemnification shall include each
person, if any, who controls any such holder or underwriter within the meaning
of the Act; provided, however, each such older, underwriter or controlling
person shall at the same time indemnify the Company, its directors, each officer
signing any registration statement or Notification or any amendment to any
registration statement or Notification and each person, if any, who controls the
Company within the meaning of the Act, from and against any and all losses,
claims, damages and liabilities (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing, defending
or settling any claim) arising from (iii) any untrue or alleged untrue statement
of a material fact contained in any registration statement or Notification or
any amendment to any registration statement or Notification or prospectus or
offering circular furnished pursuant to clause (A) of this subsection, or (iv)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
the indemnity of such holder, underwriter or controlling person shall be limited
to liability based upon information furnished, or required to be furnished, in
writing to the Company by such holder or underwriter or controlling person
expressly for use therein. The indemnity agreement of the Company herein shall
not inure to the benefit of any such underwriter (or to the benefit of any
person who controls such underwriter) on account of any losses, claims, damages,
liabilities (or actions or proceedings in respect therefor) arising from the
sale of any of such Warrant Stock by such underwriter to any person if such
underwriter failed to send or give a copy of the prospectus or offering circular
furnished pursuant to clause (A) of this subsection, as the same may then be
supplemented or amended (if such supplement or amendment shall have been
furnished to Water Chef, Inc. and the Holder(s) pursuant to said clause (A), to
such person with or prior to the written confirmation of the sale involved.

                                       56
<PAGE>

             (E) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions of this Warrant, 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 such Act and is, therefore, unenforceable. In the event that a
claim for 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 registered, the registrant 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 whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.

     (3) The Company shall comply with the  requirements  of  subsection  (1) of
this Section and shall pay all of the expenses of such offering. Expenses of the
offering for  purposes of this  Section are defined to be and shall  include all
legal, accounting,  engineering,  printing,  filing (including blue-sky filings)
and NASD fees,  out-of-pocket  expenses  incurred by  Company-retained  counsel,
accountants, and engineers, and miscellaneous identified expenses. The Holder(s)
selling shares of Common Stock in the offering shall,  however, bear the cost of
any separate counsel engaged to review the  registration  statement on behalf of
or to advise the  selling  shareholders.  Such  expense  including  underwriting
commissions,  transfer taxes and underwriter's expense allowance attributable to
the Warrant Stock,  all of which shall be borne by the Warrant  Holders  selling
shares in the offering.

         The Company's obligations under said subsections (1) and (2) hereof
shall be conditioned as to each such public offering, upon a timely receipt by
the Company in writing of:

             (A) Information as to the terms of such public offering furnished
by or on behalf of each holder intending to make a public distribution of his or
its Warrants or Warrant Stock; and

             (B) Such other information as the Company may reasonably require
from such holders, or arty underwriter for any o(pound) them, for inclusion in
such registration statement or Notification or post-effective amendment.

             (C) The Company's agreements with respect to the Warrants or
Warrant Stock in this Section will continue in effect regardless of the exercise
or surrender of this Warrant.

     (4) The Warrant  Holder(s),  to exercise  registration  rights  pursuant to
Section (1),  shall not be required to exercise  their  Warrants and may without
exercising  their  Warrants  request  that the  Warrant  Stock be  covered by an
appropriate  registration  statement,   including  registration  for  the  shelf
pursuant to Rule 415 or any successor Rule.

                                       57
<PAGE>

     (m) Right of Company to Redeem or Call the Series B Warrant.

             (a) Anything contained in this Warrant to the contrary
notwithstanding, the Company shall have the right to redeem or call the Series B
Warrants, of which this Warrant forms a part, then outstanding, at any time, and
from time to time, subsequent to six (6) months from the date thereof following
any continuous thirty (30) day period in which the price of the Common Stock of
the Company shall continuously remain at or above Thirty Cents ($.30) per share,
such price to be determined pursuant to paragraph (c)(1), (2) or (3), as
applicable, at a Call Price of Five Cents ($.05) cash per Warrant Share
represented by Series B Warrants called or redeemed.

             (b) The Directors of the Company shall have the right in their
sole, exclusive and absolute discretion to determine which, if any, and whether
pro rate or by lot, of the Series B Wan-ants should be redeemed or called.

             (c) The Directors of the Company shall cause written notice of
redemption to be given as set forth in (d) below, to each registered holder o
(pound) a Series B Warrant to be called or redeemed, at their respective
addresses as they appear on the records of the Company, specifying the Warrant
number(s) of the Warrant to be redeemed, the name and address of the Redemption
Agent, as defined below, and the name and address of the transfer agent for the
Series B Warrants. Such notice shall be mailed to said registered holders by
first class, postage prepaid mail no later than the thirtieth day before the
date fixed for redemption (the "Redemption Date"). The notice of redemption
shall set forth the redemption price, the date set for redemption and the place
where Series B Warrants shall be delivered.

             (d) The Company shall appoint as its agent for the purpose of
acting as redemption agent for the Series B Warrants, a bank or trust company in
good standing, organized under the laws of the United States of America or any
jurisdiction thereof, and having capital, surplus and undivided profits
aggregating at least Ten Million Dollars ($10,000,000), and may appoint any one
or more additional such agents which shall in each case be a bank or trust
company in good standing organized under the laws of the United States of
America or of any jurisdiction thereof, having an office or offices in the City
of Phoenix, or such other place as shall have been designated by the Company,
and having capital, surplus and undivided profits aggregating at least Ten
Million Dollars ($10,000,000). Such bank or trust company is hereinafter
referred to as the "Redemption Agent." Following such appointment and prior to
any redemption, the Company shall deliver to the Redemption Agent irrevocable
written instructions authorizing the Redemption Agent, on behalf and at the
expense of the Company, to cause such notice of redemption to be duly mailed as
above provided as soon as practicable after receipt of such irrevocable
instructions and in accordance with the above provisions. All funds necessary
for the redemption shall be deposited with the Redemption Agent in trust at
least two business days prior to the Redemption Date, for the pro rata benefit
of the holders of the Series B Warrants so called for redemption, so as to be
and continue to be available therefor. Neither failure to mail any such notice
to one or more such holders nor any defect in any notice shall affect the
sufficiency of the proceedings for redemption as to other holders.

                                       58
<PAGE>

             (e) If notice of redemption shall have been given as hereinbefore
provided, and the Company shall not default in the payment of the Redemption
Price, then each holder of Series B Warrants called for redemption shall be
entitled to all rights accorded by this Warrant until and including the date
prior to the Redemption Date. If the Company shall default in making payment or
delivery as aforesaid on the Redemption Date, then each holder of Series B
Warrants called for redemption shall be entitled to all rights accorded by this
Series B Warrant until and including the date prior to the date (the "Final
Redemption Date") when the Company makes payment as aforesaid to the holders of
the Series B Warrants. From and after the Redemption Date or, if the Company
shall default in making payment as aforesaid, the Final Redemption Date, the
Series B Warrants called for redemption shall no longer be deemed to be
outstanding, and all rights of the holders or such Series B Warrants shall cease
and terminate, except the right of the holders of such Series B Warrants, upon
surrender thereof, to receive amounts to be paid hereunder. The deposits of
monies in trust with the Redemption Agent shall be irrevocable except that the
Company shall be entitled to receive from the Redemption Agent the interest or
other earnings, if any, earned on any monies so deposited in trust, and the
holders of any Series B Warrants redeemed shall have no claim to such interest
or other earnings, if any, earned on any monies so deposited in trust, and the
holders of any Series B Warrants redeemed shall have no claim to such interest
or other earnings, any balance of monies so deposited by the Company and
unclaimed by the holders of the Series B Warrants entitled thereto at the
expiration of two (2) years from the Redemption Date (or the Final Redemption
Date, as applicable) shall be repaid, together with any interest or other
earnings thereon, to the Company, and after any such repayment, the holders of
the Series D Warrants entitled to the funds so repaid to the Company shall look
only to the Company for such payment, without interest.

     (n) Transfer to Comply with the Securities Act of 1933.

     (1) This  Warrant  or the  Warrant  Stock or any other  security  issued or
issuable  upon  exercise  of this  Warrant  may not be offered or sold except in
compliance  with the Securities  Act of 1933, as amended,  and then only against
receipt  of an  agreement  of such  person to whom such offer of sale is made to
comply with the  provisions  of this  Section (n) with  respect to any resale or
other disposition of such securities.


                                       59

<PAGE>

     (2) The  Company  may  cause the  following  legend to be set forth on each
certificate  representing Warrant Stock or any other security issued or issuable
upon exercise of this Warrant not theretofore  distributed to the public or sold
to  underwriters  for  distribution  to the public  pursuant to  subsection  (1)
hereof,  unless  counsel  for  the  Company  is of the  opinion  as to any  such
certificate that such legend is unnecessary:

         The securities represented by this certificate may not be offered for
         sale, sold or otherwise transferred except pursuant to an effective
         registration statement made under the Act, or pursuant to an exemption
         from registration under the Act the availability of which is to be
         established to the satisfaction of the Company.

     (o) Notices.  Any notices or  certificates by the Company to the Holder and
by the  Holder  to the  Company  shall be deemed  delivered  if in  writing  and
delivered  personally  or sent by certified  mail,  to the Holder at the address
supplied  by the  Holder in the  Subscription  Agreement  or if the  Holder  has
designated,  by notice in writing to the  Company,  any other  address,  to such
other address, and if to the Company, addressed to it at:

                                7707 E. Acoma Dr.
                                    Suite 109
                            Scottsdale, Arizona 85260
                          Attn: C. Gus Grant, Chairman

The Company may change its address by written notice to the then Holder(s) and
may change its address by written notice to the Company.

     (p)  Applicable  Law.  This Warrant  shall be governed by, and construed in
accordance  with,  the internal laws of the State of Delaware  without regard to
conflicts of laws principles thereof

DATED:   May 5, 1997                                 WATER CHEF, INC.

                                                     By:____________________
                                                        C. Gus Grant,
                                                        Chairman of the Board
ATTEST:



-----------------------------
Secretary

Date: May 5, 1997
[SEAL]

                                       60

<PAGE>



THE SECURITIES  REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE  STATE  SECURITIES LAWS.
IN THE ABSENCE OF AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE 1933 ACT AND
SUCH STATE LAWS,  THESE  SECURITIES  MAY NOT BE OFFERED,  SOLD,  TRANSFERRED  OR
OTHERWISE  DISPOSED OF,  EXCEPT  PURSUANT TO AN  APPLICABLE  EXEMPTION  FROM THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND SUCH STATE LAWS AND UPON OBTAINING
AN OPINION OF COUNSEL  (WHICH MAY BE COUNSEL FOR THE COMPANY),  SATISFACTORY  TO
THE  COMPANY,  THAT SUCH  DISPOSITION  MAY BE MADE WITHOUT  REGISTRATION  OF THE
SECURITIES  UNDER THE 1933 ACT AND SUCH STATE LAWS,  OR, WITH RESPECT TO FEDERAL
SECURITIES  LAWS ONLY,  UNLESS SOLD PURSUANT TO RULE 144  PROMULGATED  UNDER THE
1933 ACT.

Warrant No.                                  Warrant to Purchase_________Shares
Date of Issuance: March 27, 1997
Date of Amendment: March 26, 2002

                                    SERIES B

                                 ALLONGE TO AND
                           AMENDMENT AND EXTENSION OF
                          COMMON STOCK PURCHASE WARRANT

                                WATER CHEF, INC.

Water Chef, Inc., a Delaware  corporation  (the  "Company"),  with an address at
1007 Glen Cove Avenue, Glen Head, New York, for value received, hereby certifies
that pursuant to the Warrant to Purchase Water Chef, Inc. Series B Common Stock,
dated March 27,  1997,  affixed  hereto,  (the  "Warrant")  _______________,  or
registered assigns (the "Registered  Holder"),  is entitled to purchase from the
Company, from time to time on or before the Expiration Date provided for in this
Endorsement  Allonge Amendment and Extension to the Warrant, up to ______ shares
(as adjusted from time to time pursuant to the provisions of the Warrant) of the
Company's  common  stock,  $.001  par value per  share  ("Common  Stock")  for a
purchase price of $0.15 per share (as adjusted from time to time pursuant to the
provisions of the Warrant).

This  Allonge to and  Amendment  and  Extension  of the Warrant is being  issued
pursuant to a Settlement  Agreement dated as of  _____________,  2002, among the
Company and parties to a certain  Legal Action for the purpose of resolving  the
Legal Action between the Company and _________________.

     1. Ratification,  Adoption and Confirmation of Warrant.  Except as modified
herein, the terms and provisions of the Warrant shall remain unchanged and shall
be in full force and effect, and the Company hereby ratifies,  adopts,  confirms
and  approves  all of the terms,  provisions  and  conditions  contained  in the
Warrant as amended herein.

                                       61
<PAGE>

     2. Incorporation. This Allonge once attached to the Warrant shall become an
inseparable  part of the  Warrant  and  shall be  construed  to be a part of the
Warrant.  The Warrant shall be  incorporated  herein as if set forth in full and
shall be deemed an inseparable part hereof

     3.  Extension.  The  Warrant  by its terms was to be void  after  5:00 p.m.
Phoenix,  Arizona time on March 27,  2002.  The term of exercise of the Warrant,
subject to the  Termination  provisions of Paragraph 4, is hereby extended to on
March 27, 2004 at 5:00 o'clock p.m. Eastern Standard time.

     4.  Termination.  This Warrant (and the right to purchase  securities  upon
exercise  hereof)  shall  terminate  upon the earliest to occur of the following
(the "Expiration  Date"): (i) 5 o'clock p.m, March 27, 2004; (ii) the closing of
the Company's sale of all or substantially  all of its assets or the acquisition
of the Company by another  entity by means of merger or other  transaction  as a
result  of  which  stockholders  of  the  Company   immediately  prior  to  such
acquisition  possess a minority  of the  voting  power of the  acquiring  entity
immediately following such acquisition,  provided that the Company has given not
less than five (5) days prior written  notice;  (iii) the completion of the Call
of the Warrants as provided in the Warrant; or (iv) liquidation of the Company.

     5.  Effective  Time of Exercise.  For the purpose of each  exercise of this
Warrant,  such exercise shall be deemed to have been effected  immediately prior
to the  close of  business  on the day on which  this  Warrant  shall  have been
surrendered to the Company. At such time, the person or persons in whose name or
names any  certificates  for Warrant  Stock shall be issuable upon such exercise
shall be deemed to have  become the  holder or holders of record of the  Warrant
Stock represented by such certificates.

     6. Registration  under the Securities Act of 1933. The terms and conditions
of the Warrant  relating to the  registration  of the Warrants and Warrant Stock
set forth at Paragraph (l) are hereby amended as follows:

       (1) The registration rights granted in the Warrant are hereby extended
for a period of two years and shall apply to any  registration  statement as
defined in the Warrant which the Company may file on or before 5:00 o'clock p.m.
Eastern Daylight Time on May 5, 2004.

       (2) The provisions set forth in the second sub-paragraph of Paragraph (l)
(1) are deleted and the following provision is substituted therefor:

                                       62
<PAGE>

          Underwriting. If the registration of which the Company gives notice is
          for a  registered  public  offering  involving  an  underwriting,  the
          Company  shall so advise each  Holder as a part of the written  notice
          given  pursuant to the preceding  paragraph of this Section 1. In such
          event,  the  right of the  Holder  to  registration  pursuant  to this
          Agreement  shall be conditioned  upon such Holder's  participation  in
          such   underwriting   and  the  inclusion  of  Warrant  Stock  in  the
          underwriting to the extent provided herein.  All Holders  proposing to
          distribute their securities  through such underwriting shall (together
          with the Company and the other holders  distributing  their securities
          through such  underwriting)  enter into an  underwriting  agreement in
          customary  form  with  the  managing  underwriter  selected  for  such
          underwriting  by the Company.  Notwithstanding  any other provision of
          this Agreement,  if the managing underwriter determines that marketing
          factors   require  a  limitation   of  the  number  of  shares  to  be
          underwritten,  the managing underwriter may limit the number of shares
          (including the Warrant Stock) to be underwritten,  on a pro rata basis
          based  on  the  total  number  of   securities   (including,   without
          limitation,  Warrant Stock) entitled to  registration  pursuant to any
          registration  rights  granted by the Company at the time of the filing
          of the registration statement; provided, however, that with respect to
          any public offering following the Initial Public Offering,  the number
          of shares  allocated  among all  Holders of Warrant  Stock  exercising
          their rights under this Warrant shall not be less than thirty  percent
          (30%) of the number of shares  allocated to any Holder or other holder
          to the nearest one hundred (100) shares. If any Holder  disapproves of
          the terms of any such  underwriting,  he or she may elect to  withdraw
          therefrom   by  written   notice  to  the  Company  and  the  managing
          underwriter.   Any   securities   excluded  or  withdrawn   from  such
          underwriting shall be withdrawn from such registration.

                                                     WATER CHEF, INC.



                                                     By  _______________________
                                                         David Conway, President

                                       63
<PAGE>

                                                                     Exhibit 4.5



THIS DEBENTURE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE LAWS OF ANY STATE.

                                 WATERCHEF, INC.
                           2% SUBORDINATED DEBENTURES
                               DUE OCTOBER 1, 1997

No. R-1                                                   Scottsdale, Arizona 13
    13

                                                          June 4, 1997

WATERCHEF,  INC., a Delaware  Corporation,  (the "Company"),  for value received
hereby promises to pay to ______________,  or registered  assigns, on October 1,
1997, or if called  sooner at option of Company the principal  amount of $25,000
in such coin or  currency  of the  United  States of  America  as at the time of
payment shall be legal tender for public and private debts,  by check mailed and
addressed to the registered  holder hereof at the address shown in the debenture
register  maintained by the company for such purpose or, at the place and in the
manner indicated on the Purchaser  Schedule or such other place or in such other
commercially  reasonable  manner  as the  registered  holder  may  designate  in
writing.

The Company agrees to pay interest  (computed on the basis of a 365-day year) on
the unpaid principal  balance hereof from the date of this Debenture at the rate
of 12% per annum payable in arrears when note is due.

This Debenture is one of a duly authorized issued of Subordinated  Debentures of
the Company  designated  as its 12%  Subordinated  Debentures  due 1997  (herein
called the "Debentures"), limited in an aggregate principal amount of $350,000.

The Company  (WaterChef)  will, within 5 days, cause to have issued common stock
at a price of fifteen cents per share based on 6,666.67  shares for every $1,000
of debt.  Additionally,  the Company will issue  5-year  warrants at an exercise
price of fifteen  cents per share based on 6,666.67  shares for every  $1,000 of
debt.  The Company will  register  the shares and warrants  within six months of
being issued with the appropriate exchange.

This Debenture is a registered  Debenture and is transferable  only by surrender
thereof at the  principal  office of the Company in  Scottsdale,  Arizona,  duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered  holder of this Debenture or his attorney duly authorized in writing,
subject to the terms and conditions of this agreement.

Funds for the redemption will accumulate from the sale of the company's  current
$1.5 million private  placement now in the market. A sinking fund will be funded
at a rate equal to the percentage of the private  placement  sold.  When 100% of
the private  placement  is sold,  the  sinking  fund will  contain  100% of this
Debenture.  The Company will pay the  debenture  in full with  accrued  interest
within ten days of receipt of the funds from private placement.

                                       64
<PAGE>

In case an Event of Default  shall happen and be  continuing,  the  principal of
this Debenture may be declared due and payable immediately.

If the note is  extended  and not paid to  lender  when  due,  a  penalty  of an
additional  100,000  shares of common  stock will be  assessed by lender for the
first  thirty-one  days of extension at fifteen cents per share.  If the note is
not redeemed by the  thirty-second  day, an  additional  200,000  shares will be
issued to lender at fifteen cents per share.

This Debenture and the indebtedness  evidenced hereby,  including  principal and
interest  shall,  at all times,  be and remain junior and subordinate to any and
all Senior Debt.

This Debenture is governed by and construed in accordance with Arizona law.



                                            WATERCHEF, INC.



                                            By
                                              ----------------------------------
                                            Its
                                               ---------------------------------

         (Corporate Seal)

                                       65
<PAGE>

                                                                   Exhibit 10.1



                    SETTLEMENT AGREEMENT AND GENERAL RELEASES

     This Mutual Settlement  Agreement and General Release ( the "Agreement") is
made and entered  into by and between K. Thomas and Callaway  Decoster,  husband
and wife  and K.  Thomas  Decoster  individually,  Michael  P.  and  Roberta  S.
Gaudette,  husband and wife, Dominic M. Strazzulla, the Felix A. Hertzka Estate,
Claudette L. Gelfand and the Claudette L. Gelfand Revocable Trust,  Catherine C.
Griffin,  Michael B. and Diane L. Hayden,  husband and wife,  Alexander  Harris,
Holly O.  Harris,  and  Joseph R.  Fichtl  and the  Joseph R.  Ficht11995  Trust
(hereinafter   collectively  the  "Debenture  Holders")  and  Water  Chef,  Inc.
(hereinafter "WaterChef").

     WHEREAS, the Debenture Holders provided Bridge Loan funding to WaterChef in
exchange for the issuance of  Subordinated  Debentures  and Warrants to Purchase
Stock;

     WHEREAS, in the course of the parties' dealing, a dispute arose relative to
WaterChef  s  obligations  to  the  Debenture  Holders  and  Debenture  Holders'
obligations to Defendant pursuant to the aforementioned  Subordinated Debentures
and Warrants to Purchase Stock;

     WHEREAS,  the Debenture  Holders initiated a legal action against WaterChef
in the New Hampshire Superior Court for Hillsborough County (Northern District),
docketed  00-C-714  seeking damages flowing from alleged breaches of WaterChef s
obligations to the Debenture Holders, allegedly resulting in breach of contract,
breach of implied  covenant of good faith and fair dealing,  liability for debt,
unjust  enrichment  and liability  under a theory of quantum  meruit (the "Legal
Action");

     WHEREAS,  Defendant  asserted  counterclaims  against the Debenture Holders
seeking  damages  flowing  from  alleged  breaches  of  the  Debenture  Holders'
obligations to WaterChef, allegedly resulting money damages to Defendant;

     WHEREAS,  the  Debenture  Holders  and  WaterChef  wish  to  resolve  their
differences  and buy  peace  by  agreement  without  further  expense,  delay or
litigation;

     NOW  THEREFORE,  in  consideration  of  these  promises  and of the  mutual
promises and  covenants  set forth below,  the  Debenture  Holders and WaterChef
hereby agree as follows:

                                       66
<PAGE>

     1. Upon execution of this  Agreement,  the Debenture  Holders and WaterChef
shall execute a dismissal with prejudice of the Legal Action  (described  below)
currently pending which dismissal shall be held in escrow by Debenture  Holders'
counsel  pending  performance  by  Debenture  Holders  and  Defendant  of  their
respective  obligations under the terms of this Settlement Agreement.  Debenture
Holders and Defendant agree that prior to the filing of the dismissal they shall
execute such other  document(s),  if any, as may be required by the Hillsborough
County  Superior Court  regarding the fact of settlement of the Legal Action and
agree  that if  required  by the  Court  that  each  will  execute  a notice  of
conditional  settlement  and  continuance  pending  performance  of the  parties
obligations hereunder.

     2. (a) Upon  execution of this  Agreement,  each of the  Debenture  Holders
shall  deliver  to  Debenture  Holders'  counsel,  Nixon  Peabody,  LLP,  all of
WaterChef's Debentures held by Debenture Holders marked "Satisfied in accordance
with the terms of the  Settlement  Agreement  dated as of June 20, 2002  between
[name of  Debenture  Holder(s)]  and  WaterChef  to be held in  escrow  by Nixon
Peabody,  LLP  against  the  delivery  of  Defendant's  shares of  Common  Stock
described in Paragraphs (c) and (d).

        (b) Defendant's  Board of Directors,  pursuant to the power granted to
them under WaterChef's Articles of Incorporation, if not previously approved,
will no later than one (1) day following  the execution of this  Agreement by
all of the Debenture  Holders  authorize an increase in the number of authorized
shares of Common Stock of WaterChef in an amount at least  sufficient to permit
WaterChef to issue not less than  three  million  (3,000,000)  shares  and such
number of additional  shares of Common  Stock to the  Debenture  Holders as
provided  for herein.  Defendant shall provide  Debenture  Holders' counsel with
a copy of the minutes of the Board of Directors meeting.

        (c) No later than June 20, 2002 or two (2) days  following the execution
of this Settlement  Agreement by all of the Debenture Holders,  whichever is
later, WaterChef  shall pay to the  Debenture  Holders an aggregate of
$497,500.00  by issuing to the Debenture  Holders an aggregate of not less than
3,000,000 shares of its Common Stock,  $.01 par value.  Such shares shall be
allocated  among the Debenture  Holders  as shown on  Exhibit A to this
Agreement.  Defendant  shall deliver  said Shares to  Debenture  Holders'
counsel  with its  delivery of its executed copy of this Agreement and said
shares (and the shares,  if any, issued pursuant to Paragraph  (d) shall be held
by  Debenture  Holders'  counsel  until receipt of all of the Debenture Holders'
Debentures  described in Paragraph (a) above. Upon receipt of all of the
Debenture Holders'  Debentures and Defendant's shares,  Debenture Holders'
counsel shall exchange the Debentures and shares and distribute them to the
Debenture Holders and WaterChef

        (d) WaterChef  shall also  calculate the average daily trading price of
its Common Stock for the thirty (30) consecutive trading days immediately
following the date  WaterChef  issues the shares  described  in  paragraph  (c)
above. To determine  such average  daily  trading  price,  WaterChef  shall
calculate the average of the ending bid and asked  price on each such  trading
day as reported by Nasdaq and shall divide the sum of such  averages by thirty
(30).  WaterChef shall  distribute  its  calculations  and  the  underlying
data  on  which  its calculations are based to the Debenture Holders for their
approval,  which shall not be  unreasonably  withheld.  If  $497,500.00  divided
by such average  daily trading price equals 3,000,006 or less, no additional
shares shall be issued to the Debenture  Holders.  If the product of
$497,500.00  divided by such average daily  trading  price  exceeds  3,000,006,
then  WaterChef  shall  issue to the Debenture Holders such additional number of
shares of its Common Stock,  rounded to the next whole number of shares,  as
equals the amount of such  excess.  Such shares shall be  allocated  among the
Debenture  Holders in  accordance  with a schedule  to be provided by the
Debenture  Holders  within ten (10) days of the final  determination  of the
total  number  of shares to be issued  and shall be delivered to Debenture
Holders' counsel within twenty (20) days of the delivery of such schedule.

                                       67
<PAGE>

        (e)  WaterChef shall and does  hereby extend  the  term  of each of the
Debenture Holders' outstanding and unexercised warrants to purchase Common Stock
of  WaterChef  for an  additional  twenty-four  (24)  months  from  the  current
expiration date of each such warrant.  WaterChef further agrees that any and all
of the restrictions or conditions which limit the piggy-back registration rights
currently in effect with respect to the said warrants  shall be, and hereby are,
waived and  removed.  Debenture  Holders  shall  deliver to  Debenture  Holders'
counsel each of their  outstanding and  unexercised  warrants to be held by such
counsel until  Defendant shall have issued with respect to each such warrant its
Allonge To and  Amendment  and  Extension of Warrant dated the date hereof which
shall amend the expiry and piggy-back registration  restrictions of such warrant
as  provided  herein and shall  further  confirm  that  except as so amended the
original terms of such warrant remain in full force and effect.  Defendant shall
issue an Allonge To and  Amendment and Extension of Warrant with respect to each
outstanding and unexercised  warrant on the terms set forth herein regardless of
the vote of the  shareholders  regarding  the  proposed  increase in  authorized
capital stock. Defendant shall deliver an Allonge To and Amendment and Extension
of Warrant for each  outstanding and unexercised  warrant to Debenture  Holders'
counsel  within  thirty  (30)  days of the date of the  execution  hereof  which
Debenture  Holders'  counsel  shall  affix  to and  make a part  of  each of the
outstanding  and  unexercised  warrants,  and Debenture  Holders'  counsel shall
thereupon redeliver the warrants as amended to Debenture Holders.

     3.  In  consideration  of  this  Agreement  and  other  good  and  valuable
consideration,  the receipt  and  sufficiency  of which is hereby  acknowledged,
WaterChef,  on  behalf  of  itself,  its  parents,   affiliates,   subsidiaries,
directors,  shareholders,  officers,  employees,   administrators,   successors,
agents,  or other  assigns,  does  hereby  unconditionally  release  and forever
discharge each and every one of the Debenture Holders,  (including each of their
heirs, executors, administrators,  successors, agent, representatives, employees
and assigns), from any and all claims,  actions,  liabilities and demands of any
kind,  whether at law or in equity, and whether such claims arise in contract or
tort,  and  whether  such  claims are  founded  upon  statutory  or common  law,
including,  but not limited to,  breach of contract,  negligence,  breach of any
duty of good  faith  and  fair  dealing,  causes  of  action  arising  out of or
construed to be deceptive trade practices,  business torts,  breach of warranty,
or any other  cause of  action  whatsoever,  whether  such  claims  are known or
unknown,  contingent or liquidated,  arising out of or in any way related to the
Bridge Loan Transactions described above and the debentures,  shares or warrants
issued in connection therewith, or the transactions  contemplated thereby, which
Defendant may now have against the Debenture  Holders (to the extent such claims
originated in whole or in part or, based on presently existing facts, could have
originated in whole or in part on or before the date hereof), including, without
limitation,  any and all  claims  which  have been  asserted  or could have been
asserted by Defendant in the case  captioned K. Thomas  Decoster et. al v. Water
Chef,  Inc.  now  pending  before the  Hillsborough  County  Superior  Court and
identified as docket number 00-C-714 (the "Legal Action") and any and all claims
directly or indirectly  arising from or in connection with (1) the bridge loans,
(2) the  debentures  executed in  connection  therewith (3) any shares issued to
Debenture  Holders  pursuant  to the  debentures  (4)  the  warrants  issued  in
connection with the debentures,  (5) any action or omission to act by any of the
Debenture  Holders  in  connection  with  any of  the  foregoing,  or any  other
documents  executed  in  connection  with the bridge loan  transactions,  (6) or
arising from the negotiation of the terms of this Agreement.

                                       68
<PAGE>

     4.  In  consideration  of  this  Agreement  and  other  good  and  valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, each
of the  Debenture  Holders,  on behalf of  themselves,  and each of their heirs,
executors,  administrators,  successors, agents, representatives,  employees and
assigns,  does hereby  unconditionally  release and forever discharge WaterChef,
(including  its  parents,  affiliates,  subsidiaries,  directors,  shareholders,
officers, employees, administrators, successors, agents, or other assigns), from
any and all claims, actions, liabilities and demands of any kind, whether at law
or in equity,  and whether  such claims  arise in contract or tort,  and whether
such claims are founded upon statutory or common law, including, but not limited
to,  breach of contract,  negligence,  breach of any duty of good faith and fair
dealing,  causes of action  arising out of or construed  to be  deceptive  trade
practices,  business  torts,  breach of  warranty,  or any other cause of action
whatsoever,  whether such claims are known or unknown, contingent or liquidated,
arising  out of or in any way  related to the bridge  loan  transaction  and the
debentures,   shares  or  warrants  issued  in  connection  therewith,   or  the
transactions  contemplated thereby, which Debenture Holders may now have against
WaterChef (to the extent such claims originated in whole or in part or, based on
presently existing facts, could have originated in whole or in part on or before
the date hereof),  including,  without limitation, any and all claims which have
been  asserted  or could have been  asserted by  Debenture  Holders in the Legal
Action  and  any  and all  claims  directly  or  indirectly  arising  from or in
connection with (1) the bridge loans, (2) the debentures  executed in connection
therewith (3) any shares issued to Debenture  Holders pursuant to the debentures
(4) the warrants  issued in connection  with the  debentures,  (5) any action or
omission to act by WaterChef in  connection  with any of the  foregoing,  or any
other documents executed in connection with the bridge loan transactions, (6) or
arising from the negotiation of the terms of this Agreement.

     5. Adequacy of  Consideration.  WaterChef and each of the Debenture Holders
acknowledge  that the  consideration  for this  Agreement  and their  respective
releases  is hereby  accepted  in  satisfaction  of all  claims  and/or  damages
sustained  or ever to be  sustained,  in full  and  complete  discharge  for the
claims.  Each  acknowledges  they understand that the Agreement,  and the rights
conferred herein represent the entire  consideration that will ever be exchanged
between the parties.

     6. Covenant Not To Sue. Defendant,  for itself, its officers and directors,
affiliates,  successors  and  assigns,  and  Debenture  Holders,  on  behalf  of
themselves,  and each of their  heirs,  executors,  administrators,  successors,
agents,  representatives,  employees  and assigns and all others  claiming by or
through them, hereby covenant not to bring, commence,  prosecute or maintain any
suit,  action or  proceeding,  either at law or in  equity,  in any court of the
United  States  or of any  State  thereof,  arising  under or by  virtue  of the
negotiations   and/or   communications   entertained  in  connection  with  this
Agreement.  Defendant,  for  itself,  its  officers  and  directors,  affliates,
successors and assigns, and Debenture Holders, on behalf of themselves, and each
of their heirs, executors, administrators,  successors, agents, representatives,
employees and assigns and all others  claiming by or through them,  hereby fully
and forever  release and  discharge the other from any and all causes of action,
whether  sounding  in  contract  or in  tort,  or  otherwise,  and  any  and all
liability,  accrued or  unaccrued,  known or unknown,  fixed or  contingent,  on
account of any and all  claims,  demands,  and causes of action for all  losses,
damages,  expenses or liabilities to them,  arising out of any  negotiations  or
communications  entertained in connection with this Agreement, the bridge loans,
the debentures, the shares and the additional shares.

                                       69
<PAGE>

     7.  Retained  Rights and  Claims.  Notwithstanding  anything  contained  in
paragraphs 3, 4 and 6 hereof to the contrary,  none of the parties  releases the
other from the obligations created by this Agreement.

     8. The parties  expressly  agree not to publicize,  communicate,  reveal or
otherwise disclose,  directly or indirectly to any person, any term or condition
of this Agreement  except pursuant to compulsory  process of law and/or to their
legal and  financial  advisors to the extent  necessary to receive  professional
advice if such persons are expressly advised of this  confidentiality  provision
and agree to be bound thereby.

     9. This Agreement supersedes all prior communications regarding the matters
contained herein between the parties, their attorneys and representatives. There
shall not be a presumption  that the terms of this Agreement are to be construed
more or less favorably for or against the signatories  hereto.  The parties have
consulted with counsel with respect to this  Agreement.  The Agreement  contains
the  entire  agreement   between  the  parties  regarding  this  matter  and  no
representations  or promises have been made or relied on by any party other than
as stated herein.

     10. Nothing in this Agreement or the actions of any of the parties to it in
negotiating,  executing or complying with this Agreement shall be regarded as an
admission of liability or wrongdoing by any of the parties.

     11. The parties  acknowledge  that this is a compromise on disputed  claims
and this Agreement is entered to buy the peace of the respective parties.

     12. The  parties  acknowledge  and agree that this  Agreement  shall not be
admitted  into  evidence  in  any  proceeding,  except  as may  be  required  to
effectuate or enforce the terms of this Agreement.

     13. This  Agreement  shall be governed by and construed in accordance  with
the internal laws of the State of New  Hampshire,  without  giving effect to any
choice of law provisions that might apply.

     14.  This  Agreement  may be executed  in  counterparts  each of which will
constitute  an original  but all of which  constitutes  but one  Agreement.

     15. Representations and Warranties. Each undersigned expressly warrants and
represents  to the parties  released  herein,  as a condition to this  Agreement
that:

                                       70
 <PAGE>

     a. Each person  executing this Agreement and the Releases  contained herein
is over the age of  eighteen  (18)  years of age,  of sound  mind,  and  legally
capable of making this agreement.

     b. Each person  executing this Agreement and the Releases  contained herein
has read and  understands  this Settlement and Release  Agreement,  and each has
been  provided  the advice of attorneys  of their  selection  with regard to the
legal consequences of this agreement.

     c. No promise or  representation  of any kind has been expressed or implied
by any party,  or by anyone  acting for them,  except as is expressly  stated in
this Agreement.

     d. No person executing this Agreement and the Releases  contained herein is
relying  on the advice the other  party or parties or their  representatives  or
attorneys, on any matters relating to this Agreement.

     16. None of the persons  executing this Agreement have assigned,  conveyed,
or pledged any part of the claims and cause of actions released herein.

     17. This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be original and all of which taken together  shall  constitute one and
the same agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]













                                       71

<PAGE>



         IN WITNESS HERETO, the parties have executed under seal this Agreement
to be effective as of June 20, 2002.

DEBENTURE HOLDERS:                  WATER CHEF, INC.

                                                     By:
------------------------------                         -------------------------
K. Thomas Decoster                                   Name: David Conway
                                                     Its:  President
                                                     Duly Authorized

-----------------------------
Callaway Decoster



-----------------------------
Michael P. Gaudette



-----------------------------
Roberta S. Gaudette



-----------------------------
Dominic M. Strazzulla



-----------------------------
Sandra Hertzka, Executrix of the Felix A. Hertzka Estate



-----------------------------
Claudette L. Gelfand, individually and as Trustee of the Claudette L. Gelfand
Trust



-----------------------------
Catherine C. Griffm



-----------------------------
Michael B. Hayden



-----------------------------
Diane L. Hayden



-----------------------------
Alexander Harris



-----------------------------
Holly O. Harris



-----------------------------
Joseph R. Fichtl, Trustee of the Joseph R. Fichtl 1995 Trust


                                       72
<PAGE>
<TABLE>
<CAPTION>

                                                     EXHIBIT A


           Debenture Holder                       Original Issue Date                    Amount of Debenture
---------------------------------------- -------------------------------------- --------------------------------------
<S>                                                       <C> <C>                              <C>
         Dominic M. Strazzulla                      March 27, 1997                             $50,000

           Felix A. Hertzka                          April 1, 1997                             $25,000

        Michael P. and Roberta                      April 22, 1997                             $25,000
          S. Gaudette, JTWROS

         Claudette L. Gelfand                       April 22, 1997                             $25,000
            Revocable Trust

         Catherine C. Griffin                       April 24, 1997                             $25,000

          Joseph R Fichtl '95                       April 24, 1997                             $50,000
                 Trust

             K. Thomas and                          April 25, 1997                             $30,000
           Callaway Decoster

            Holly O. Harris                         April 28, 1997                             $10,000

           Alexander Harris                         April 29, 1997                             $10,000

        Michael B. and Diane L.                     April 30, 1997                             $25,000
            Hayden, JTWROS

          K. Thomas Decoster                         June 4, 1997                              $25,000

</TABLE>

                                       73
<PAGE>


                                                                    Exhibit 10.2

                          SUBDISTRIBUTORSHIP AGREEMENT

     Subdistributorship  Agreement  made  this 18th day of May,  2001  between 4
CLEAN WATERS LTD., a corporation  organized  and existing  under the laws of the
British Virgin Islands,  whose principal place of business is CNAC Building, 9th
Floor,  10  Queens  Road,   Central,   Hong  Kong  (hereafter   referred  to  as
"Distributor"),  and I. Salman EXP.  IMP.  EST.,  a  corporation  organized  and
existing  under  the  laws of the  State of  Jordan,  whose  principal  place of
business is Nassar Bin Jamil St., #159 Amman,  Jordan (hereafter  referred to as
"Subdistributor").

                                    RECITALS

     1. Distributor is the exclusive licensee of WaterChef,  Inc., for the "Pure
Safe  Water  Station"  and  related  components  and has the right  to,  appoint
Subdistributors.

     2.  Subdistributor  desires to obtain  from  Distributor,  and  Distributor
desires to grant to Subdistributor,  the exclusive right and license to sell and
promote  the  sale  of the  Pure  Safe  Water  Station  and  related  components
(hereafter  referred to as "Products") in Jordan,  Sudan,  Palestine  (hereafter
referred to as "Territory").

     In consideration of the matters described above, and of the mutual benefits
and obligations set forth in this agreement, the parties agree as follows:

                                   SECTION ONE

                                   APPOINTMENT

     A. Distributor appoints Subdistributor as the exclusive  Subdistributor for
the marketing, sale and servicing of the Products in the Territory.

     B. During the continuance of this Agreement,  Distributor agrees to notify,
in writing, all other Subdistributors of the Products that Subdistributor is the
exclusive  Subdistributor  for such Products and has the sole right to sell such
products in the Territory.

                                  SECTION TWO

                                RIGHT TO USE NAME

     A.  Distributor,  under the  authority  of  WaterChef,  Inc.,  licenses  to
Subdistributor  the right to use the trade name "Pure Safe Water  Station",  and
the trademark,  copyrights, pending patents and patents, in the marketing of the
Products  which,  and to  the  same  extent  as,  Distributor  now  has,  or may
subsequently acquire, the right to use.

     B.  Subdistributor  shall  not  produce  or use any  other  label,  name or
trademark on the Products.

                                       74
<PAGE>

     C. On the  termination  of this  Agreement  for any reason,  Subdistributor
shall  discontinue  the use of the trade same,  trademark,  labels,  copyrights,
pending  patents or patents and other  advertising  media,  and shall remove all
signs and displays  relating to the same; and, in the event of  Subdistributor's
failure to do so,  Distributor  may itself  remove such  article and material at
Subdistiibutor's expense.

     D. On the termination of this Agreement for any reason,  Distributor  shall
have  the  option  to  repurchase   the  Products  then  in  the  possession  of
Subdistributor,   and  available  for  sale,  at  prices  originally  billed  to
Subdistributor  plus actual  freight on the shipment of them to  Subdistributor,
and with deductions  from moneys due or to become due to Distributor  under this
Agreement.  As to any of  Distributors  Products  not  repurchased  by it within
thirty (30) days of such  termination,  Subdistributor  shall have the. right to
dispose of such  Products in the regular  course of its  business,  and for this
purpose,  the restrictions of the preceding Subsection C shall be deferred until
three (3) months after the termination of this Agreement.

                                 SECTION THREE

                          PURCHASE PRICE; MINIMUM SALES

     A.  Subdistributor  agrees  to  purchase  no fewer  than  100  units in the
calendar year,  commencing on January 1, 2001. The minimum number of units to be
purchased by Subdistributor shall be a minimum of 50 units for the calendar year
commencing  January 1, 2002 and by an  additional 50 units for the calendar year
commencing  January 1, 2003.  The minimum  quantities  are  cumulative,  and any
excess for prior years may be carried over to later years.

     B. The purchase  price for each unit purchased by  Subdistributor  shall be
the  Subdistributor  Prices  set forth in  Exhibit  A per  unit,  less ___ (__%)
percent. Similarly,  Subdistributor can purchase Refill Supplies at _____ (___%)
percent below Subdistributor Prices for the Refill Supplies set forth on Exhibit
B.  Distributor's  price list for the  Products  and the Refill  Supplies is set
forth in Exhibits "A" and "B" appended hereto and forming a part hereof.  In the
event of a price change,  Distributor agrees to give Subdistributor  thirty (30)
days notice prior to the effect thereof.

     C. The  minimum  quantities  are  cumulative  and any excess for prior yeah
maybe carried over to later years. If sales to the Subdistributor by Distributor
during  any year are  fifteen  (25%)  percent  lower  than  the  agreed  levels,
Distributor  shall have the  unrestricted  option,  to be exercised within sixty
(60) days of the year, of termination of the Subdistributors marketing and sales
rights and converting it to a non-exclusive  basis, within the Territory or part
of the Territory.

     D.  All  shipments  of the  Products  to  the  Subdistributor  will  be FOB
"WaterChef"  manufacturing  location.  Subdistributor  will be  responsible  for
selection and payment of all special  packing,  shipping,  freight and insurance
charges, which charges Distributor may require Subdistributor to pay in advance.
Subdistributor will also have the sole responsibility of obtaining any necessary
legal  documents  required by the various  Governments  of the  countries in the
Territory.

                                       75
<PAGE>

                                  SECTION FOUR

                                      TERM

     The term of this Agreement shall begin on the date first written above, and
shall end on December 31, 2003, subject to the following:  An Option to renew by
both parties after agreement of quantities for an additional 3 years.

     A. Provided  Subdistributor is not in default in this Agreement,  or any of
its  terms or  provisions,  Subdistributor  may  elect,  by  written  notice  to
Distributor  at least  30 days  prior  to the end of the  original  term of this
Agreement,  to  extend  automatically,  this  Agreement  on the same  terms  and
conditions,  for  successive  automatic  renewal  period of the year  commencing
January 1, 2003, so long as the minimum quantities ___ units per year in the 4th
year, ___ units per year in the 5th year, and ___ units per year in the 6th year
and thereafter are met.

     B.  Subdistributor  may, on ninety (90) days written notice to Distributor,
terminate this Agreement for any reason, without cause, but without prejudice to
may rights of either party to moneys due or to become due under this Agreement.

     C. In the event of breach by Distributor,  or its failure to perform any of
the terms or conditions of this  Agreement,  Subdistributor  may terminate  this
Agreement  on 60 days  written  notice,  which  notice shall be effective at the
expiration of the 60-day period. However,  failure by Distributor to deliver any
order to  Subdistributor  shall not be deemed a breach or  failure to perform by
Distributor,  if such  failure to deliver is the direct  result of  revolutions,
insurrections,  riots, wars, acts of enemies,  acts of God, national  emergency,
strikes or floods (referred to below as "force  majeure"),  aid the existence of
such force majeure is disclosed,  in writing, to Sub-distributor  within 30 days
of its occurrence.

     D. If  Subdistributor  is in default in any  payment to  Distributor  for a
period  of  30  days  after   demand  for  payment  from   Distributor,   or  if
Subdistributor  defaults,  in performing  any of the other terms,  conditions or
promises  of this  Agreement,  and  continues  in default for a period of 5 days
after written notice of default,  then  Distributor  shall have the right at the
expiration  of the 15-day  notice of default,  to  terminate  this  Agreement on
giving written notice of the termination at the end of the 15-day period.

     E. If Subdistributor is or becomes insolvent,  or enters into a composition
with its creditors,  or if a receiver is appointed for it, or if  Subdistributor
files any  petition or  application  under any  bankruptcy  laws or acts,  or is
adjudicated a bankrupt,  then Distributor shall have the right to terminate this
Agreement on giving  notice to  Subdistributor  at least 30 days before the time
when such  termination is to take effect,  and at the expiration of the 30 days,
this Agreement  shall become null and void, but without  prejudice to the rights
of either party to moneys due or to become due under this Agreement.

                                       76
<PAGE>

                                  SECTION FIVE

                          RETURN OF DEFECTIVE PRODUCTS

         Subdistributor may return any products that are defective within sixty
(60) days of delivery, and Distributor shall immediately replace all such
defective products at Distributor's expense.

                                  SECTION SIX

                                 REPRESENTATIONS

     Distributor represents, covenants and warrants as follows:

     A. Distributor is a corporation  formed and in good standing in the British
Virgin  Islands,  and is not now  operating  in  bankruptcy,  or  Pursuant to an
arrangement with its creditors under any chapter of the federal bankruptcy laws.

     B.  Distributor  has the  worldwide  exclusive  rights to market,  sell and
service the Products  covered,  by this  Agreement  and has tie right to license
exclusive and nonexclusive rights to others to market such products worldwide.

     C. Distributor has not gamed and will not, without prior written consent of
Subdistributor,  grant to any person, entity or organization,  the right to sell
or market the  products  covered by this  Agreement  whether at  wholesale or at
retail, in the Territory covered by this Agreement and will not itself or by its
employees or agents make any such sales.

     D. During the term of this  Agreement,  Distributor  will  endeavor to have
WaterChef  maintain  in full  force and  effect  its  present  rights to use the
tradename,   trademark,   labels,  copyrights.   pending  patents  rind  patents
affiliated  with the  Products  covered by this  Agreement  and shall at its own
expense exercise its common-law . and statutory rights against any infringements
of its right to so use such tradename,  trademark,  labels, copyrights,  pending
patents and patents.

                                 SECTION SEVEN

                        REPRESENTATIONS OF SUBDISTRIBUTOR

          Subdistributor covenants and warrants as follows:

     A. Subdistributor is a corporation formed and in good standing in Jordan.

     B. Subdistributor shall use its best efforts to market, service and sell at
the Products covered by this Agreement in the Territory specified.

     C.  Subdistributor  agrees that in the  countries  where  WaterChef  and/or
Distributor  have applied for patent  protection to be vigilant in detecting any
possible  infringement  of the patents by third parties and to inform  WaterChef
and Distributor  promptly of any  infringement and to collaborate with WaterChef
and Distributor in proceeding against any infringement, to the extent requested.

                                       77
<PAGE>

                                 SECTION EIGHT

                                ENTIRE AGREEMENT

     This  Agreement  constitutes  the  entire  agreement  between  the  parties
pertaining to the subject  matter  contained in it and  supersedes all prior and
contemporaneous  agreements,  representations and understandings of the parties.
No supplement,  modification  or amendment of this  Agreement  shall be binding,
unless  executed in writing by all the parties to this  Agreement.  No waiver of
any of the provisions of this Agreement shall be deemed, or shall constitute,  a
waiver of any other  provision,  whether  or not  similar,  nor shall any waiver
constitute a continuing  waiver.  No waiver shall be binding unless  executed in
writing by the ply making the waiver.

                                  SECTION NINE

                    BINDING EFFECT ON SUCCESSORS AND ASSIGNS

     This  Agreement  shall be binding on and shall  inure to the benefit of the
successors end assigns of the parties to this Agreement.

                                  SECTION TEN

                                  ATTORNEY FEES

     If any legal action or other  proceeding is brought for the  enforcement of
this  Agreement,   or  because  of  an  alleged  dispute,   breach,  default  or
misrepresentation  in connection  with any of the provisions of this  Agreement,
the  successful  or  prevailing  party or parties  shall be  entitled to recover
reasonable  attorney fees and other costs incurred in that action or proceeding,
in addition to any other relief to which it may be entitled.

                                 SECTION ELEVEN

                                     NOTICES

     All  notices,   requests,  demands  and  other  communications  under  this
Agreement skull be in writing and shall be deemed to have been given on the date
of soviet if served personally on the party to whom notice is to be given, or on
the  third  day after  mailing,  if mailed to the party to whom  notice is to be
given,  by first-class  trail,  registered or certified,  postage  prepaid,  and
unless  either  party should  notify the other of a change of address,  properly
addressed, as follows:

         To Distributor             4 Clean Waters, Ltd.
                                    c/o Law Offices of Howard L. Mann, Esq.
                                    50 Main Street, Ste. 1076
                                    White Plains, New York 10606

         To Subdistributor
                                    -----------------------------------
                                       78
<PAGE>

                                 SECTION TWELEV

                                 INTERPRETATION

     This Agreement shall be governed by the laws of the State of New York.

                                SECTION THIRTEEN

                               TIME OF THE ESSENCE

     Time is of the essence in all portions of this Agreement.

                                SECTION FOURTEEN

                                    CAPTIONS

     The subject  headings of the sections and subsections of this Agreement are
included for purposes of convenience  only and shall not affect the construction
or interpretation of any of its provisions.

                                 SECTION FIFTEEN

                                AUTHORITY TO BIND

     Each person executing this Agreement  warrants that the person has full and
legal  authority to execute this  Agreement for and on behalf of the  respective
corporations and to bind such corporations.

         WHEREFORE, the parties have executed this Agreement at New York City on
the date and year first above written.

[SUBDISTRIBUTOR]                            4 CLEAN WATERS LTD.





By:                                         By:
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Title:                                      Title:
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