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 March 31, 1998

[ ]  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                                        March 31, 1998
          -----                                      -----------------
Common
Par Value $.001 per share                               36,606,792
<PAGE>

                                WATER CHEF, INC.

                                   FORM 10-QSB

                       FOR FIRST QUARTER ENDED MARCH 31, 1998

                                TABLE OF CONTENTS


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

         Consolidated Balance Sheet as of March 31, 1998...................  3

         Consolidated Statements of Operations for the three and six
         month periods ended March 31, 1998 and 1997.......................  5

         Consolidated Statements of Cash Flows for the six
         month periods ended March 31, 1998 and 1997.......................  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

                                                 March 31, 1998
                                                 --------------  
                                                  (Unaudited)
CURRENT ASSETS:
  Cash                                            $   43,853
  Accounts receivable, net of allowance for
   doubtful accounts of $26,541.98 at March 31,
   1998 and $26,541.98 at December 31, 1997           58,520
  Inventories, net                                 1,083,045   
  Deposits and other                                 222,698
                                                  ----------   

        Total Current Assets                       1,408,117   

PROPERTY AND EQUIPMENT, at cost less 
  accumulated depreciation of $380,862 
  at March 31, 1998 and $271,140 at 
  December 31, 1997                                  161,060

PATENTS,  DESIGNS  AND  TRADEMARKS,  at 
  cost less accumulated amortization of 
  $6,934 at March 31, 1998 and $5,200 
  at December 31, 1997                               162,639

FRANCHISE-SALE                                       300,000
Investment In Subsidiaries                           499,013
                                                  ----------   

                                                  $2,530,830
                                                  ==========   




                   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


                                                  March 31, 1998
                                                  --------------
                                                   (Unaudited)
CURRENT LIABILITIES:
  Accounts payable:
    Trade                                          $1,234,763
    Other                                               5,846 
  Accrued expenses and other                          889,668 
  Current portion of notes payable                    481,488
                                                  ----------- 
        Total Current Liabilities                   2,611,766
                                                  ----------- 
NOTES PAYABLE, net of current portion               2,184,227 
                                                  ----------- 
MINORITY INTEREST (Note 3)                            246,125
                                                  ----------- 
STOCKHOLDERS' DEFICIT:

 Preferred Stock, $.001 par value, 10,000,000 
   shares authorized; 145,000 shares issued
   and outstanding at March 31, 1998                      146

 Common Stock, $.001 par value, 40,000,000 
   shares authorized; 36,606,792 shares issued
   and outstanding at March 31, 1998                  152,060
 Comon Stock Issued                                     1,571
 Additional paid-in capital                         6,073,139 
 Treasury stock, at cost                               (5,768)
 Accumulated deficit                               (8,978,561)
                                                  ----------- 
       Total Stockholders' Deficit                 (2,511,288)
                                                  ----------- 
                                                  $ 2,530,830
                                                  =========== 

  
                   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 MONTH PERIOD ENDED MARCH 31, 1998 AND 1997
                                   (UNAUDITED)


                                       1998         1997
                                       ----         ----     

Net sales                        $   101,708     $    40,025

Cost of sales                         99,167          50,669
                                 -----------     -----------
Gross margin                           2,541         (10,644)

Selling, general &
administrative expenses              337,029         288,434
                                 -----------     -----------
Profit (Loss) from operations       (334,488)       (299,078)

  Interest expense                   (24,783)        (24,225)
                                 -----------     -----------
Other Net                                 --              --
Total Other Expense                 (359,271)        (24,225)

Gain of Foreign Subsidiary           (19,649)             --

Net Profit (Loss) before
provision for income taxes          (339,622)        (62,081)

Provision for income taxes                --              -- 
                                 -----------     -----------
NET PROFIT (LOSS)                   (339,622)        (62,081)

Loss per common share and
common share equivalent          $     (0.01)    $        (0)
                                 ===========     ===========
Weighted average number
of common shares and
common share equivalents
outstanding                       36,606,792      16,838,574
                                 ===========     ===========



                   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 THREE MONTH PERIOD ENDED MARCH 31, 1998 AND 1997
                                   (UNAUDITED)

                                                             1998        1997
                                                             ----        ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                        $(339,622)   $ (62,081)
Adjustments to reconcile net income (loss) to net
 cash used in operating activities:
  Depreciation and amortization                           (193,769)    (186,389)
  Non-Operating Cash Flow Adjustments                            0        7,689
  Change in assets and liabilities:
  (Increase) decrease in accounts receivable, net           66,083       70,287
  Decrease (increase) in inventories                       (12,323)     (31,555)
  Increase in investment in China Joint-Venture                  0            0
  Increase (decrease) in prepaid expenses and
    other assets                                           (14,404)     (28,817)
  Increase (decrease) in accounts payable                 (176,943)      72,711
  Increase in accounts payable China Joint-Venture               0     (148,000)
  Increase (decrease) in accrued expenses and
   other liabilities                                       256,661      270,768
                                                         ---------    ---------
     Net cash used in operating activities               $(405,317)   $ (35,987)
                                                         ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of property and equipment                   $       0    $(133,240)
 Acquisition of patents, designs and trademarks          $  32,974    $(154,187)
                                                         ---------    ---------
     Net cash used in investing activities               $  32,974    $(287,427)
                                                         ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from borrowings on notes payable               $      91    $  92,003
 Payments on notes payable                                       0      (10,149)
 Proceeds from preferred and common stock, net             360,111      261,536
                                                         ---------    ---------
     Net cash provided by financing activities           $ 360,202    $ 343,390
                                                         ---------    ---------

Net increase (decrease) in cash                          $ (12,141)   $  19,976

CASH, beginning of period                                $  55,994    $  18,553

CASH, end of period                                      $  43,853    $  38,529
                                                         =========    =========
Supplemental Cash Flow Information:
Cash paid 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 three month period ended March 31, 1998, are not necessarily  indicative
of the operating  results that may be expected for the year ending  December 31,
1998, or with the Company's December 31, 1998 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 March 31, 1998, Inventories consist of the following:
    (including in China facility inventory)

          Raw Material             $  393,639
          Work in Progress             30,060
          Finished Goods              659,346
                                   ----------
                                   $1,083,045
                                   ==========

                                       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,  was  in the form of machinery
and other equipment in the approximate  value of $144,000 (based on the price of
the equipment 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 $246,125 reflected in the consolidated  balance sheet represents the
minority  shareholder's  proportionate share of the equity of the Joint-Venture.
The Joint-Venture operated for all of the First Quarter 1998 and its results are
included in the consolidated stetements.

(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 and other fine filtration
products  offered  by  WaterChef,  Inc.  can grow  into a  Multi-Million  Dollar
Business.

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

RESULTS OF OPERATIONS

Net sales for the First Quarter  ended March 31, 1998 were $101,708  compared to
$40,025 in First  Quarter, 1997.  First  Quarter sales yielded a gross margin of
$2,541,  which included a gain of $12,086 from domestic operations and a loss of
$9,545 from the China Joint-Venture.  The First Quarter of the year is typically
the slowest  quarter for water cooler sales,  and this year's  results were also
adversely  affected by returns from a major  retailer to free up floor space for
other seasonal  items.  The Company's  manufacturing  facilities were staffed at
minimum levels with shipments made from inventory built during 1997.

Selling,  general and  administrative  expenses  for the Quarter  were  $337,029
compared to  $299,078 in the 1997  Quarter,  reflecting  increased  costs in the
China  Joint-Venture  and costs  incurred in the First Quarter for the launch of
the Company's Sante line of products, which were introduced in late March.

The net loss for the Quarter was $(339,622) or $.01 per share.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  working  capital  deficit  increased  from  December 31, 1997 to
$1,203,649 at March 31, 1998. The deficit decreased primarily because of the net
profit for the quarter and account adjustments.  The company's current ratio .71
to 1 on December 31, 1997, and .52 to 1 at March 31, 1998.

                                       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,
1998 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.  The principal and accrued
interest  will be  converted  to equity in the  Second  Quarter  1998,  with the
issuance of 600,000 shares of common stock to Canaccord Capital.

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, 1995 the Company raised  approximately  $485,000  through
this funding source. This fundeing effort was closed at this point.

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 on January 6, 1997.

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 1997, $400,000 had been raised.

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  company's  operations  until  the  working  capital  program  was
completed a bridge loan in the amount of $375,000 was negotiated in March 1997.

                                       9
<PAGE>

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 and 4th quarter,  however the timing of the financing caused the
company  to miss  the  prime  selling  season,  and fell  short  of its  revenue
forecast.

Additional  shares were issued as part of the  Company's  program to improve the
balance sheet and working capital. In total 19,199,663 shares were issued broken
down as follows:  10 million shares to raise $1.5M.  2.43 million shares for the
bridge loan.  Seven key employees  purchased 2.3 million shares at market price.
Of these  shares which are  restricted,  Gus Grant  Chairman  and CEO  purchased
960,000. 1 million shares were issued to settle debt which has been removed from
the  balance  sheet.  663,000  shares were  issued for a private  placement  and
400,000 shares were issued as incentive shares for stock sales.

In the First Quarter  1998, a first  payment of penalty  shares in the amount of
1,570,555  shares were issued due to the  Company's  failure to repay the bridge
loan on a timely basis.

Management  of the  Company  believes  that  the  current  product  mix  and the
marketing plan to penetrate new markets (both domestic and international)  while
increasing  sales  to  current  accounts  will  allow  the  Company  to  operate
profitably in 1998.  There can be no assurance  that  additional  debt or equity
funding will be available to the Company.

                           PART II - OTHER INFORMATION


ITEM 3.  EXHIBITS AND REPORTS ON FORM 8-K

A. Exhibits:

     Exhibit 1 -  Calculation of Earnings Per Share

     Exhibit 27 - Financial Data Schedule

B. Reports on Form 8-K:

     There were no Reports on Form 8-K filed during the quarter ended
     March 31, 1998.


                                       10
<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:  May 21, 1998                            /s/ David A. Conway
                                               -----------------------------
                                                   David A. Conway
                                                   President, Director and Chief
                                                   Executive Officer
                                                   (Principal Operating Officer)



                                       11