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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   FORM 10-QSB

(Mark One)

(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934

                  For the quarterly period ended June 30, 2007

( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

              For the transition period from           to
                                            ----------    ----------

                         Commission file number 1-09478

                                WATER CHEF, INC.
         ---------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

            Delaware                                             86-0515678
 ------------------------------                               -----------------
(State or Other Jurisdiction of                              (IRS Employer
 Incorporation or Organization)                              Identification No.)

           68 South Service Road, Suite 100, Melville, New York 11747
                     --------------------------------------
                    (Address of Principal Executive Offices)

                                  631-577-7915
                 ----------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

               ---------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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
                                                             -----   -----

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.) Yes      No  X
                                    -----   -----

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date.

                        OUTSTANDING AS OF AUGUST 7, 2007
           CLASS                                                      Common
           -----                                                      ------
Par value $0.001 per share                                          190,191,843

Transitional small business disclosure format (check one) Yes      No  X
                                                             -----   -----

<PAGE>


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

                                WATER CHEF, INC.

                                      INDEX




                                                                          PAGE


PART I - FINANCIAL INFORMATION:


                         ITEM 1: FINANCIAL STATEMENTS:

     Condensed Balance Sheet (Unaudited)
        At June 30, 2007                                                   2-3

     Condensed Statements of Operations (Unaudited)
        For the Three Months Ended June 30, 2007 and 2006
        For the Six Months Ended June 30, 2007 and 2006
        For the Period January 1, 2002 to June 30, 2007                     4

     Condensed Statement of Stockholders' Deficiency (Unaudited)
        For the Six Months Ended June 30, 2007 and 2006
                                                                           5-6
     Condensed Statements of Cash Flows (Unaudited)
        For the Six Months Ended June 30, 2007 and 2006
        For the Period January 1, 2002 to June 30, 2007                    7-8

     Notes to Condensed Financial Statements (Unaudited)                   9-16


ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION        17-20

ITEM 3:  CONTROLS AND PROCEDURES                                          21-22


PART II: OTHER INFORMATION:


ITEM 2:  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS       23

ITEM 6: EXHIBITS                                                           24

SIGNATURE                                                                  25

                                       1

<PAGE>

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

                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)


                             CONDENSED BALANCE SHEET
                                   (UNAUDITED)

                                  JUNE 30, 2007

                                     ASSETS


CURRENT ASSETS:
    Cash                                                                $215,129
    Prepaid expenses and other current assets                             30,685
                                                                        --------

      Total Current Assets                                               245,814
                                                                        --------

FIXED ASSETS:
    Property and equipment  net of accumulated
     depreciation of $234                                                 13,806
                                                                        --------

OTHER ASSETS
    Patents and trademarks  net of accumulated
       amortization of $11,579                                            14,476
    Other assets                                                           6,360
                                                                        --------

      Total Other Assets                                                  20,836
                                                                        --------

TOTAL ASSETS                                                            $280,456
                                                                        ========


                  See notes to condensed financial statements.

                                        2

<PAGE>
<TABLE>
<CAPTION>

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


                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)

                             CONDENSED BALANCE SHEET
                                   (UNAUDITED)

                                  JUNE 30, 2007

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY


CURRENT LIABILITIES:
<S>                                                                  <C>
    Accounts payable and accrued expenses                            $   401,099
    Accrued compensation                                                 135,000
    Accrued consulting and director fees                                 155,833
    Notes payable to officer and director
      (including accrued interest of $2,863)                             102,863
    Notes payable
      (including accrued interest of $393,361)                         1,001,314
    Fair value of detachable warrants and options                        501,800
    Fair value of embedded conversion options                            143,900
    Accrued dividends payable                                            190,084
                                                                     -----------

TOTAL CURRENT LIABILITIES                                              2,631,893
                                                                     -----------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDER'S DEFICIENCY:
    Preferred stock  $.001 par value; 10,000,000 shares
      Authorized; 185,819 shares issued and outstanding,
      (liquidation preference $2,294,425)                                    186
    Common stock  $.001 par value; 340,000,000 shares authorized;
      190,196,243 shares issued and 190,191,843 shares outstanding       190,191
    Additional paid-in capital                                        25,333,677
    Treasury stock, at cost - 4,400 shares of common stock           (     5,768)
    Deficit accumulated through December 31, 2001                    (14,531,596)
    Deficit accumulated during development stage                     (13,338,127)
                                                                     -----------

TOTAL STOCKHOLDERS' DEFICIENCY                                       ( 2,351,437)
                                                                     -----------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                       $   280,456
                                                                     ===========


                  See notes to condensed financial statements.

                                        3

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

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

                                                          WATER CHEF, INC.
                                      (A Development Stage Company Commencing January 1, 2002)

                                                 CONDENSED STATEMENTS OF OPERATIONS
                                                             (UNAUDITED)



                                                                                                                     For the period
                                                     For the Three Months Ended        For the Six Months Ended      January 1, 2002
                                                             June 30,                          June 30,                 to June 30,
                                                          -------------                     -------------             -------------

                                                       2007             2006             2007            2006             2007
                                                   -------------    -------------    -------------   -------------    -------------
<S>                                                <C>              <C>              <C>                   <C>        <C>
SALES                                              $        --      $        --      $        --           115,000    $     471,290
                                                   -------------    -------------    -------------   -------------    -------------

COST OF SALES                                              8,000           21,000           23,000          72,000          575,680

SELLING, GENERAL AND ADMINISTRATIVE
  Including stock based compensation of
  $503,838 and $727,000 for the three months
  ended June 30, 2007 and 2006 and $503,838
  and $767,699 for the six months ended June 30,
  2007 and 2006, and  $2,038,927 for the period
  January 1, 2002 to June 30, 2007, respectively         757,718          878,966          920,255       1,163,937        6,577,306


NON-DILUTION AGREEMENT TERMINATION COST                     --               --               --              --          2,462,453

INTEREST EXPENSE  Including interest expense to
  related parties of $2,466 and $5,967 for the
  three months ended June 30, 2007 and 2006 and
  $2,863 and $ 11,934 for the six months ended
  June 30, 2007 and 2006, and $122,203 for the
  period January 1, 2002 through June 30, 2007,
  respectively                                            31,925           36,064          139,200         191,864        1,245,761

FINANCING COSTS - EXTENSION OF WARRANTS                     --               --               --              --             74,700

LOSS ON SETTLEMENT OF DEBT                                  --               --               --              --          2,614,017

INTEREST EXPENSE - CONVERSION PROVISION                  113,000             --            113,000            --            113,000

CHANGE IN FAIR VALUE OF WARRANTS
   AND EMBEDDED CONVERSION OPTION                        (94,100)          72,400           18,400         186,600          146,500
                                                   -------------    -------------    -------------   -------------    -------------
                                                         816,543        1,008,430        1,213,855       1,614,401       13,809,417
                                                   -------------    -------------    -------------   -------------    -------------

NET LOSS                                                (816,543)      (1,008,430)      (1,213,855)     (1,499,401)     (13,338,127)
                                                   -------------    -------------    -------------   -------------    -------------

DEEMED DIVIDEND ON PREFERRED STOCK                          --               --               --              --        ( 2,072,296)

PREFERRED STOCK DIVIDENDS                            (        74)     (    42,401)     (       213)    (    42,401)     (   509,280)
                                                   -------------    -------------    -------------   -------------    -------------
                                                     (        74)     (    42,401)     (       213)    (    42,401)     ( 2,581,576)
                                                   -------------    -------------    -------------    -------------   -------------

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS         $ (   816,469)   $ ( 1,050,831)   $ ( 1,214,068)   $ ( 1,541,802)  $ (15,919,703)
                                                   -------------    -------------    -------------    -------------   -------------

BASIC AND DILUTED LOSS PER COMMON SHARE            $ (      0.00)   $ (      0.01)   $ (      0.01)   $(      0.01)
                                                   -------------    -------------    -------------   -------------
WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING  BASIC AND DILUTED                     185,852,398      193,303,682      187,799,075     187,869,690
                                                   -------------    -------------    -------------   -------------


                                                See notes to condensed financial statements.

                                                                      4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

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


                                                          WATER CHEF, INC.
                                      (A Development Stage Company Commencing January 1, 2002)

                                           CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIENCY
                                                             (UNAUDITED)


                                                                                                                        Additional
                                                           Preferred Stock                   Common Stock                Paid-in
                                                      Shares           Amount           Shares           Amount          Capital
                                                   -------------    -------------    -------------    -------------   -------------
<S>                                                <C>              <C>              <C>              <C>             <C>
FOR THE SIX MONTHS ENDED JUNE 30, 2007

BALANCE - JANUARY 1, 2007                                188,917    $         189      198,977,497    $     198,977   $  22,836,764

Proceeds from Sale of Common Stock:
  ($0.090 per share) May 10, 2007                           --               --          1,111,112            1,111          98,889

  ($0.083 per share) May 10, 2007                           --               --          2,409,640            2,409         197,591

  ($0.090 per share) May 31, 2007                           --               --            555,555              555          49,445

  ($0.083 per share) June 26, 2007                          --               --          1,203,080            1,203          98,797

Stock for compensation:
  ($0.110 per share) May 2, 2007                            --               --          2,500,000            2,500         272,500

Common stock issued in repayment of debt:
  ($0.132 per share) February 26, 2007                      --               --            195,212              195          25,534

  ($0.111 per share) March 8, 2007                          --               --            234,165              234          25,571

  ($0.107 per share) March 14, 2007                         --               --            256,643              257          25,587

  ($0.099 per share) March 19, 2007                         --               --            262,650              263          25,608

  ($0.097 per share) March 23, 2007                         --               --            806,583              807          76,867

  ($0.095 per share) April 4, 2007                          --               --            546,901              547          51,354

  ($0.086 per share) May 1, 2007                            --               --            908,885              909          77,345

 Stock for late payment penalty:
  ($0.100 per share) May 22, 2007                           --               --            100,000              100           9,900

Preferred stock converted to common stock:
  During the quarter ended March 31, 2007            (     2,848)    (          3)         113,920              114     (       111)

  During the quarter ended June 30, 2007             (       250)            --             10,000               10     (        10)

Cancellation of debt for no consideration                   --               --               --               --         1,327,321

Surrender and cancellation of common stock                  --              --         (20,000,000)     (    20,000)         20,000

Reclassification of derivative liability
 to equity upon conversion of debt                          --               --               --               --           140,000

Reclassification of options to non employees to
 derivative liability                                       --               --               --               --          (247,100)

Reclassification of derivative liability to
equity upon conversion of preferred stock                   --               --               --               --             3,200

Amortization of warrants and option
over the vesting  period for employees and
non employees                                               --               --               --               --           218,838

Preferred stock dividend                                    --               --               --               --       (       213)

Net loss                                                    --               --               --               --              --
                                                   -------------    -------------    -------------    -------------   -------------

BALANCE - JUNE 30, 2007                                  185,819    $         186      190,191,843    $     190,191   $  25,333,677
                                                   =============    =============    =============    =============   =============


                                            See notes to condensed financial statements.

                                                                  5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

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


                                               WATER CHEF, INC.
                          (A Development Stage Company Commencing January 1, 2002)

                                CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIENCY
                                                  (UNAUDITED)
                                                  (CONTINUED)


                                                                  Deficit        Deficit
                                                                Accumulated    Accumulated
                                                 Treasury         through        During           Total
                                                   Stock        December 31,   Development     Stockholders'
                                                - at cost          2001           Stage         Deficiency
                                               ------------    ------------    ------------    ------------
<S>                                            <C>             <C>             <C>             <C>
FOR THE SIX MONTHS ENDED JUNE 30, 2007

BALANCE - JANUARY 1, 2007                      $     (5,768)   $(14,531,596)   $(12,124,272)   $ (3,625,706)

Proceeds from Sale of Common Stock:
  ($0.090 per share) May 10, 2007                      --              --              --           100,000
  ($0.083 per share) May 10, 2007                      --              --              --           200,000
  ($0.090 per share) May 31, 2007                      --              --              --            50,000
  ($0.083 per share) June 26, 2007                     --              --              --           100,000

Stock for compensation:
  ($0.110 per share) May 2, 2007                       --              --              --           275,000

Common stock issued in repayment of debt:
  ($0.132 per share) February 26, 2007                 --              --              --            25,729
  ($0.111 per share) March 8, 2007                     --              --              --            25,805
  ($0.107 per share) March 14, 2007                    --              --              --            25,844
  ($0.099 per share) March 19, 2007                    --              --              --            25,871
  ($0.097 per share) March 23, 2007                    --              --              --            77,674
  ($0.095 per share) April 4, 2007                     --              --              --            51,901
 ($0.086 per share) May 1, 2007                        --              --              --            78,254

Stock for late payment penalty:
  ($0.100 per share) May 22, 2007                      --              --              --            10,000

Preferred stock converted to common stock:
  During the quarter ended March 31, 2007              --              --              --              --
  During the quarter ended June 30, 2007               --              --              --              --

Cancellation of debt for no consideration              --              --              --         1,327,321

Surrender and cancellation of common stock             --              --              --              --

Reclassification of derivative liability
 to equity upon conversion of debt                     --              --              --           140,000

Reclassification of options to non employees
 to derivative liability                               --              --              --          (247,100)

Reclassification of derivative liability to
equity upon conversion of preferred stock              --              --              --             3,200

Amortization of warrants and option over
the vesting  period for employees and
non employees                                          --              --              --           218,838

Preferred stock dividend                               --              --              --        (      213)

Net loss                                               --              --        (1,213,855)     (1,213,855)
                                               ------------    ------------    ------------    ------------

BALANCE - JUNE 30, 2007                        $     (5,768)   $(14,531,596)   $(13,338,127)   $ (2,351,437)
                                               ============    ============    ============    ============


                                 See notes to condensed financial statements.

                                                      6
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


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

                                               WATER CHEF, INC.
                           (A Development Stage Company Commencing January 1, 2002)

                                      CONDENSED STATEMENTS OF CASH FLOWS
                                                 (UNAUDITED)



                                                                                               For the Period
                                                                   For the Six Months Ended    January 1, 2002
                                                                           June 30,              to June 30,
                                                                    2007            2006            2007
                                                                ------------    ------------    ------------
<S>                                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                    $( 1,213,855)   $( 1,499,401)   $(13,338,127)

    Adjustments to reconcile net loss to net
     cash used in operating activities:
      Depreciation                                                       234            --               234
      Amortization of patents                                            927             927          10,197
      Interest expense - deferred financing                            4,687           4,687          15,000
      Stock-based compensation                                       503,838         767,699       2,362,289
       Interest expense - conversion provision                       113,000            --              --
      Accretion of debt discount                                      69,800         112,800         362,320
        Change in fair value of warrants and embedded
        conversion option                                             18,400         186,600         178,400
      Loss on settlement of debt                                        --              --         2,614,017
      Non-dilution agreement termination cost                           --              --         2,462,453
      Inventory reserve                                                 --              --           159,250
      Write-off of stock subscription receivable                        --              --            21,800
      Financing cost - warrant extension                                --              --            74,700
    Changes in assets and liabilities:
       Inventory                                                        --            30,000            --
       Prepaid expenses and other current assets                 (    11,403)          2,394          25,815
      Security deposits                                          (     3,198)           --       (     3,198)
       Accounts payable, accrued expenses and other current
        liabilities, accrued compensation, accrued consulting
        and director fees, accrued dividends and customer
        deposits                                                     136,661     (   189,381)      1,534,649
                                                                ------------    ------------    ------------

             Net Cash Used in Operating Activities               (   380,909)    (   583,675)    ( 3,752,460)
                                                                ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                            (    14,040)           --       (    14,040)
                                                                ------------    ------------    ------------

            Net Cash Used in Investing Activities               $    (14,040)   $       --      $(    14,040)
                                                                ------------    ------------    ------------


                                 See notes to condensed financial statements.

                                                       7

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

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

                                           WATER CHEF, INC.
                       (A Development Stage Company Commencing January 1, 2002)

                                  CONDENSED STATEMENTS OF CASH FLOWS
                                              (UNAUDITED)



                                                                                        For the Period
                                                             For the Six Months Ended   January 1, 2002
                                                                     June 30,             to June 30,
                                                               2007           2006          2007
                                                            -----------    -----------   -----------
<S>                                                         <C>            <C>           <C>
 CASH FLOWS FROM FINANCING ACTIVITIES:
   Stock subscription receivable                            $      --      $      --     $    65,700
   Proceeds from sale of preferred stock                           --             --       1,130,127
   Proceeds from sale of common stock                           450,000        540,000     1,990,560
   Proceeds from sale of common stock to be issued                 --             --         200,000
   Deferred financing costs                                        --             --      (   15,000)
   Proceeds from convertible promissory notes                      --             --         550,000
   Proceeds from officers and directors loans                   100,000           --         100,000
   Repayment of notes payable                                (   39,638)    (   15,962)   (   75,269)
                                                            -----------    -----------   -----------

             Net Cash Provided by Financing Activities          510,362        524,038     3,946,118
                                                            -----------    -----------   -----------

 NET INCREASE (DECREASE)  IN CASH                               115,413     (   59,637)      179,618

CASH AT BEGINNING OF PERIOD                                      99,716        244,595        35,511
                                                            -----------    -----------   -----------


CASH AT END OF PERIOD                                       $   215,129    $   184,958   $   215,129
                                                            ===========    ===========   ===========
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:
 CASH PAID DURING THE YEAR FOR:
          INTEREST                                          $      --      $      --     $   356,931
                                                            -----------    -----------   -----------

 SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING
   AND FINANCING ACTIVITIES
    Compensation satisfied by issuance of common stock      $      --      $      --     $    55,250
                                                            -----------    -----------   -----------


   Common stock issued in satisfaction of liabilities       $   311,078    $    48,485   $ 6,675,362
                                                            -----------    -----------   -----------
    Reclassification of derivative liabilities upon
     conversion of debt                                     $   140,800    $      --     $   508,800
                                                            -----------    -----------   -----------

    Reclassification of equity instruments to liabilities   $   247,100    $      --     $   536,000
                                                            -----------    -----------   -----------

    Reclassification of derivative liabilities upon
     conversion of preferred stock                          $     3,200    $      --     $     3,200
                                                            -----------    -----------   -----------

   Cancellation of debt for no consideration                $ 1,327,321    $      --     $ 1,327,321
                                                            -----------    -----------   -----------


                              See notes to condensed financial statements.

                                                   8
</TABLE>

<PAGE>

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

                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1:  DESCRIPTION OF BUSINESS

          Water Chef, Inc. (the "Company"), is a Delaware corporation currently
          engaged in the design and marketing of water purification equipment
          both inside and outside the United States. The Company's corporate
          headquarters are located in Melville, New York.


NOTE 2:  BASIS OF PRESENTATION AND ACCOUNTING POLICIES

          The accompanying unaudited condensed financial statements have been
          prepared in accordance with accounting principles generally accepted
          in the United States of America for interim financial information.
          Accordingly, these interim financial statements do not include all of
          the information and footnotes required for annual financial
          statements. In the opinion of management, all adjustments (consisting
          of normal recurring accruals) considered necessary to make the
          financial statements not misleading have been included.

          The operating results for the six-month period ended June 30, 2007 are
          not necessarily indicative of the results that may be expected for the
          year ending December 31, 2007. These financial statements should be
          read in conjunction with the financial statements and footnotes
          thereto included in the Company's Annual Report on Form 10-KSB, filed
          on March 30, 2007, for the year ended December 31, 2006.

          DEVELOPMENT STAGE COMPANY
            The Company is in the development stage as defined by Statement of
            Financial Accounting Standards ("SFAS") Statement No. 7, "Accounting
            and Reporting for Development Stage Companies." To date, the Company
            has generated limited sales and has devoted its efforts primarily to
            developing its products, implementing its business and marketing
            strategy and raising working capital through equity financing or
            short-term borrowings.

          REVENUE RECOGNITION
            The Company recognizes its revenues when the product is shipped and
            or title passes and collection is reasonably assured.

         STOCK BASED COMPENSATION
            Effective January 1, 2006, the Company adopted SFAS 123R which
            replaces SFAS 123, "Accounting for Stock-Based Compensation" and
            supersedes Accounting Principles Board Opinion No. 25, "Accounting
            for Stock Issued to Employees." SFAS 123R requires all share-based
            payments to employees, including grants of employee stock options,
            to be recognized in the financial statements based on their fair
            values. Pro forma disclosure is no longer an alternative to
            financial statement recognition.

                                        9

<PAGE>


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

                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 3:  GOING CONCERN

          The accompanying condensed financial statements have been prepared
          assuming that the Company will continue as a going concern. The
          Company has incurred recurring losses from operations, an accumulated
          deficit since its inception of approximately $27,870,000 and has a
          working capital deficiency of approximately $2,386,000 at June 30,
          2007. 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,
          settling its existing debt by issuing shares of its common stock and
          raising additional capital through future issuance of stock and or
          debentures. However, there can be no assurance that the Company will
          be able to obtain sufficient funds to continue the development of its
          product, marketing plan and distribution network. The accompanying
          condensed financial statements do not include any adjustments that
          might be necessary should the Company be unable to continue as a going
          concern.


NOTE 4:  RECENT ACCOUNTING STANDARDS

          In February 2006, the FASB issued SFAS 155, "Accounting for Certain
          Hybrid Financial Instruments - an amendment of FASB Statements No. 133
          and 140" ("SFAS 155"). SFAS 155 resolves issues addressed in SFAS 133
          Implementation Issue No. D1, "Application of Statement 133 to
          Beneficial Interests in Securitized Financial Assets." The
          requirements in SFAS 155 are effective for all financial instruments
          acquired or issued after the beginning of an entity's first fiscal
          year that begins after September 15, 2006. The adoption of this
          pronouncement did not have an impact on the Company's financial
          position, results of operations or cash flows.

          In September 2006, the FASB issued SFAS No. 157, "Fair Value
          Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a
          framework for measuring fair value in accordance with accounting
          principles generally accepted in the U.S., and expands disclosures
          about fair value measurements. SFAS 157 is effective for financial
          statements issued for fiscal years beginning after November 15, 2007,
          with earlier application encouraged. Any cumulative effect will be
          recorded as an adjustment to the opening accumulated deficit balance,
          or other appropriate component of equity. The adoption of this
          pronouncement did not have an impact on the Company's financial
          position, results of operations or cash flows.

          In September 2006, the SEC staff issued Staff Accounting Bulleting
          ("SAB") No. 108, Considering the Effects of Prior Year Misstatements
          when Quantifying Misstatements in Current Year Financial Statements
          ("SAB 108"). SAB 108 was issued in order to reduce the diversity in
          practice in how public companies quantify misstatements of financial
          statements, including misstatements that were not material to prior
          years' financial statements. SAB 108 is effective for fiscal year
          2007. The adoption of this pronouncement did not have an impact on the
          Company's financial position, results of operations, or cash flows.

                                       10

<PAGE>


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

                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 4:  RECENT ACCOUNTING STANDARDS (Continued)

          In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
          for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159
          provides companies with an option to report selected financial assets
          and liabilities at fair value. The objective of SFAS 159 is to reduce
          both complexity in accounting for financial instruments and the
          volatility in earnings caused by measuring related assets and
          liabilities differently. Generally accepted accounting principles have
          required different measurement attributes for different assets and
          liabilities that can create artificial volatility in earnings. The
          FASB has indicated it believes that SFAS 159 helps to mitigate this
          type of accounting-induced volatility by enabling companies to report
          related assets and liabilities at fair value, which would likely
          reduce the need for companies to comply with detailed rules for hedge
          accounting. SFAS 159 also establishes presentation and disclosure
          requirements designed to facilitate comparisons between companies that
          choose different measurement attributes for similar types of assets
          and liabilities.

          SFAS 159 does not eliminate disclosure requirements included in other
          accounting standards, including requirements for disclosures about
          fair value measurements included in SFAS 157 and SFAS No. 107,
          "Disclosures about Fair Value of Financial Instruments." SFAS 159 is
          effective for the Company as of the beginning of fiscal year 2009 the
          adoption of this pronouncement is not expected to have an impact on
          the Company's financial position, results of operations or cash flows.

          In December 2006, the FASB approved FASB Staff Position (FSP) No. EITF
          00-19-2, "Accounting for Registration Payment Arrangements" ("FSP EITF
          00-19-2"), which specifies that the contingent obligation to make
          future payments or otherwise transfer consideration under a
          registration payment arrangement, whether issued as a separate
          agreement or included as a provision of a financial instrument or
          other agreement, should be separately recognized and measured in
          accordance with SFAS No. 5, "Accounting for Contingencies." FSP EITF
          00-19-2 also requires additional disclosure regarding the nature of
          any registration payment arrangements, alternative settlement methods,
          the maximum potential amount of consideration and the current carrying
          amount of the liability, if any. The guidance in FSP EITF 00-19-2
          amends FASB Statements No. 133, "Accounting for Derivative Instruments
          and Hedging Activities," and No. 150, "Accounting for Certain
          Financial Instruments with Characteristics of both Liabilities and
          Equity," and FASB Interpretation No. 45, "Guarantor's Accounting and
          Disclosure Requirements for Guarantees, Including Indirect Guarantees
          of Indebtedness of Others," to include scope exceptions for
          registration payment arrangements.

          FSP EITF 00-19-2 is effective immediately for registration payment
          arrangements and the financial instruments subject to those
          arrangements that are entered into or modified subsequent to the
          issuance date of this FSP, or for financial statements issued for
          fiscal years beginning after December 15, 2006, and interim periods
          within those fiscal years, for registration payment arrangements
          entered into prior to the issuance date of this FSP. The adoption of
          this pronouncement did not have an impact on the Company's financial
          position, results of operations or cash flows.

                                       11

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                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 4:  RECENT ACCOUNTING STANDARDS (Continued)

          Effective January 1, 2007, the Company adopted the provisions of FASB
          Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -
          an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
          prescribes a recognition threshold and a measurement attribute for the
          financial statement recognition and measurement of tax positions taken
          or expected to be taken in a tax return. For those benefits to be
          recognized, a tax position must be more-likely-than-not to be
          sustained upon examination by taxing authorities. Differences between
          tax positions taken or expected to be taken in a tax return and the
          benefit recognized and measured pursuant to the interpretation are
          referred to as "unrecognized benefits." A liability is recognized (or
          amount of net operating loss carry forward or amount of tax refundable
          is reduced) for an unrecognized tax benefit because it represents an
          enterprise's potential future obligation to the taxing authority for a
          tax position that was not recognized as a result of applying the
          provisions of FIN 48.

          In accordance with FIN 48, interest costs related to unrecognized tax
          benefits are required to be calculated (if applicable) and would be
          classified as "Interest expense, net" in the consolidated statements
          of operations. Penalties would be recognized as a component of
          "General and administrative expenses."

          In many cases the Company's uncertain tax positions are related to tax
          years that remain subject to examination by relevant tax authorities.
          The Company files income tax returns in the United States (federal)
          and in various state and local jurisdictions. In most instances, the
          Company is no longer subject to federal, state and local income tax
          examinations by tax authorities for years prior to 2003.

          The adoption of the provisions of FIN 48 did not have a material
          impact on the Company's financial position and results of operations.
          As of June 30, 2007, no liability for unrecognized tax benefits was
          required to be recorded.

          The Company recognized a deferred tax asset of approximately $8
          million as of June 30, 2007, primarily relating to net operating loss
          carry-forwards of approximately $24 million through 2006, available to
          offset future taxable income.

          The ultimate realization of deferred tax assets is dependent upon the
          generation of future taxable income during the periods in which those
          temporary differences become deductible. The Company considers
          projected future taxable income and tax planning strategies in making
          this assessment. At present, the Company does not have a sufficient
          history of income to conclude that it is more likely than not that the
          Company will be able to realize all of its tax benefits in the near
          future and therefore a valuation allowance was established in the full
          value of the deferred tax asset.

          A valuation allowance will be maintained until sufficient positive
          evidence exists to support the reversal of any portion or all of the
          valuation allowance net of appropriate reserves.

                                       12

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                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 5:  CONVERTIBLE PROMISSORY NOTES

          On October 17, 2006, the Company entered into a Convertible Promissory
          Note for proceeds of $300,000. The loan has a stated interest rate of
          8% per annum and matured on February 17, 2007. The Company issued a
          warrant for 882,352 shares of the Company's common stock, exercisable
          at $0.085 per share and has a life of three years. The warrant has a
          cashless exercise provision. The note and accrued interest are
          convertible at any time after the maturity date into shares of the
          Company's common stock at a conversion price equal to the current
          market price multiplied by eighty-five percent. After the maturity
          date, the lender converted $300,000 of principal and $11,078 of
          interest to 3,211,039 shares of common stock during the six months
          ended June 30, 2007 in full satisfaction of the note plus accrued
          interest

          The Convertible Promissory Note agreement required the Company to file
          a registration statement no later than thirty business days from the
          date of the agreement for no less than the amount of subscribed
          shares, and to cause the registration statement relating to the
          registrable securities to become effective the earlier of five
          business days after notice from the Securities and Exchange Commission
          that the registration statement may be declared effective, or one
          hundred twenty days.

          The Convertible Promissory Note agreement included a liquidated
          damages clause, which stipulates if the registration statement is not
          filed by the filing date or declared effective by the effective date,
          then upon failure of either event the subscriber shall be entitled to
          liquidated damages, payable in cash, in the sum of one percent (1%) of
          the principal amount of the Note:

          (a)  for each 30 day period after the filing date the transpires until
               the date that the Company files the registration statement, and

          (b)  for each 30 day period after the effective date that transpires
               until such date as the registration statement is declared
               effective.

          The Company accounted for the above transaction in accordance with
          EITF issue No. 00-19 "Accounting for Derivative Financial Instruments
          Indexed to, and Potentially Settled in, a Company's Own Stock." The
          Company has determined that there is an embedded conversion option of
          the warrants and derivative liabilities. Accordingly, the warrants and
          the embedded conversion option are recorded at fair market value and
          marked to market through earnings at the end of each reporting period.

          The gross proceeds of $300,000 were recorded net of a discount of
          $174,200. The debt discount consisted of $12,800 related to the
          warrants and $161,400 related to the embedded conversion option.
          During the six months ended June 30, 2007 the Company charged to
          interest expense $69,800 for the accretion of the debt discount.

                                       13

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                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 5:  CONVERTIBLE PROMISSORY NOTES (Continued)

          The warrants and the embedded conversion option were accounted for
          under EITF issue No. 00-19 "Accounting for Derivative Financial
          Instruments Indexed to, and Potentially Settled in, a Company's Own
          Stock" and EITF 05-4, View A "The Effect of a Liquidated Damages
          Clause on a Freestanding Financial Instrument." Due to certain factors
          and the liquidated damage provision in the registration rights
          agreement, the Company determined that the embedded conversion option
          and the warrants are derivative liabilities.

          Accordingly, the warrants and the embedded conversion option were
          marked to market through earnings at the end of each reporting period.
          The Company determined that the value of the registration rights was
          deemed to be de minimis and the related registration statement became
          effective in January 2007. The warrants and the conversion option are
          valued using the Black-Scholes valuation model.

          The Convertible Promissory Note was secured by 4,000,000 shares of the
          Company's common stock held by an officer of the Company. The security
          shares were returned upon the registration of the common stock
          underlying the convertible debenture.

          Under accounting guidance provide by EITF 00-19, the conversion price
          of the convertible promissory note did not have a determinable number
          of shares the note could be settled in. As a result, previously
          granted warrants as well as the embedded conversion option of the
          Series F Convertible Preferred Stock were required to be reclassified
          from equity and presented as a derivative liability. Accordingly, the
          warrants, options and conversion option will be marked to market
          through earnings at the end of each reporting period.


NOTE 6:  NET LOSS PER SHARE OF COMMON STOCK

          Basic loss per share was computed using the weighted average number of
          outstanding common shares. Diluted loss per share includes the effect
          of dilutive common stock equivalents from the assumed exercise of
          options, warrants, convertible preferred stock and convertible notes.
          Common stock equivalents were excluded in the computation of diluted
          loss per share since their inclusion would be anti-dilutive. Total
          shares issuable upon the exercise of warrants and conversion of
          preferred stock for the six months ended June 30, 2007 and 2006 were
          20,274,384 and 8,666,720, respectively.

                                       14

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                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 7:  STOCKHOLDERS' DEFICIENCY

          Debt
             During the six months ended June 30, 2007, the Company issued
             3,211,039 shares of common stock for $300,000 of debt principal and
             $11,078 of accrued interest.

          Conversion of preferred stock into common stock
             During the six months ended June 30, 2007, the Company issued
             123,920 shares of common stock in connection with the conversion of
             3,098 shares of preferred stock.

          Cash
             During the six months ended June 30, 2007, the Company raised
             $450,000 through the sale of 5,279,387 shares of common stock.

          Services
             During the six months ended June 30, 2007, the Company issued
             100,000 shares of common stock in satisfaction of a late payment
             penalty to one of its note holders. The Company recorded a charge
             of $10,000.

             During the six months ended June 30, 2007, the Company issued
             2,500,000 shares of common stock to two management employees for
             services. The Company incurred a stock based compensation charge of
             $275,000.

             During the six months ended June 30, 2007, the Company granted
             9,100,000 warrants to various employees and consultants for
             services. Of this amount 4,100,000 warrant shares fully vested on
             the date of the grant, and the balance vest over the life of the
             grant. Each of the warrants has a life of three years, and is
             exercisable at $0.11 to $0.1175 per share. The Company incurred a
             stock based compensation charge of $218,838.

          Relinquishment of common stock
             Effective with his resignation as President and Chief Executive
             Officer, on January 29, 2007 David Conway returned to the Company
             20,000,000 shares of common stock owned by him and his affiliates.
             The return of the shares was recorded as a retirement and
             cancellation of the common stock.


NOTE 8:       RELATED PARTY TRANSACTIONS

                On January 29, 2007, the Company's President and Chief Executive
                Officer resigned and surrendered his stock appreciation rights,
                any severance under his employment agreement, returned
                20,000,000 shares of common stock, forgave $525,738 of notes
                payable and accrued interest, and relinquished his rights to
                $471,583 of unpaid and accrued salary.

                The Company reclassified the accrued compensation, notes payable
                and accrued interest to equity. The return of the shares was
                recorded as a retirement and cancellation of the common stock.
                The cancellation of the stock appreciation rights did not have
                an accounting impact.

                                       15

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                                WATER CHEF, INC.
            (A Development Stage Company Commencing January 1, 2002)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 8:  RELATED PARTY TRANSACTIONS (Continued)

          On February 12, 2007, Marshall S. Sterman resigned from the Board of
          Directors and waived his rights to any accrued consulting and director
          fees owed to him by the Company. The Company reclassified the debt of
          $330,000 during the six months ended June 30, 2007 to equity.

          In January 2007, Leslie J. Kessler was appointed as President of the
          Company. In connection with her employment, she is to receive a salary
          of $9,000 per month. In addition, Ms. Kessler will be issued 2,000,000
          shares of the Company's common stock and a warrant to purchase
          2,000,000 shares of the Company's common stock. The warrants are
          exercisable at $0.11 per share, have a life of three years and vest
          over two years. In addition, the employment agreement provides for
          certain performance-based cash incentives. During the six months ended
          June 30, 2007, the Company issued the 2,000,000 shares of common stock
          at a value of $220,000 and granted the warrants at a value of
          $125,200. The warrants were valued using the Black-Scholes option
          valuation model.

          In March 2007, the Chief Executive Officer and a Director each made
          bridge loans of $50,000 to the Company. The loans pay simple interest
          at the rate of 10% per annum and are due and payable in 120 days.

          The loans to the Chief Executive Officer and the Director carry an
          option that if the loans are not repaid by June 14, 2007 and June 29,
          2007, respectively, such option will entitle the lenders to convert
          their debt to common stock at a price equal to 50% of the average
          closing price of the Company's common stock over the three previous
          business days before demand for conversion is made. The Company
          recorded a charge of $113,000 during the second quarter ended June 30,
          2007 for the embedded conversion option.


NOTE 9:  MAJOR CUSTOMERS / CREDIT RISK

          During the six months ended June 30, 2007, the Company had no sales.
          During the six months ended June 30, 2006, the Company sold two units
          to one customer and recognized revenues of $115,000.

          The Company maintains cash deposits with financial institutions, which
          from time to time may exceed federally insured limits. The Company has
          not experienced any losses and believes it is not exposed to any
          significant credit risk from cash.


NOTE 10: CONTINGENCIES

          On July 14, 2006, Funding Group, Inc. filed a complaint with the
          Supreme Court of the State of New York in New York County seeking
          damages due to an alleged breach of contract related to a $25,000 loan
          made by the plaintiff to the Company. On October 11, 2006, the Company
          filed a counter claim against Funding Group, Inc. with the Supreme
          Court of the State of New York. The Company believes the complaint is
          without merit and intends to vigorously defend itself in these
          actions, and believes that the eventual outcome of these matters will
          not have a material adverse effect on the Company. However, the
          ultimate outcome of these matters cannot be determined at this time.

                                       16

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ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

          The following discussion and analysis of financial condition and
          results of operations of the Company should be read in conjunction
          with the Company's Financial Statements and related Footnotes.

          Forward-Looking Statements

            This quarterly report on Form 10-QSB contains "forward-looking
            statements" intended to qualify for the safe harbor from liability
            established by the Private Securities Litigation Reform Act of 1995.
            All statements regarding the Company's expected financial position,
            business and financing plans are forward-looking statements. Such
            forward-looking statements are identified by use of forward-looking
            words such as "anticipates," "believes," "plans," "estimates,"
            "expects," and "intends" or words or phrases of similar expression.
            These forward-looking statements are subject to various assumptions,
            risks and uncertainties, including but not limited to, changes in
            political and economic conditions, demand for the Company's
            products, acceptance of new products, technology developments
            affecting the Company's products and to those discussed in the
            Company's filings with the Securities and Exchange Commission
            ("SEC"). Accordingly, actual results could differ materially from
            those contemplated by the forward-looking statements.

          Introduction

            Until the fourth quarter of 2001, Water Chef was engaged in the
            manufacture and marketing of water coolers and water purification
            and filtration products. In the fourth quarter of 2001, the Company
            completed the sale of this business in order to focus its activities
            on its PureSafe line of business. The PureSafe Water Station has
            been designed by the Company to meet the needs of communities which
            either do not have access to municipal water treatment systems, or
            for those which systems have been compromised, either by
            environmental factors or by faulty design or maintenance.

          Results of Operations

            Sales for the six months ended June 30, 2007 and 2006 were $0 and
            $115,000, respectively. During the six months ended June 30,2006,
            the Company recognized the sale of two PureSafe Water Station
            Systems

            Cost of sales for the six month period ended June 30, 2007 and 2006
            was $23,000 and $72,000, respectively. An analysis of the components
            of cost of sales in the 2007 and 2006 periods follows:


                                                        Rent and
                                                        Overhead
                                            Product    Payments to
             Costs of Sales Period           CGS       Manufacturer     Total

            For the six months ended
              June 30, 2007               $   --        $ 23,000      $ 23,000
            For the six months ended
              June 30, 2006               $ 30,000      $ 42,000      $ 72,000


                                       17

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ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Continued)

          Results of Operations (Continued)

            Selling, general and administrative expenses for the six months
            ended June 30, 2007 were $920,255 compared to $1,163,937 for the six
            months ended June 30, 2006, a decrease of 21%.

            The net loss for the six months ended June 30, 2007 was $1,213,855
            compared to $1,499,401 in the same period ended June 30, 2006.

          Liquidity and Capital Resources

            At June 30, 2007, the Company had a working capital deficiency of
            approximately $2,386,000. In addition, the Company continues to
            suffer recurring losses from operations and has an accumulated
            deficit since inception of approximately $27,870,000. The
            accompanying financial statements have been prepared assuming that
            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 equity, and finding
            sufficient profitable markets for its products to generate
            sufficient cash to meet its business obligations. However, there can
            be no assurance that the Company will be able to obtain sufficient
            funds to continue the development of its product, marketing plan and
            distribution network. The accompanying financial statements do not
            include any adjustments that might be necessary should the Company
            be unable to continue as a going concern.

            In March 2007, the Chief Executive Officer and a Director each made
            bridge loans of $50,000 to the Company. The loans pay simple
            interest at the rate of 10% per annum and are due and payable in 120
            days. Failure to repay the loans on a timely basis will entitle the
            lenders to convert their debt to common stock at a price equal to
            50% of the average closing price of the Company common over the
            three previous business days before demand for conversion is made.

            The loans to the Chief Executive Officer and the Director carry an
            option that if the loans are not repaid by June 14, 2007 and June
            29, 2007, respectively, such option will entitle the lenders to
            convert their debt to common stock at a price equal to 50% of the
            average closing price of the Company's common stock over the three
            previous business days before demand for conversion is made. The
            Company recorded a charge of $113,000 during the second quarter
            ended June 30, 2007 for the embedded conversion option.



          Recent Accounting Standards

            In February 2006, the FASB issued SFAS 155, "Accounting for Certain
            Hybrid Financial Instruments - an amendment of FASB Statements No.
            133 and 140" ("SFAS 155"). SFAS 155 resolves issues addressed in
            SFAS 133 Implementation Issue No. D1, "Application of Statement 133
            to Beneficial Interests in Securitized Financial Assets." The
            requirements in SFAS 155 are effective for all financial instruments
            acquired or issued after the beginning of an entity's first fiscal
            year that begins after September 15, 2006. The adoption of this
            pronouncement did not have an impact on the Company's financial
            position, results of operations or cash flows.

                                       18

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ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Continued)

          Recent Accounting Standards (Continued)

            In September 2006, the FASB issued SFAS No. 157, "Fair Value
            Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes
            a framework for measuring fair value in accordance with accounting
            principles generally accepted in the U.S., and expands disclosures
            about fair value measurements. SFAS 157 is effective for financial
            statements issued for fiscal years beginning after November 15,
            2007, with earlier application encouraged. Any cumulative effect
            will be recorded as an adjustment to the opening accumulated deficit
            balance, or other appropriate component of equity. The adoption of
            this pronouncement did not have an impact on the Company's financial
            position, results of operations, or cash flows.

            In September 2006, the SEC staff issued Staff Accounting Bulleting
            ("SAB") No. 108, Considering the Effects of Prior Year Misstatements
            when Quantifying Misstatements in Current Year Financial Statements
            ("SAB 108"). SAB 108 was issued in order to reduce the diversity in
            practice in how public companies quantify misstatements of financial
            statements, including misstatements that were not material to prior
            years' financial statements. SAB 108 is effective for fiscal year
            2007. The adoption of this pronouncement did not have an impact on
            the Company's financial position, results of operations, or cash
            flows.

            In February 2007, the FASB issued SFAS No. 159, "The Fair Value
            Option for Financial Assets and Financial Liabilities" ("SFAS 159").
            SFAS 159 provides companies with an option to report selected
            financial assets and liabilities at fair value. The objective of
            SFAS 159 is to reduce both complexity in accounting for financial
            instruments and the volatility in earnings caused by measuring
            related assets and liabilities differently. Generally accepted
            accounting principles have required different measurement attributes
            for different assets and liabilities that can create artificial
            volatility in earnings. The FASB has indicated it believes that SFAS
            159 helps to mitigate this type of accounting-induced volatility by
            enabling companies to report related assets and liabilities at fair
            value, which would likely reduce the need for companies to comply
            with detailed rules for hedge accounting. SFAS 159 also establishes
            presentation and disclosure requirements designed to facilitate
            comparisons between companies that choose different measurement
            attributes for similar types of assets and liabilities.

            SFAS 159 does not eliminate disclosure requirements included in
            other accounting standards, including requirements for disclosures
            about fair value measurements included in SFAS 157 and SFAS No. 107,
            "Disclosures about Fair Value of Financial Instruments." SFAS 159 is
            effective for the Company as of the beginning of fiscal year 2009.
            The adoption of this pronouncement is not expected to have an impact
            on the Company's financial position, results of operations or cash
            flows.

                                       19

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ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Continued)

          Recent Accounting Standards (Continued)

            In December 2006, the FASB approved FASB Staff Position (FSP) No.
            EITF 00-19-2, "Accounting for Registration Payment Arrangements"
            ("FSP EITF 00-19-2"), which specifies that the contingent obligation
            to make future payments or otherwise transfer consideration under a
            registration payment arrangement, whether issued as a separate
            agreement or included as a provision of a financial instrument or
            other agreement, should be separately recognized and measured in
            accordance with SFAS No. 5, "Accounting for Contingencies." FSP EITF
            00-19-2 also requires additional disclosure regarding the nature of
            any registration payment arrangements, alternative settlement
            methods, the maximum potential amount of consideration and the
            current carrying amount of the liability, if any. The guidance in
            FSP EITF 00-19-2 amends FASB Statements No. 133, "Accounting for
            Derivative Instruments and Hedging Activities," and No. 150,
            "Accounting for Certain Financial Instruments with Characteristics
            of both Liabilities and Equity," and FASB Interpretation No. 45,
            "Guarantor's Accounting and Disclosure Requirements for Guarantees,
            Including Indirect Guarantees of Indebtedness of Others," to include
            scope exceptions for registration payment arrangements.

            FSP EITF 00-19-2 is effective immediately for registration payment
            arrangements and the financial instruments subject to those
            arrangements that are entered into or modified subsequent to the
            issuance date of this FSP, or for financial statements issued for
            fiscal years beginning after December 15, 2006, and interim periods
            within those fiscal years, for registration payment arrangements
            entered into prior to the issuance date of this FSP. The adoption of
            this pronouncement did not have an impact on the Company's financial
            position, results of operations or cash flows.

                                       20

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ITEM 3:  CONTROLS AND PROCEDURES

          Evaluation and Disclosure Controls and Procedures

            The Company, under the supervision and with the participation of the
            Company's management, including the Company's Chief Executive
            Officer and Chief Financial Officer, has evaluated the effectiveness
            of the design and operation of the Company's "disclosure controls
            and procedures," as such term is defined in Rules 13a-15e
            promulgated under the Securities Exchange Act of 1934, as amended
            (the "Exchange Act"), as of this report. Based upon that evaluation,
            the Chief Executive Officer and Chief Financial Officer has
            concluded that the Company's disclosure controls and procedures were
            effective as of the end of the period covered by this report to
            provide reasonable assurance that information required to be
            disclosed by the Company in reports that it files or submits under
            the Exchange Act is recorded, processed, summarized and reported
            within the time periods specified in SEC rules and forms.

            Management is aware that there is a lack of segregation of duties at
            the Company due to the small number of employees dealing with
            general administrative and financial matters. This constitutes a
            significant deficiency in the financial reporting. Management has
            mitigated these factors by hiring an outside accountant/bookkeeper
            to review and compile the financial statements on a quarterly and
            annual basis.

            At this time management has decided that, considering the employees
            involved and the control procedures in place and the potential
            benefits of adding additional employees to clearly segregate duties,
            the benefit does not justify the additional expense.

            Management will periodically reevaluate this situation. If the
            volume of the business increases and sufficient capital is secured,
            it is the Company's intention to increase staffing to mitigate the
            current lack of segregation of duties within the general
            administrative and financial functions.

            The second reportable condition identified is in our inability to
            ensure that the accounting for our debt and equity-based
            transactions is accurate and complete. This condition is considered
            a material weakness. In recent years we have consummated a series of
            complex debt and equity transactions involving the application of
            highly specialized accounting principles. Although we believe these
            events are unique to our Company, we are evaluating certain
            corrective measures we may take including the possibility of hiring
            an outside consultant to provide us with the guidance we need at
            such times that we may engage in these complex transactions.

          Changes in Internal Controls

            Management has evaluated the effectiveness of the disclosure
            controls and procedures as of June 30, 2007. Based on such
            evaluation, management has concluded that the disclosure controls
            and procedures were effective for their intended purpose described
            above. There were no changes to the internal controls during the six
            months ended June 30, 2007 that have materially affected or that are
            reasonably likely to affect the internal controls.

                                       21

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ITEM 3:  CONTROLS AND PROCEDURES (Continued)

          Limitations on the Effectiveness of Controls

            A control system, no matter how well conceived and operated, can
            provide only reasonable, not absolute, assurance that the objectives
            of the control system are met. Because of the inherent limitations
            in all control systems, no evaluation of controls can provide
            absolute assurance that all control issues and instances of fraud,
            if any, within a company have been detected. The Company's
            disclosure controls and procedures are designed to provide
            reasonable assurance of achieving its objectives. The Company's
            principal executive officer and principal financial officer
            concluded that the Company's disclosure controls and procedures are
            effective at that reasonable assurance level.

                                       22

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                           PART II - OTHER INFORMATION


ITEM 2:  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


            During the six months ended June 30, 2007, the Company issued
            3,211,039 shares of common stock for the settlement of $311,078 of
            debt and accrued interest.

            During the six months ended June 30, 2007, the Company issued
            123,920 shares of common stock in connection with the conversion of
            3,098 shares of preferred stock.

            During the six months ended June 30, 2007, the Company raised
            $450,000 through the sale of 5,279,387 shares of common stock.

            During the six months ended June 30, 2007, the Company issued
            100,000 shares of common stock in satisfaction of a late payment
            penalty to one of its note holders. The Company recorded a charge of
            $10,000.

            During the six months ended June 30, 2007 the Company issued
            2,500,000 shares of common stock to two management employees for
            services. The Company incurred a stock based compensation charge of
            $275,000.

            During the six months ended June 30, 2007, the Company granted
            9,100,000 warrants for services. Of this amount 4,100,000 warrant
            shares fully vested on the date of the grant, and the balance vest
            over the life of the grant. Each of the warrants has a life of three
            years, and is exercisable at $0.11 to $0.01175 per share. The
            Company incurred a stock based compensation charge of $532,200.

            The Company issued these shares in reliance on the exemption from
            registration afforded by Section 4(2) of the Securities Act of 1933
            and Regulation D promulgated thereunder. These shares were offered
            to less than 35 "non-accredited" investors and were purchased for
            investment purposes with no view to resale.

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ITEM 6:  EXHIBITS

     Exhibit No.    Description
     -----------    -----------


         31         Certification of Chief Executive Officer and Chief Financial
                    Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
                    2002.

         32         Certification of Chief Executive Officer and Chief Financial
                    Officer pursuant to 8 U.S.C. Section 1350 as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Report to be signed on its behalf by the undersigned
thereunto duly authorized.

                                            Water Chef, Inc.




                                            /s/  Leslie J. Kessler
Date August 13, 2007                        -----------------------------------
                                                 Leslie J. Kessler,
                                                 President,
                                                 Chief Executive Officer, and
                                                 Chief Financial Officer
                                                 (Principal Operating Officer)


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