U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB

(Mark One)

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934
                  For the quarterly period ended June 30, 1997

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

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

                       Commission file number 2-96455-LA
                                              ----------

                                WATER CHEF, INC.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


           Delaware                                               86-0515678
---------------------------------                            -------------------
 (State or other jurisdiction                                 (IRS Employer
of incorporation or organization)                            Identification No.)


             7707 E. Acoma Dr. Suite 109, Scottsdale, Arizona 85260
             ------------------------------------------------------
                    (Address of principal executive offices)


                                  602-991-4534
                          ---------------------------
                          (Issuer's telephone number)

              ----------------------------------------------------
              (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 [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

                                                     Outstanding as of
          Class                                        June 30, 1997
          -----                                      -----------------
Common
Par Value $.001 per share                               19,769,645
<PAGE>

                                WATER CHEF, INC.

                                   FORM 10-QSB

                       FOR THE QUARTER ENDED JUNE 30, 1997

                                TABLE OF CONTENTS


                         PART I - FINANCIAL INFORMATION
                                                                           Page
                                                                           ----
Item 1.  Financial Statements:

         Consolidated Balance Sheets as of June 30, 1997
         and December 31, 1996.............................................  3

         Consolidated Statements of Operations for the three and six
         month periods ended June 30, 1997 and 1996........................  5

         Consolidated Statements of Cash Flows for the six
         month periods ended June 30, 1997 and 1996........................  6

         Notes to Consolidated Financial Statements........................  7

Item 2.  Management's Discussion and Analysis of Results
         of Operations and Financial Condition.............................  8


                           PART II - OTHER INFORMATION

Item 3.  Exhibits and Reports on Form 8-K.................................. 11

Signatures................................................................. 12


                                       2
<PAGE>
                        WATER CHEF, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


                                     ASSETS

                                                 June 30,1997   December 31,1996
                                                 ------------   ----------------
                                                 (Unaudited)
CURRENT ASSETS:
  Cash ......................................... $   825,516       $   18,553
  Accounts receivable, net of allowance for
   doubtful accounts of $51,940 at June 30,
   1997 and $51,940 at December 31, 1996 .......      64,632           91,985
  Inventories, net .............................     953,022          495,910
  Deposits and other ...........................     232,126          452,138
                                                 -----------       ----------

        Total Current Assets ...................   2,075,296        1,058,586

PROPERTY AND EQUIPMENT, at cost less 
  accumulated depreciation of $494,469, 
  at June 30, 1997 and $278,375 at 
  December 31, 1996 ............................     433,363          679,690

PATENTS,  DESIGNS  AND  TRADEMARKS,  at 
  cost less accumulated amortization of 
  $21,640 at June 30, 1997 and $18,943 
  at December 31, 1996 .........................     184,396           39,297
  Franchise-Sale ...............................     500,000
INVESTMENT IN CHINA JOINT VENTURE (Note 3) .....     148,000          148,000

OTHER ..........................................     (51,255)         104,999
                                                 -----------       ----------

                                                 $ 3,289,800       $2,030,572
                                                 ===========       ==========




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

                                       3
<PAGE>
                        WATER CHEF, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


                      LIABILITIES AND STOCKHOLDERS' DEFICIT


                                                  June 30,1997  December 31,1996
                                                  ------------  ----------------
                                                  (Unaudited)
CURRENT LIABILITIES:
  Accounts payable:
    Trade ......................................  $   825,502     $   852,407
    Other ......................................      276,163          54,396
  Accrued expenses and other ...................      568,450         879,966
  Current portion of notes payable .............      623,221         232,739
                                                  -----------     -----------
        Total Current Liabilities ..............    2,293,336       2,020,508
                                                  -----------     -----------
NOTES PAYABLE, net of current portion ..........    2,614,637       2,789,600
                                                  -----------     -----------
MINORITY INTEREST IN CONSOLIDATED JOINT
 VENTURE (Note 3) ..............................      253,000         253,000
                                                  -----------     -----------
STOCKHOLDERS' DEFICIT:

 Preferred Stock, $.001 par value, 10,000,000 
   shares authorized; 93,000 shares issued
   and outstanding at June 30, 1997 and 
   52,500 shares issued or outstanding 
   at December 31, 1996 ........................           93             215
 Common Stock, $.001 par value, 40,000,000 
   shares authorized; 19,769,645 shares issued
   and 19,769,645 outstanding at June 30, 1997
   and 19,769,574 shares issued and 16,836,574
   outstanding at December 31, 1996 ............       19,769          16,836
 Comon Stock to be issued: .....................    2,044,744         397,342
 Additional paid-in capital ....................    2,874,383       2,892,961
 Preferred Stock D to be issued ................                            0
 Treasury stock, at cost........................       (5,768)         (5,768)
 Accumulated deficit ...........................   (6,804,394)     (6,334,122)
                                                  -----------     -----------
       Total Stockholders' Deficit .............   (1,871,173)     (3,032,536)
                                                  -----------     -----------
                                                  $ 3,289,800     $ 2,030,572
                                                  ===========     ===========

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

                                       4
<PAGE>
                        WATER CHEF, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

        FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
                                   (UNAUDITED)


                                Three Months Ended         Six Months Ended
                                     June 30,                  June 30
                            ------------------------   ------------------------
                                 1997         1996          1997         1996
                                 ----         ----          ----         ----

Net sales                       194,554     $200,017      $234,579     $218,630

Cost of sales                   178,308       68,447       228,997      129,820
                            -----------  -----------   -----------  -----------
Gross margin                     16,246      131,570         5,602      (88,810)

Selling, general &
administrative expenses         406,850       19,609       695,284      226,223
                            -----------  -----------   -----------  -----------
  Profit from operations        423,096      151,179      (689,682)    (137,413)

Sale of WaterChef-Franchise                                266,175

Other income (expense):
  Interest expense               (6,711)      61,200       (68,381)       7,262
                            -----------  -----------   -----------  -----------
  Net Profit (Loss) before 
  provision for income taxes   (429,870)     212,379      (491,888)    (144,675)

Provision for income taxes           --           --            --           --
                            -----------  -----------   -----------  -----------
NET Profit (Loss)           $  (429,807) $   212,379   $  (491,888) $  (144,675)
                            ===========  ===========   ===========  ===========
Profit (Loss) per common 
share and common share
equivalent                  $     (0.02) $       .01   $     (0.02) $     (.001)
                            ===========  ===========   ===========  ===========
Weighted average number
of common shares and
common share equivalents
outstanding                  19,769,645   15,836,574    19,769,645   15,836,574
                            ===========  ===========   ===========  ===========


                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       5
<PAGE>
                        WATER CHEF, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

             FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
                                   (UNAUDITED)

                                                             1997        1996
                                                             ----        ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ....................................    $(491,888)  $ 341,656
Adjustments to reconcile net income (loss) to net
 cash used in operating activities:
  Depreciation and amortization ......................     (147,290)     13,699
  Non-operating cash flow adjustments ................            0           0
  Change in operating assets and liabilities:
  (Increase) decrease in accounts receivable, net ....       27,353      60,982
  Decrease (increase) in inventories .................     (457,112)   (167,814)
  (Increase) decrease in prepaid expenses and 
    other assets .....................................     (232,126)          0
  Increase in accounts payable-China joint venture ...     (148,000)   (148,000)
  Increase (decrease) in accounts payable ............      186,243     230,034
  Increase (decrease) in accrued expenses and 
   other liabilities..................................      459,516     109,376
                                                        -----------   ---------
     Net cash used in operating activities ...........  $  (803,304)  $ 439,933
                                                        -----------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of property and equipment ...............      338,220   $(118,149)
 Acquisition of patents, designs and trademarks ......  $  (145,099)  $ (60,393)
                                                        -----------   ---------
     Net cash used in investing activities ...........  $   193,121   $(178,542)
                                                        -----------   ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from borrowings on notes payable ...........  $  (214,519)  $(664,486)
 Payments on notes payable ...........................       16,983     (71,887)
 Proceeds from preferred and common stock, net .......    1,614,682     399,361
     Net cash provided by financing activities .......  $ 1,417,146   $(337,012)
                                                        -----------   ---------

Net increase (decrease) in cash ......................  $   806,963   $ (75,621)

CASH, beginning of period ............................  $    18,553   $  94,174

CASH, end of period ..................................  $   825,516   $  18,553
                                                        ===========   =========
Supplemental Cash Flow Information:
Cash paid during the period for interest .............  $         0   $       0
                                                        ===========   =========

                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       6
<PAGE>
                                WATER CHEF, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 1997

(1) The  accompanying  unaudited  consolidated  financial  statements  have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB. Accordingly,  they do
not include all the  information  and footnotes  required by generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  all adjustments  (which include only normal recurring  adjustments)
necessary to present  fairly the financial  position,  results of operations and
cash flows for all periods  presented  have been made. The results of operations
for the six-month period ended June 30, 1997, are not necessarily  indicative of
the  operating  results  that may be expected  for the year ending  December 31,
1997.  These  financial  statements  should  be read  in  conjunction  with  the
Company's December 31, 1996 Form 10-KSB,  financial  statements and accompanying
notes thereto.

Pursuant to a Merger  Agreement and Plan of  Reorganization  between the Company
and Water Chef-Nevada dated June 4, 1993 ("the  Agreement"),  the Company issued
3,800,000 shares of its common stock to Water  Chef-Nevada's three stockholders,
in exchange for all issued and  outstanding  common stock of Water  Chef-Nevada.
The common stock issued  represented 62% of the issued and outstanding shares of
its common stock after the merger.  In connection with this  transaction,  Water
Chef-Nevada's  officers and its director  became  officers and a director of the
Company.  This  resulted  in Water  Chef-Nevada's  officers  and  director,  and
directors appointed by Water Chef-Nevada,  controlling the Company's  day-to-day
operations.

In  accordance  with  Accounting  Principles  Board  Opinion  No.16,  the  Water
Chef-Nevada  acquisition  has been accounted for as a reverse  acquisition.  The
historical  financial  statements  prior  to June 4,  1993  are  those  of Water
Chef-Nevada  (Water  Chef-Nevada was formed on January 25, 1993,  therefore,  no
financial  statements are presented prior to that date). For financial statement
presentation purposes, the Company is considered to be the predecessor.

(2) As of June 30, 1997, Inventories consist of the following:

          Raw Material               914,395
          Work in Progress             1,539
          Finished Goods              37,088
                                    --------
                                    $953,022
                                    ========

                                       7
<PAGE>

(3) In February 1994, the Company entered into an agreement (the "Agreement") to
form a joint  venture,  Tianjin Tahoe Cooler Co., Ltd. (the "Joint  Venture") to
establish and operate a facility to  manufacture  the  Company's  Series I water
coolers in the People's  Republic of China.  The Company's  contribution  to the
Joint Venture, in which it has a 55% interest,  will be in the form of machinery
and other equipment in the approximate  value of $144,000 (based on the price of
the equipment to be supplied by the Company to the joint venture), $140,000 cash
and designs and technology  with an agreed upon value of $156,000.  The minority
interest of $253,000 reflected in the consolidated  balance sheet represents the
minority shareholder's proportionate share of the equity of the Joint Venture.

(4) In December 1996 the company  purchased all of the outstanding  common stock
of Natural Water Systems Inc.  Boulder,  Co for 1, Million  shares of Water Chef
common.  The company supplies water dispensing  systems for Natural Water stores
and a shower  filter  of  patented  design  that  removes  95% of the  chlorine.
Chlorine  causes dry skin,  split ends,  scalp  flaking  and red eyes,  Chlorine
absorbed by the body during a shower has been known to cause cancer of the colon
and  bladder.  It is believed  this shower  filter  product can grow into a $100
Million business.  This subsidiary  currently  accounts for 15% of the companies
revenue.

ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION

RESULTS OF OPERATIONS

Net sales  for the  quarter  and six  month  periods  ended  June 30,  1997 were
$194,554 and $234,579 respectively.  Cost of sales for the quarter and six month
periods were $178,308 and $228,977, or 91% and 97% of sales,  respectively.  The
high  cost  of  sales  percentage  resulted  primarily  from  the low  level  of
manufactuing  operations  due to lack of working  capital.  This  condition  has
change in the 3rd quarter.

Selling,  general  and  administrative  expenses  for the  quarter and six month
periods were $406,850 and $695,284,or 209% and 296% of sales, respectively. This
reflects the increase in activity in  preparation  for larger sales in the third
quarter both from China and U.S. facilities.

Net Profit for the quarter and the loss for six month  periods  were  $(429,807)
and  $(491,888),  or $0.01  profit and $0.02 per loss share,  respectively.  The
first quarter is traditionally a low sales period for water coolers, and in this
case the 2nd quarter was  restricted by cash of working  capital.  This has been
corrected for the 3rd quarter.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  working capital  deficit  decreased from $961,922 at December 31,
1996 to $218,040 at June 30, 1997. The deficit  decreased  primarily  because of
the infusion of $1.5 Million in working capital.  The companies current ratio .9
to 1 on June 30, 1997, and .52 to 1 at December 31, 1996.

                                       8
<PAGE>

In January 1994, the Company  commenced a private  placement of Units (each Unit
consisting of one share of the Company's  Series A Preferred Stock, one share of
the  Company's  common stock and one Series A Warrant to purchase four shares of
the  Company's  common  stock at a price of $1.00 per share) at a Unit  purchase
price of $10.00.

The Series A Preferred  Stock  provides for a 10% cumulative  dividend,  payable
annually in the Company's common stock or cash, at the Company's  option,  based
upon the  $10.00  Unit  purchase  price.  The  Series A  Preferred  Stock is not
convertible,  and is callable by the Company at any time  following  January 17,
1997 at a price of $11.00 per share. In total, the Company sold 52,500 Units and
received net proceeds of  approximately  $335,000,  after  deduction of offering
expenses of approximately $190,000. The private placement expired in April 1994.

In January and February 1994, Canaccord Capital Corporation loaned the Company a
total of $170,000 to meet the  temporary  working  capital needs of the Company.
These notes bear  interest at 10% and were  payable on February  28,  1994.  The
notes  are  secured  by  substantially  all the  assets of the  Company  and are
guaranteed by an officer and director of the Company.

During February and March 1994, the Chairman and Chief Executive  Officer of the
Company,  and  affiliate  of his advanced the Company a total of $26,000 to meet
the temporary  working  capital  needs of the Company.  A portion of these loans
($13,000) was repaid out of the proceeds of the Company's  private  placement in
March 1994.

In September 1994, the Company  completed a private placement of 2,578,750 units
at $0.80 per unit,  each unit  consisting  of two shares of common stock and one
Series C warrant to purchase  one share of common  stock at a price of $1.00 per
share.  Net  proceeds to the Company  were  $2,000,442  plus the  conversion  of
$25,000 of debt then  outstanding  into 62,500  shares of the  Company's  common
stock. A partnership in which the Company's former Executive Vice-President is a
controlling partner purchased 350,000 shares of common stock in the offering.

In October 1994, the Company commenced efforts to raise up to $1,200,000 in debt
funding  through  several  sources.  As part  of this  effort,  the  Company  is
attempting  to raise  $800,000 in debt funding  (the "Note" or "Notes")  through
private sources. The Notes would be unsecured and payable in one year, including
interest at 10% per annum.  Each Note  holder  would  receive  Series D Warrants
entitling the Note holder to purchase,  at a purchase  price of $0.60 per share,
one  share of the  Company's  common  stock for each  dollar of note  principal.
Through  September 30, 1996 the Company raised  approximately  $485,000  through
this funding source. No further funds were solicited from this offering.

In August 1996,  the Montana  Department of Commerce  amended its open Community
Development Block Grant project to assist the Company with an additional loan of
$340,000. The Company borrowed $200,000 of these funds through November 20, 1996
to meet working capital requirements. The balance was drawn in January 06, 1997.

                                       9
<PAGE>

In December 1996 the company commenced efforts to raise $2, Million from private
placement  of $5pfd 12% with 5 shares of common stock as of the end of the first
quarter $400,000 had been raised. This private placement has been modified as of
July 1, 1997 by adding an addition 5 shares of incentive stock.

The company's operations and cash flow have been hampered due to an inability to
raise sufficient capital with which to fund its operations. This lack of capital
has prevented the Company from being able to purchase sufficient  inventory with
which to fill sales orders.

To carry  the  companies  operations  until  the  working  capital  program  was
completed a bridge loan in the amount of $375,000 was negotiated.  The loan will
be repaid by the end of 1997.

The company raised $1.5 Million in working  capital late in June 1997.  Funds to
purchase parts for coolers from China and US sources were immediately  released.
These parts will be used to fill the company's backlog of orders for delivery in
the 3rd  quarter.  The  funds  were not made  available  in time to  affect  the
company's 2nd quarter operations.

Management of the Company believes that the marketing and  distribution  network
it has  created  along  with the  creation  of new  markets  (such as retail and
international),  will produce a volume of sales sufficient to operate profitably
during 1997.  There can be no assurance that  additional  debt or equity funding
will be available to the Company.  The Company's  management  believes that with
anticipated cash flow from operations,  along with the funding just received the
Company will have  sufficient  working capital with which to fund its operations
for the next twelve months.


                                       10
<PAGE>

                           PART II - OTHER INFORMATION


ITEM 3.  EXHIBITS AND REPORTS ON FORM 8-K

A. Exhibits:

     Exhibit 11 Statement re: Computation of earnings per share

     Exhibit 27 Financial Data Schedule

B. Reports on Form 8-K:

     The company filed Form 8-K,  dated February 27, 1997, to report that Arthur
     Andersen resigned as auditor for the Company.

     The company filed Form 8-K,  dated May 30, 1997, to report that the Company
     had engaged Semple and Cooper, LLP. as auditor for the Company.




                                       11
<PAGE>

                                   SIGNATURES


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



                                               WATER CHEF, INC.


Date:  August 20, 1997                         /s/ C. GUS GRANT
                                               -----------------------------
                                               C. Gus Grant
                                               President, Director and Chief
                                               Executive Officer
                                               (Principal Operating Officer)



                                       12