**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**




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




For
      the
      quarterly period ended **September
      30, 2007**




o TRANSITION
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      transition period from _______ to ________









Commission
      File No: **333-137210**





**DIET
      COFFEE, INC.**


(Exact
      name of issuer as specified in its charter)





**DELAWARE**
            **05-0630427**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)**16
                East 40****th****Street, 12****th****Floor**
              **New
                York, NY 10016**
              **________________________________________________________________________**
              (Address
                of principal executive offices, including zip
                code)


**(212)
      867-1370**


(Issuer’s
      telephone number)




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 
      o




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of November 16, 2007, the issuer had
      85,587,677 shares of its common stock issued and outstanding.




Transitional
      Small Business Disclosure Format (check one): Yes  oNo 
      x







**PART
      I - FINANCIAL INFORMATION**




**Item
      1.**  **Financial
      Statements.**


**DIET
                  COFFEE, INC.****CONDENSED
                  CONSOLIDATED BALANCE SHEET**
                **(Unaudited)**
  September
                  30,
                2007ASSETSCurrent
                  Assets:Cash
              
              $
              1,222Other
                  receivables (Note B)
              
              
              3,158Total
                  current assets
              
              $
              4,380LIABILITIES
                  AND (DEFICIENCY IN) STOCKHOLDERS' EQUITYCurrent
                  Liabilities:Accounts
                  payable and accrued expenses (Note C)
              
              $
              655,330Customer
                  deposits
              
              
              15,544Total
                  current liabilities
              
              
              670,874COMMITMENTS
                  AND CONTINGENCIES (Note G)(DEFICIENCY
                  IN) STOCKHOLDERS' EQUITY (Note D):Series
                  A Preferred stock, par value $0.001; 50,000 shares designated,
                  50,000
                  shares issued and outstandingat
                  September 30, 2007
              
              
              50Common
                  stock, $0.001 par value; 200,000,000 authorized;72,619,818
                  issued and outstandingas
                  of September 30, 2007
              
              
              72,620Common
                  stock to be issued
              
              
              -Additional
                  paid in capital
              
              
              833,575Accumulated
                  deficit
              
              
              (1,572,739
              )Total
                  (deficiency in) stockholders' equity
              
              
              (666,494
              )Total
                  liabilities and (deficiency in) stockholders' equity
              
              $
              4,380
  See
        the
        accompanying notes to unaudited condensed consolidated financial
        statements.
  1
 **DIET
        COFFEE, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENT OF OPERATIONS**
 **(UNAUDITED)**
  Three
                  Months Ended
                September
                  30,2007
              
              2006REVENUESSales
              
              $
              1,812
              
              $
              268,854Cost
                  of sales
              
              
              600
              
              
              66,593Gross
                  profit
              
              
              1,212
              
              
              202,261OPERATING
                  EXPENSESSelling,
                  general and administrative
              
              
              275,535
              
              
              515,875LOSS
                  FROM OPERATIONS
              
              
              (274,323
              )
              
              (313,614
              )OTHER
                  INCOME (EXPENSE)Interest
                  income
              
              
              -
              
              
              1,011Net
                  loss before provision for income taxes
              
              
              (274,323
              )
              
              (312,603
              )Income
                  taxes
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              (274,323
              )
              $
              (312,603
              )Net
                  loss per common share (basic and fully diluted)
              
              $
              (0.0038
              )
              $
              (0.0044
              )Weighted
                  average of common shares outstanding(basic
                  and fully diluted)
              
              
              71,737,037
              
              
              70,531,348
  See
        the
        accompanying notes to unaudited condensed consolidated financial
        statements.
  2
  **DIET
                  COFFEE, INC****CONDENSED
                  CONSOLIDATED STATEMENT OF (DEFICIENCY IN) STOCKHOLDER'S
                  EQUITY**
 From
        December 19, 2005 (date of inception) to September 30, 2007
 (Unaudited)
  Series
                  A-Preferred stock
              
              Common
                  stock
              
              Common
                Stock
                To
                  be
              
              Subscription
              
              Additional
                  Paid-In-
              
              AccumulatedShares
              
              Amount
              
              Shares
              
              Amount
              
              issued
              
              Receivable
              
              Capital
              
              Deficit
              
              TotalBalance-December
                  19, 2005
              
              
              -
              
              $
              -
              
              
              
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Common
                  stock issuedto
                  founders
              
              
              -
              
              
              -
              
              
              67,750,000
              
              
              67,750
              
              
              -
              
              
              (67,750
              )
              
              -
              
              
              -
              
              
              -Series
                  A preferred stockissued
                  to founders
              
              
              50,000
              
              
              50
              
              
              -
              
              
              -
              
              
              -
              
              
              (50,000
              )
              
              49,950
              
              
              -
              
              
              -Subscription
                  received
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              117,750
              
              
              -
              
              
              -
              
              
              117,750Sale
                  of common stock(to
                  be issued)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              640,599
              
              
              -
              
              
              -
              
              
              -
              
              
              640,599Net
                  Loss (Restated)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (447,186
              )
              
              (447,186
              )Balance-June
                  30, 2006 (Restated)
              
              
              50,000
              
              $
              50
              
              
              67,750,000
              
              $
              67,750
              
              $
              640,599
              
              $
              -
              
              $
              49,950
              
              $
              (447,186
              )
              $
              311,163Sale
                  and issuance of common stock
              
              
              -
              
              
              -
              
              
              3,763,000
              
              
              3,763
              
              
              (640,599
              )
              
              -
              
              
              693,336
              
              
              -
              
              
              56,500Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (851,230
              )
              
              (851,230
              )Balance-June
                  30, 2007
              
              
              50,000
              
              $
              50
              
              
              71,513,000
              
              $
              71,513
              
              $
              -
              
              $
              -
              
              $
              743,286
              
              $
              (1,298,416
              )
              $
              (483,567
              )Issuance
                  of shares inexchangefor
                  servicesrendered
              
              
              -
              
              
              -
              
              
              1,106,818
              
              
              1,107
              
              
              -
              
              
              -
              
              
              90,289
              
              
              -
              
              
              91,396Net
                Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (274,323
              )
              
              (274,323
              )Balance-September
                  30, 2007
              
              
              50,000
              
              $
              50
              
              
              72,619,818
              
              $
              72,620
              
              
              -
              
              
              -
              
              $
              833,575
              
              $
              (1,572,739
              )
              $
              (666,494
              )
  See
                  the accompanying footnotes to unaudited condensed consolidated
                  financial
                  statements
  3
  **DIET
          COFFEE, INC.**
 CONDENSED
          CONSOLIDATED STATEMENT OF CASH
          FLOWS
 (UNAUDITED)
 Three
                    Months Ended
                  September
                    30,2007
                
                2006CASH
                    FLOWS FROM OPERATING ACTIVITIES:
                
                $
                1,133
                
                $
                (352,342
                )CASH
                    FLOWS FROM INVESTING ACTIVITIES:
                
                
                -
                
                
                -CASH
                    FLOWS FROM FINANCING ACTIVITIES:
                
                
                -
                
                
                56,500Net
                    increase (decrease) in cash and cash equivalents
                
                
                1,133
                
                
                (295,842
                )Cash
                    and cash equivalents at beginning of period
                
                
                89
                
                
                328,401Cash
                    and cash equivalents at end of period
                
                $
                1,222
                
                $
                32,559SUPPLEMENTAL
                    DISCLOSURES OF CASH FLOW INFORMATION:Cash
                    paid during the period for interest
                
                $
                -
                
                $
                -Cash
                    paid during the period for taxes
                
                
                -
                
                
                -
 See
                    the accompanying footnotes to unaudited condensed consolidated
                    financial
                    statements
  4
 **DIET
          COFFEE, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007**
 **(UNAUDITED)**
  **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES**
 
 A
        summary
        of the significant accounting policies applied in the preparation of the
        accompanying unaudited condensed consolidated financial statements
        follows.
 
 General
  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 and the instructions to Form 10-QSB.
        Accordingly, they do not include all of the information and footnotes required
        by generally accepted accounting principles for complete financial
        statements.
  In
        the
        opinion of management, all adjustments (consisting of normal recurring accruals)
        considered necessary for a fair presentation have been included. Accordingly,
        the results from operations for the three month period ended September 30,
        2007,
        are not necessarily indicative of the results that may be expected for the
        year
        ended June 30, 2008.. The unaudited condensed consolidated financial statements
        should be read in conjunction with the June 30, 2007 financial statements
        and
        footnotes thereto included in the Company's Form 10KSB filed on October 18,
        2007.
 
 Business
        and Basis of Presentation
 
 Diet
        Coffee, Inc. (“Company”) was organized on December 19, 2005 under the state laws
        of Delaware with an original name of “The Diet Coffee Company”. On March 1,
        2006, the Company changed its name to the current existing name.
 
 Diet
        Coffee is engaged in the retailing and marketing of an all natural, high
        energy
        fat burning specialty coffee that helps individuals lose weight.
 
 The
        Company has adopted a fiscal year end of June 30.
 
 Revenue
        Recognition
 
 For
        revenue from product sales, the Company recognizes revenue in accordance
        with
        Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB104"), which
        superseded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
        Statements ("SAB101"). SAB 101 requires that four basic criteria must be
        met
        before revenue can be recognized: (1) persuasive evidence of an arrangement
        exists; (2) delivery has occurred; (3) the selling price is fixed and
        determinable; and (4) collectibility is reasonably assured. Determination
        of
        criteria (3) and (4) are based on management's judgments regarding the fixed
        nature of the selling prices of the products delivered and the collectibility
        of
        those amounts. Provisions for discounts and rebates to customers, estimated
        returns and allowances, and other adjustments are provided for in the same
        period the related sales are recorded. The Company defers any revenue for
        which
        the product was not delivered or is subject to refund until such time that
        the
        Company and the customer jointly determine that the product has been delivered
        or no refund will be required.
 
 SAB
        104
        incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
        Multiple-deliverable Revenue Arrangements. EITF 00-21 addresses accounting
        for
        arrangements that may involve the delivery or performance of multiple products,
        services and/or rights to use assets. The effect of implementing EITF 00-21
        on
        the Company's consolidated financial position and results of operations was
        not
        significant.
  Consideration
        Paid to Customers
  We
        offer
        our customers certain incentives in the form of cooperative advertising
        arrangements, product markdown allowances, trade discounts, cash discounts,
        and
        slotting fees. We account for these incentives in accordance with Emerging
        Issues Task Force Issue No. 01-9, Accounting for Consideration Given by a
        Vendor
        to a Customer, ("EITF 01-9"). Markdown allowances, trade discounts, cooperative
        advertising program participation and cash discounts are all recorded as
        reductions of net sales. No customer incentives included in sales for the
        quarters ended September 30, 2007 and 2006.
 5
 **DIET
          COFFEE, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007**
 **(UNAUDITED)**
  **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (Continued)**
  Use
        of
        Estimates
 
 The
        preparation of the financial statement in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect certain reported amounts and disclosures. Accordingly, actual results
        could differ from those estimates.
 
 Foreign
        Currency Translation
 
 The
        Company translates the foreign currency financial statements in accordance
        with
        the requirements of Statement of Financial Accounting Standards No. 52, "Foreign
        Currency Translation." Assets and liabilities are translated at current exchange
        rates, and related revenue and expenses are translated at average exchange
        rates
        in effect during the period. Resulting translation adjustments are recorded
        as a
        separate component in stockholders' equity. Foreign currency translation
        gains
        and losses are included in the statement of operations.
 
 Cash
        and Cash Equivalents
 
 For
        the
        purpose of the accompanying financial statements, all highly liquid investments
        with a maturity of three months or less are considered to be cash
        equivalents.
 
 Inventories
        / Cost of Goods Sold
 
 The
        Company has adopted a policy to record inventory at the lower of cost or
        market
        determined by the first-in-first-out method. The elements of cost that comprise
        inventory and cost good sold are FOB shipping point costs, freight and
        destination charges, customs and importation fees and taxes, customer broker
        fees (if any) and other related costs. Warehousing costs are changed to cost
        of
        goods in the period the costs are incurred. The Company provides inventory
        allowances based on estimates of obsolete inventories. Inventories consist
        of
        finished products available for sale to distributors and customers. At September
        30, 2007, Finished Goods inventory was $0.
 
 Allowance
        for doubtful accounts
 
 The
        Company maintains an allowance for doubt accounts to reduce amounts to their
        estimated realizable value, including reserves for customer allowances and
        incentives. In estimating the provision for doubtful accounts, the company
        considers a number of factors including age of the accounts receivable, trends
        and ratios involving the age of the accounts receivable and the customer
        mix of
        each aging categories. As of September 30, 2007, the allowance for doubtful
        accounts was $27,761 and -0-, respectively.
 
 Property
        and Equipment
 
 Property
        and equipment are stated at cost. When retired or otherwise disposed, the
        related carrying value and accumulated depreciation are removed from the
        respective accounts and the net difference less any amount realized from
        disposition, is reflected in earnings. For financial statement purposes,
        property and equipment are recorded at cost and depreciated using the
        straight-line method over their estimated useful lives.
  6
 **DIET
          COFFEE, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007**
 **(UNAUDITED)**
  **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (Continued)**
 
 Impairment
        of Long-Lived Assets
 
 The
        Company has adopted Statement of Financial Accounting Standards No. 144 (SFAS
        144). The Statement requires that long-lived assets and certain identifiable
        intangibles held and used by the Company be reviewed for impairment whenever
        events or changes in circumstances indicate that the carrying amount of an
        asset
        may not be recoverable. Events relating to recoverability may include
        significant unfavorable changes in business conditions, recurring losses,
        or a
        forecasted inability to achieve break-even operating results over an extended
        period. The Company evaluates the recoverability of long-lived assets based
        upon
        forecasted discounted cash flows. Should impairment in value be indicated,
        the
        carrying value of intangible assets will be adjusted, based on estimates
        of
        future discounted cash flows resulting from the use and ultimate disposition
        of
        the asset. SFAS No. 144 also requires assets to be disposed of be reported
        at
        the lower of the carrying amount or the fair value less disposal
        costs.
 
 Income
        Taxes
 
 The
        Company has adopted Financial Accounting Standards No. 109 ("SFAS 109") which
        requires the recognition of deferred tax liabilities and assets for the expected
        future tax consequences of events that have been included in the financial
        statement or tax returns. Under this method, deferred tax liabilities and
        assets
        are determined based on the difference between financial statements and the
        tax
        basis of assets and liabilities using enacted tax rates in effect for the
        year
        in which the differences are expected to reverse. Temporary differences between
        taxable income reported for financial reporting purposes and income tax purposes
        are insignificant.
  Research
        and Development
 
 The
        Company accounts for research and development costs in accordance with the
        Financial Accounting Standards Board's Statement of Financial Accounting
        Standards No. 2 ("SFAS 2"), "Accounting for Research and Development Costs".
        Under SFAS 2, all research and development costs must be charged to expense
        as
        incurred. Accordingly, internal research and development costs are expensed
        as
        incurred. Third-party research and developments costs are expensed when the
        contracted work has been performed or as milestone results have been achieved.
        Company-sponsored research and development costs related to both present
        and
        future products are expensed in the period incurred. The Company had no
        expenditures on research and product development for the three months ended
        September 30, 2007 and, 2006, respectively.
  Advertising
 
 The
        Company follows SOP 93-7 whereby charging the costs of advertising to expenses
        as incurred. The Company charged to operations $1,738 and $199,987, as
        advertising costs for the three months ended September 30, 2007 and, 2006,
        respectively.
  Comprehensive
        Income
 
 Statement
        of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
        Income," establishes standards for reporting and displaying of comprehensive
        income, its components and accumulated balances. Comprehensive income is
        defined
        to include all changes in equity except those resulting from investments
        by
        owners and distributions to owners. Among other disclosures, SFAS 130 requires
        that all items that are required to be recognized under current accounting
        standards as components of comprehensive income be reported in a financial
        statement that is displayed with the same prominence as other financial
        statements. The Company does not have any items of comprehensive income in
        the
        period presented.
 
 7
  **DIET
          COFFEE, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007**
 **(UNAUDITED)**
 **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (Continued)**
 
 Segment
        Information
 
 The
        Company has adopted Statement of Financial Accounting Standards No. 131,
        Disclosures about Segments of an Enterprise and Related Information ("SFAS
        131")
        in the years ended December 31, 2001 and subsequent years. SFAS 131 establishes
        standards for reporting information regarding operating segments in annual
        financial statements and requires selected information for those segments
        to be
        presented in interim financial reports issued to stockholders. SFAS 131 also
        establishes standards for related disclosures about products and services
        and
        geographic areas. Operating segments are identified as components of an
        enterprise about which separate discrete financial information is available
        for
        evaluation by the chief operating decision maker, or decision making group,
        in
        making decisions on how to allocate resources and assess
        performance.
  Stock
        Based Compensation
 
 In
        December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based
        Compensation-Transition and Disclosure-an amendment of SFAS 123.” This statement
        amended SFAS 123, “Accounting for Stock-Based Compensation,” to provide
        alternative methods of transition for a voluntary charge to the fair value
        based
        method of accounting for stock-based employee compensation. In addition,
        this
        statement amended the disclosure requirements of SFAS No. 123 to require
        prominent disclosures in both annual and interim financial statements about
        the
        method of accounting for stock-based employee compensation and the effect
        of the
        method used on reported results. Effective for the period ended June 30,
        2006
        the Company has adopted SFAS 123 (R) which supersedes APB Opinion No. 25,
        “Accounting for Stock Issued to Employees” and eliminates the intrinsic value
        method that was provided in SFAS 123 for accounting of stock-based compensation
        to employees. The Company made no employee stock-based compensation grants
        before June 30, 2007 and during the three months ended September 30, 2007
        and
        therefore has no unrecognized stock compensation related liabilities or expense
        unvested or vested.
 
 Loss
        per Share
 
 The
        Company follows Statement of Financial Accounting Standards No. 128 (“SFAS No.
        128”) “Earnings per Share”. Basic and diluted earnings (loss) per share amounts
        are computed based on net income (loss) divided by the weighted average number
        of common shares outstanding. The assumed exercise of warrants into 3,763,000
        common shares was not included in the computation of diluted loss per share
        because the assumed exercise would be anti-dilutive for the period
        presented.
 
 Liquidity
 
 As
        shown
        in the accompanying unaudited condensed consolidated financial statements,
        the
        Company incurred a quarterly net loss of $124,234 on revenues of $1,812 and
        generated $1,133 in cash flows for operations during the quarter ended September
        30, 2007.
 
 Concentration
        of Credit Risk
 
 Financial
        instruments and related items, which potentially subject the Company to
        concentrations of credit risk, consist primarily of cash, cash equivalents
        and
        trade receivables. The Company places its cash and temporary cash investments
        with high credit quality institutions. At times, such investments may be
        in
        excess of the FDIC insurance limit.
 
 New
        Accounting Pronouncements
  8
 **DIET
          COFFEE, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007**
 **(UNAUDITED)**
  **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (Continued)**
 
 In
          February 2006, the FASB issued SFAS No. 155. “Accounting for certain Hybrid
          Financial Instruments an amendment of FASB Statements No. 133 and 140,” or SFAS
          No. 155. SFAS No. 155 permits fair value remeasurement for any hybrid financial
          instrument that contains an embedded derivative that otherwise would require
          bifurcation, clarifies which interest-only strips and principal-only strips
          are
          not subject to the requirements of Statement No. 133, establishes a requirement
          to evaluate interests in securitized financial assets to identify interests
          that
          are freestanding derivatives or that are hybrid financial instruments that
          contain an embedded derivative requiring bifurcation, clarifies that
          concentrations of credit risk in the form of subordination are not embedded
          derivatives, and amends SFAS No. 140 to eliminate the prohibition on a
          qualifying special purpose entity from holding a derivative financial instrument
          that pertains to a beneficial interest other than another derivative financial
          instrument. SFAS 155 is effective for all financial instruments acquired
          or
          issued after the beginning of an entity's first fiscal year that begins
          after
          September 15, 2006. We do not expect the adoption of SFAS 155 to have a
          material
          impact on our consolidated financial position, results of operations or
          cash
          flows.
 
 In
        March
        2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
        Financial Assets - an amendment to FASB Statement No. 140. Statement 156
        requires that an entity recognize a servicing asset or servicing liability
        each
        time it undertakes an obligation to service a financial asset by entering
        into a
        service contract under certain situations. The new standard is effective
        for
        fiscal years beginning after September 15, 2006. The adoption of SFAS No.156
        did
        not have a material impact on the Company's financial position and results
        of
        operations.
 
 In
        July
        2006, the FASB issued Interpretation No. 48 (FIN 48). “Accounting for
        uncertainty in Income Taxes”. FIN 48 clarifies the accounting for Income Taxes
        by prescribing the minimum recognition threshold a tax position is required
        to
        meet before being recognized in the financial statements. It also provides
        guidance on derecognition, measurement, classification, interest and penalties,
        accounting in interim periods, disclosure and transition and clearly scopes
        income taxes out of SFAS 5, “ Accounting for Contingencies”. FIN 48 is effective
        for fiscal years beginning after December 15, 2006. We have not yet evaluated
        the impact of adopting FIN 48 on our consolidated financial position, results
        of
        operations and cash flows.
 
 In
        September 2006, the FASB issued SFAS 157, Fair Value Measurements, which
        defines fair value, establishes a framework for measuring fair value in
        generally accepted accounting principles (“GAAP”), and expands disclosures about
        fair value measurements. The Company will be required to adopt SFAS 157
        effective for the fiscal year beginning January 1, 2008. The requirements
        of SFAS 157 will be applied prospectively except for certain derivative
        instruments that would be adjusted through the opening balance of retained
        earnings in the period of adoption. The Company is currently evaluating the
        impact of the adoption of SFAS 157 on the Company's consolidated financial
        statements and the management believes that the adoption of SFAS 157 will
        not
        have a significant impact on its consolidated results of operations or financial
        position.
 
 In
        September 2006, the Financial Accounting Standards Board issued FASB
        Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and
        Other Postretirement Plans” (“SFAS 158”). SFAS 158 requires us to
        record the funded status of its defined benefit pension and other postretirement
        plans in its financial statements. We are required to record an asset in
        its
        financial statements if a plan is overfunded or record a liability in its
        financial statements if a plan is underfunded with a corresponding offset
        to
        shareholders’ equity. Previously unrecognized assets and liabilities are
        recorded as a component of shareholders’ equity in accumulated other
        comprehensive income, net of applicable income taxes. SFAS 158 also
        requires us to measure the value of our assets and liabilities as of the
        end of
        our fiscal year ending after December 15, 2008. We have implemented
        SFAS 158 using the required prospective method. The recognition provisions
        of SFAS 158 are effective for the fiscal year ending after
        December 15, 2006. We do not expect that adoption of this new standard to
        have a material impact on our 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 permits entities to choose
        to measure many financial instruments, and certain other items, at fair value.
        SFAS 159 applies to reporting periods beginning after November 15, 2007.
        The adoption of SFAS 159 is not expected to have a material impact on our
        financial condition or results of operations.
 
 9
 **DIET
          COFFEE, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007**
 **(UNAUDITED)**
  **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (Continued)**
 
 In
        December 2006, the FASB issued FSP EITF 00-19-2, Accounting for
        Registration Payment Arrangements ("FSP 00-19-2") which addresses accounting
        for
        registration payment arrangements. FSP 00-19-2 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 FASB Statement No.
        5,
        Accounting for Contingencies. FSP 00-19-2 further clarifies that a financial
        instrument subject to a registration payment arrangement.
 
 **NOTE B
        - OTHER RECEIVABLES**
  Other
        receivables at September 30, 2007 consisted of a $3,158 credit card holdback
        by
        a merchant bank that processes payment due for product sales. The merchant
        bank
        holdback account is based on the dollar amount of sales and is designed to
        allow
        the Company to receive the credit card holdback cash, including interest
        for the
        Company, after customer refunds and chargebacks are cleared.
 
 **NOTE C
        - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES**
 
 Accounts
        payable and accrued liabilities at September 30, 2007 are as
        follows:
  Accounts
                  payable
              
              $
              151,988Accrued
                  payroll and payroll taxes
              
              
              170,590Accrued
                  professional fees
              
              
              143,000Accrued
                    general and administrative expense
              
              
              150,000Other
                  accrued liabilities
              
              
              39,752Total
              
              $
              655,330
  **NOTE D
        - STOCKHOLDERS' EQUITY**
 
 Series
        A - Preferred stock
 
 The
        Company has authorized 10,000,000 shares of Preferred stock, par value $0.001,
        within the limitations and restrictions stated in the Certificate of
        Incorporation of the Company.
 
 The
        Company designated and issued of 50,000 shares of Series A - Preferred stock;
        non convertible. Each share of the Series A- Preferred stock is entitled
        to
        10,000 votes on all matters submitted to the stockholders of the Company.
        The
        holders of the Series A-Preferred stock are not granted any preference upon
        the
        liquidation, dissolution or winding up of the business of the
        Company.
 
 Common
        stock
 
 The
        Company has authorized 200,000,000 shares of Common stock, par value
        $0.001, of which 72,619,818 shares are issued and outstanding.
 
 On
        July
        20, 2007, the Company issued 181,819 shares of common stock to a consultant
        in
        exchange for satisfaction of royalty obligations pursuant to a Licensing
        and
        Supply Agreement dated May 18, 2007. The shares were valued at $54,546 (based
        on
        a closing price of $0.30). On September 26, 2007, the Company issued an
        additional 500,000 shares of common stock to the consultant in satisfaction
        of
        additional royalty obligations under the Agreement. The shares were valued
        at
        $19,000 (based on a closing price of $0.038).
   10
 **DIET
          COFFEE, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007**
 **(UNAUDITED)**
 **NOTE D
        - STOCKHOLDERS' EQUITY****(Continued)**
  On
        September 17, 2007, the Company issued 425,000 shares of common stock to
        a
        consultant in exchange for legal services. The shares were valued at $17,850
        (based on closing prices of $0.042).
  Warrants
 
 The
        Company issued 3,478,000 warrants to purchase Common stock at a purchase
        price
        of $0.50 per share expiring two years from the date of their issuance in
        2006.
  **NOTE E
        - INCOME TAXES**
 
 The
        Company has adopted Financial Accounting Standards No. 109, which requires
        the
        recognition of deferred tax liabilities and assets for the expected future
        tax
        consequences of events that have been included in the financial statement
        or tax
        returns.
 
 Under
        this method, deferred tax liabilities and assets are determined based on
        the
        difference between financial statements and tax basis of assets and liabilities
        using enacted tax rates in effect for the year in which the differences are
        expected to reverse. Temporary differences between taxable income reported
        for
        financial reporting purposes and income tax purposes are insignificant. A
        management estimate that at September 30, 2007, the Company has available
        for
        federal income tax purposes a net operating loss carry forward of approximately
        $988,000, expiring in the year 2023, that may be used to offset future taxable
        income. Due to significant changes in the Company's ownership, the future
        use of
        its existing net operating losses may be limited.
 
 The
        Company has provided a valuation reserve against the full amount of the net
        operating loss benefit, since in the opinion of management based upon the
        earnings history of the Company; it is more likely than not that the benefits
        will not be realized. Components of deferred tax assets as of September 30,
        2007
        are as follows:
 
 Non
        current:
 
 Net
                  operating loss carry forward
              
              $
              988,000Valuation
                  allowance
              
              
              (988,000
              )Net
                  deferred tax asset
              
              
              -
 
 **NOTE F
        - STOCK OPTIONS AND WARRANTS**
  The
        following table summarizes the changes in warrants outstanding and the related
        prices for the shares of the Company's common stock issued to shareholders
        at
        September 30, 2007.
 Warrants
                  Outstanding
              
              
              
              
              
              Warrants
                  ExercisableExercise
                  Prices
              
              
              Number
                Outstanding
              
              
              WeightedAverageRemainingContractual
                  Life(years)
              
              
              WeightedAverageExercisePrice
              
              
              Number
                Exercisable
              
              
              WeightedAverageExercisePrice$
                  0.50
              
              
              3,763,000
              
              
              1.31
              
              $
              0.50
              
              
              3,763,000
              
              $
              0.50
 
  11
 **DIET
        COFFEE, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2007**
 **(UNAUDITED)**
  **NOTE F
        - STOCK OPTIONS AND WARRANTS (Continued)**
 
 Transactions
        involving the Company's warrant issuance are summarized as follows:
 
 Number
                  of Shares
              
              Weighted
                  Average
                Price
                  Per ShareOutstanding
                  at December 15, 2005 (date of inception)
              
              
              -
              
              $
              -Granted
              
              
              3,763,000
              
              
              0.50Exercised
              
              
              -
              
              
              -Canceled
                  or expired
              
              
              -
              
              
              -Outstanding
                  at June 30, 2007
              
              
              3,763,000
              
              $
              0.50Granted
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Canceled
                  or expired
              
              
              -
              
              
              -Outstanding
                  at September 30, 2007
              
              
              3,763,000
              
              $
              0.50
  During
        the fiscal year ended June 30, 2006, the Company completed a private placement
        in which we subsequently issued 3,478,000 shares of common stock and warrants
        to
        acquire 3,478,000 shares of common stock. The warrants are exercisable until
        two
        years after the date of issuance at a purchase price of $0.50 per share on
        3,478,000 warrants and include registration rights. The warrants were issued
        subsequent to June 30, 2006.
 
 In
        July
        2006, the Company sold 285,000 shares of its Common stock at a net average
        of
        $0.185 per share. As part of the sale of Common stock the Company issued
        285,000
        warrants to purchase its Common stock at a price of $0.50 per share expiring
        2
        years from the date of issuance.
  There
        are
        no outstanding options as of September 30, 2007.
  **NOTE G
        - COMMITMENTS AND CONTINGENCIES**
 
 Employment
        agreements
 
 The
        Company had employment agreements with the Company’s President and Chief
        Executive Officer as well as the Company’s Secretary. In addition to salary and
        benefit provisions, the agreements contain defined benefit commitments should
        the employee terminate their employment with or without cause. As of September
        30, 2007, the Company owes $170,590 in deferred salaries that were incurred
        in
        accordance with the employment agreements with management.
 
 On
        October 5, 2007, the Company increased the number of authorized directors
        to
        three and appointed Mr. Adam Engel as a director. Mr. Engel was also appointed
        to the officer positions of Chief Executive Officer, Chief Financial Officer
        and
        Secretary upon the resignation of the two officers discussed further
        below.
 
 On
        October 5, 2007, the Company’s President and Chief Executive Officer and its
        Secretary resigned from all of their respective employment positions with
        the
        Company, which resignations were to be effective October 12, 2007. In connection
        with their resignations, the Company entered into separation and consulting
        agreements with both of them.
  12
 **DIET
          COFFEE, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007**
 **(UNAUDITED)**
  **NOTE G
        - COMMITMENTS AND CONTINGENCIES**  **(Continued)**
 
 Separation
        agreements
 
 In
        connection, with Messrs. Stocknoff and Attarian’s resignation from their officer
        and director positions with us, we entered into a letter agreement dated
        October
        5, 2007 with each of Messrs Stocknoff and Attarian setting forth the terms
        of
        our mutual separation. Under the terms of these Agreements (which contained
        the
        same terms), Each of Mr. Stocknoff and Mr. Attarian and the Company agreed
        to
        waive any and all continuing rights and obligations under Mr. Stocknoff’s and
        Mr. Attarian’s respective employment agreements dated June 14, 2006. In
        consideration thereof and to enter into the Letter Agreements, we agreed
        to pay
        Messrs. Stocknoff and Attarian each $90,000 as follows: $20,000 on the Effective
        Date (as defined) and thereafter in equal semi-monthly installments of $2,500
        until January 2008 at which time the installment payments shall increase
        to
        $5,000. Beginning January 2008, we may pay all or part of the installments
        in
        share of our common stock. In addition, we agreed to issue 5,000,000 shares
        of
        our common stock on the Effective Date to each of Messrs. Stocknoff and
        Attarian. Messrs. Stocknoff and Attarian also agreed to a 1 year non-compete/non
        solicitation provisions as well as confidentiality and non-disparagement
        clauses. Each party to this agreement granted mutual releases.
 
 U.S.
        Federal Trade Commission Investigation
 
 On
        March
        26, 2007, Diet Coffee, Inc. (the “Company”) received a letter from the U.S.
        Federal Trade Commission (“FTC”) whereby the Company was informed that the FTC
        is conducting an investigation into advertising claims made
        for
        the Company’s weight loss product known as “Slim Coffee”. The purpose of the
        investigation was to determine whether the Company, in connection with its
        sales
        of Slim Coffee, engaged in unfair or deceptive acts or practices and false
        advertising. The FTC threatened to file a complaint in the United States
        District Court, Southern District of New York, alleging False Advertising,
        unless the Company and the FTC could reach a satisfactory resolution to the
        matter. A negotiated settlement has been reached with the FTC under which
        the
        Company, its officers and directors did not admit any wrongdoing. On October
        5,
        2007, the Company executed a stipulation to a final order and judgment in
        the
        amount of $923,910. The full amount of the judgment, and payment of any portion
        of it is suspended and cannot be reinstated so long as the Company abides
        by the
        reporting and monitoring requirements of the judgment; does not make false
        advertising claims in connection with any of its products in the future;
        and its
        past financial disclosures to the FTC were materially accurate. The Company
        expects stipulation will be executed by the FTC and filed with the United
        States
        District Court, Southern District of New York. The Company expects to comply
        with terms of the stipulation and does not anticipate incurring a liability
        for
        the judgment.
 
 Royalty
        commitment
 
 On
        May
        18, 2007, Diet Coffee, Inc. (the "Company") entered into a License and Supply
        Agreement with Jason Ryu, pursuant to which the Company licensed the right
        to
        market and sell a fluorescent light bulb that contains an air purifying
        microchip ion emitter from Mr. Ryu. In exchange for this license the Company
        agrees to pay Mr. Ryu a royalty of $0.20 per unit for the first 1.5 million
        units sold by the Company and the lesser of $0.15 per unit or 5% of
        manufacturing costs for all additional units. The initial term of this agreement
        shall be two years and shall automatically
        be renewed for subsequent two year periods if at lease 5 million units are
        sold
        by the Company during each period. Within ninety days from the date of this
        Agreement, the Company was required to place an order not less than 100,000
        units and at least 600,000 units each quarter thereafter. As of the date
        of this
        filing, the Company has not ordered any units, however the Company has issued
        681,819 shares of its common stock as prepayment of $30,000 in royalties
        under
        the agreement. Mr. Ryu has sent notice to the Company that license agreement
        shall continue on a non-exclusive basis.
  13
 **DIET
          COFFEE, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007**
 **(UNAUDITED)**
  **NOTE
        H - CASH FLOWS**
 
 The
        following are non-cash transactions for the three months ended September
        30,
        2007:
 
 On
        September 17, 2007, the Company issued 425,000 shares of common stock to
        a
        consultant in exchange for legal services. The shares were valued at $17,850
        (based on a closing price of $0.042).
 
 During
        the three months ended September 30, 2007, the Company issued a total of
        681,819
        shares of common stock to Mr. Jason Ryu as prepayment of royalty obligations
        under a License and Supply Agreement. The shares were valued at $73,546 (based
        on closing prices of $0.30 for 181,819 shares and $0.038 for 500,000
        shares).
 
 **NOTE I
        - GOING CONCERN MATTERS**
  The
        accompanying unaudited condensed consolidated statements have been prepared
        on a
        going concern basis, which contemplates the realization of assets and the
        satisfaction of liabilities in the normal course of business. As shown in
        the
        accompanying financial statements, as of September 30, 2007 and for the quarter
        then ended, the Company had sales of $1,812, incurred losses of $274,323
        and
        generated $1,133 in cash to fund the current loss. These factors among others
        may indicate that the Company will be unable to continue as a going concern
        for
        a reasonable period of time.
  The
        Company is actively pursuing additional equity financing through discussions
        with investment bankers and private investors. There can be no assurance
        the
        Company will be successful in its effort to secure additional equity
        financing.
 
 If
        operations and cash flows continue to improve through these efforts, management
        believes that the Company can continue to operate. However, no assurance
        can be
        given that management's actions will result in profitable operations or the
        resolution of its liquidity problems.
 
 The
        Company's existence is dependent upon management's ability to develop profitable
        operations and resolve its liquidity problems. Management anticipates the
        Company will attain profitable status and improve its liquidity through the
        continued developing, marketing and selling of its services and additional
        equity investment in the Company. The accompanying unaudited condensed
        consolidated financial statements do not include any adjustments that might
        result should the Company be unable to continue as a going concern.


14


**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation.**





The
      following discussion and analysis should be read in conjunction with our audited
      consolidated financial statements and related notes included in this report.
      This report contains “forward-looking statements” within the meaning of the
      Private Securities Litigation Reform Act of 1995. The statements contained
      in
      this report that are not historic in nature, particularly those that utilize
      terminology such as “may,” “will,” “should,” “expects,” “anticipates,”
“estimates,” “believes,” or “plans” or comparable terminology are
      forward-looking statements based on current expectations and
      assumptions.





Various
      risks and uncertainties could cause actual results to differ materially from
      those expressed in forward-looking statements. Factors that could cause actual
      results to differ from expectations include, but are not limited to, those
      set
      forth under the section “Risk Factors” set forth in this report.





The
      forward-looking events discussed in this annual report, the documents to which
      we refer you and other statements made from time to time by us or our
      representatives, may not occur, and actual events and results may differ
      materially and are subject to risks, uncertainties and assumptions about us.
      For
      these statements, we claim the protection of the “bespeaks caution” doctrine.
      All forward-looking statements in this document are based on information
      currently available to us as of the date of this report, and we assume no
      obligation to update any forward-looking statements. Forward-looking statements
      involve known and unknown risks, uncertainties and other factors that may cause
      the actual results to differ materially from any future results, performance
      or
      achievements expressed or implied by such forward-looking
      statements.





***General***





The
      following discussion and analysis is provided to increase the understanding
      of,
      and should be read in conjunction with, our unaudited financial statements
      and
      related notes included elsewhere in this Report. Historical results and
      percentage relationships among any amounts in these financial statements are
      not
      necessarily indicative of trends in operating results for any future period.
      This report contains “forward looking statements” within the meaning of the
      Private Securities Litigation Reform Act of 1995. The statements, which are
      not
      historical facts contained in this Report, including this Management’s
      discussion and analysis of financial condition and results of operation, and
      notes to our unaudited financial statements, particularly those that utilize
      terminology such as “may” “will,” “should,” “expects,” “anticipates,”
“estimates,” “believes,” or “plans” or comparable terminology are
      forward-looking statements. Such statements are based on currently available
      operating, financial and competitive information, and are subject to various
      risks and uncertainties. Future events and our actual results may differ
      materially from the results reflected in these forward-looking statements.
      Factors that might cause such a difference include, but are not limited to,
      dependence on existing and future key strategic and strategic end-user
      customers, limited ability to establish new strategic relationships, ability
      to
      sustain and manage growth, variability of operating results, our expansion
      and
      development of new service lines, marketing and other business development
      initiatives, the commencement of new engagements, competition in the industry,
      general economic conditions, dependence on key personnel, the ability to
      attract, hire and retain personnel who possess the technical skills and
      experience necessary to meet the service requirements of our clients, the
      potential liability with respect to actions taken by our existing and past
      employees, risks associated with international sales, and other risks described
      herein and in our other filings with the Securities and Exchange
      Commission.





The
      safe
      harbor for forward-looking statements provided by Section 21E of the Securities
      Exchange Act of 1934 excludes issuers of “penny stock” (as defined under Rule
      3a51-1 of the Securities Exchange Act of 1934). Our common stock currently
      falls
      within that definition





All
      forward-looking statements in this document are based on information currently
      available to us as of the date of this report, and we assume no obligation
      to
      update any forward-looking statements. Forward-looking statements involve known
      and unknown risks, uncertainties and other factors that may cause the actual
      results to differ materially from any future results, performance or
      achievements expressed or implied by such forward looking
      statements.





15


The
      following discussion of our financial condition and results of operations should
      be read in conjunction with our unaudited financial statements and related
      notes
      appearing elsewhere in this report.





**Company
      History**




We
      were
      incorporated in the State of Delaware on December 19, 2005 and amended our
      Certificate of Incorporation on March 1, 2006. On March 1, 2006, we changed
      our
      name from The Diet Coffee Company, Inc. to Diet Coffee, Inc. Our principal
      executive offices are located at 16 East 40 th Street,
      12 th Floor,
      New York, New York. Our telephone number is (212) 867-1370.




We
      are
      engaged in the direct marketing and distribution of consumer products. Our
      first
      offering was the Slim Coffee product line, which featured coffee beverages.
      We
      no longer sell or market Slim Coffee products and do not anticipate selling
      Slim
      Coffee products in the fiscal year ended June 30, 2008. In May 2007, we entered
      into a license agreement to sell an energy saving compact fluorescent light
      bulb
      named the Ionic Bulb. We plan to market the Ionic Bulb through TV infomercials,
      catalogs, magazines and major U.S. retail and specialty stores and our website www.ionicbulb.com .




**Comparison
      of Three Months Ended September 30, 2007 To September 30, 2006**




*Results
      of Operations*





*Revenues*





Our
      sales
      were $1,812 for the three months ended September 30, 2007, consisting
      of Ionic Bulb product sales which we began marketing in this three month period.
      Our sales were $268,854 for the three months ended September 30, 2006 from
      sales
      of products under the Slim Coffee product line, which we generated primarily
      from customer responses to our advertisements and their placing orders with
      us
      through our www.slimcoffee.com website or calling one of our toll-free telephone
      numbers. We no
      longer sell or market Slim Coffee products and do not anticipate actively
      selling Slim Coffee products in the future.





*Gross
      Profit*




Our
      gross
      profit was $1,212 for the three months ended September 30, 2007 versus our
      gross
      profit of $202,261 for the three months ended September 30, 2006, a decrease
      of
      $201,049. The decrease is attributable to our discontinuance of sales under
      the
      Slim Coffee product line and out recent entry into the Ionic Bulb
      market




Our
      gross
      profit percentage for quarter ended September 30, 2007 was 66.9%, as compared
      to
      75.2% for the quarter ended September 30, 2006. Our gross profit percentage
      is
      generally higher for sales we make through direct response marketing as compared
      to sales we make to mass market and specialty retailers. We did not generate
      any
      sales from direct marketing in the quarter ended September 30, 2007 in contrast
      to the quarter ended September 30, 2006, when the majority of our net sales
      were
      generated from direct marketing of our Slim Coffee products.




*Operating
      expenses*




Operating
      expenses for the three ended September 30, 2007 were $275,535 and consisted
      primarily of rent
      and
      other office overhead expenses,personnel costs, stock based compensation
      costs and licensing royalties in accordance with the Ionic Bulb Licensing and
      Consulting Agreement. Operating expenses for the three months ended September
      30, 2006 were $515,875 and consisted primarily of $199,987 in product
      advertising, $114,703 in sales and marketing consulting fees, $94,897 in
      personnel costs and $72,766 in customer order fulfillment costs. Operating expenses decreased by $240,340 in the three months ended
      September 30, 2007, or approximately 47%, from $515,875 for the comparable
      period in 2006. This decrease in operating costs is attributable to the decrease
      in sales.




We
      decreased our media advertising spending in the three-month period ended
      September 30, 2007 by $198,249 or 99.1%, as compared to the three-month period
      ended September 30, 2006. We no longer sell or market Slim Coffee products
      as we
      did in the previous fiscal year and we do not anticipate actively selling Slim
      Coffee products in the future. We are seeking further improvements with our
      planned sales and marketing programs for the Ionic Bulb product.




16


*Net
      Income and Loss*





Our
      net
      loss for the three months ended September 30, 2007 was $274,323 in contrast
      to a
      net loss of $312,603 for the three months ended September 30, 2006. We recently
      began operating our business, including efforts to market and sell our products,
      and revenues generated were not sufficient to cover our operating costs in
      both
      three-month periods then ended. We reduced our net loss but terminating our
      Slim
      Coffee sales and marketing activities and reducing overhead costs. We are
      continuing our efforts to market and sell our Ionic Bulb products in order
      to
      generate a higher sales volume and unless and until such time as we generate
      substantially higher sales volume, we will continue realize net
      losses.





Our
      net
      loss per common share was ($0.0038) (basic and diluted) for the three months
      ended September 30, 2007 as compared to our ($0.0044) (basic and diluted) net
      loss per common share for the three months ended September 30, 2006.




The
      weighted average number of outstanding shares was 71,737,037 (basic and
      diluted) for the three-month period ended September 30, 2007 as compared to
      70,531,348 (basic and diluted) for the three-month period ended September 30,
      2006. For the three months ended September 30, 2007 and 2006, common stock
      equivalents derived from shares issuable in conversion of 3,763,000 warrants
      are
      not considered in the calculation of the weighted average number of common
      shares outstanding because they would be anti-dilutive, thereby decreasing
      the
      net loss per share.





**Liquidity
      and Capital Resources**




*Overview*





As
      of
      September 30, 2007, we had a working capital deficit and negative net worth
      of
      $666,494. As of June 30, 2007, we had a working capital deficit and negative
      net
      worth of $483,567. Our cash position at September 30, 2007 was $1,222 as
      compared to $89 as of June 30, 2007.





For
      the
      quarter ended September 30, 2007, we generated a net cash flow from operating
      activities of $1,133 consisting primarily of a net loss of $274,323, adjusted
      primarily for $91,396 in non-cash expenses for legal services and licensing
      royalties that were satisfied by issuance of our common stock and a $171,374
      increase in account payable and accrued expenses.





We
      expect
      capital expenditures to be nominal for the year ending June 30, 2008. These
      anticipated expenditures are for continued investments in property and equipment
      used in our business and software for our accounting and information
      systems.




*Financing*




As
      of
      September 30, 2007, we raised an aggregate of $814,849 in initial financing
      through the issuance 50,000 Series A preferred stock and 67,750,000 shares
      of
      common stock to founders and 3,763,000 shares issued in a private offering
      of
      common stock and warrants totaling $50,000, $67,750 and $697,099,
      respectively.





*Plan
      of Operation and Financing Needs*




Since
      our
      inception, we have generated insufficient revenues and gross profits and have
      incurred net losses. We have acquired the rights to sell the Ionic BulbTM,
      a n energy
      saving compact fluorescent light bulb that we plan to market through TV
      infomercials, catalogs, magazines and major U.S. retail and specialty stores
      and
      our website www.ionicbulb.com .
      It is
      hoped that we will begin to achieve sustainable revenues within the next 12
      months, of which there can be no guarantee. Our ability to achieve profitability
      is dependent on several factors, including but not limited to, our ability
      to:
      generate liquidity from operations and satisfy our ongoing operating costs
      on a
      timely basis. We still need additional investments in order to continue
      operations to cash flow break even. Additional investments are being sought,
      but
      we cannot guarantee that we will be able to obtain such investments. Financing
      transactions may include the issuance of equity or debt securities, obtaining
      credit facilities, or other financing mechanisms. However, the trading price
      of
      our common stock and conditions in the U.S. stock and debt markets make it
      more
      difficult to obtain financing through the issuance of equity or debt securities.
      Even if we are able to raise the funds required, it is possible that we could
      incur unexpected costs and expenses, fail to collect significant amounts owed
      to
      us, or experience unexpected cash requirements that would force us to seek
      alternative financing. Further, if we issue additional equity or debt
      securities, stockholders may experience additional dilution or the new equity
      securities may have rights, preferences or privileges senior to those of
      existing holders of our common stock. If additional financing is not available
      or is not available on acceptable terms, we will have to curtail our operations
      again, attempt to further restructure financial obligations and/or seek a
      strategic merger, acquisition or a sale of assets.





17


The
      independent auditor's report on our June 30, 2007 financial statements states
      that our recurring losses raise substantial doubts about our ability to continue
      as a going concern.





The
      effect of inflation on our revenue and operating results was not significant.
      Our operations are located in North America and there are no seasonal aspects
      that would have a material effect on our financial condition or results of
      operations.





**CRITICAL
      ACCOUNTING POLICIES AND USE OF ESTIMATES**





Financial
      Reporting Release No. 60, recently released by the Securities and Exchange
      Commission, requires all companies to include a discussion of critical
      accounting policies or methods used in the preparation of financial statements.
      The notes to the consolidated financial statements include a summary of
      significant accounting policies and methods used in the preparation of our
      Consolidated Financial Statements. In addition, Financial Reporting Release
      No.
      61 was recently released by the SEC requires all companies to include a
      discussion which addresses, among other things, liquidity, off-balance sheet
      arrangements, contractual obligations and commercial commitments. The following
      is a brief discussion of the more significant accounting policies and methods
      used by us.





The
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States.
      The preparation of financial statements in accordance with generally accepted
      accounting principles in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities,
      including the recoverability of tangible and intangible assets, disclosure
      of
      contingent assets and liabilities as of the date of the financial statements
      and
      the reported amounts of revenues and expenses during the reported period.





On
      an
      on-going basis, we evaluate our estimates. The most significant estimates relate
      to our recognition of revenue, the allowance for doubtful accounts receivable
      and inventory valuation reserves.





We
      believe the following critical accounting policies affect our more significant
      judgments and estimates used in the preparation of our consolidated financial
      statements:





***Revenue
      Recognition***





We
      recognize revenue when we ship our product to customers. Customers at times
      request credits for returned product or in connection with incentives such
      as
      cooperative advertising agreements. We reduce sales or increase selling,
      general, and administrative expenses, depending on the nature of the credits,
      for estimated future credits to customers. Management bases such estimates
      either on historical information about credits issued, relative to total sales,
      or on specific knowledge of incentives offered to retailers.





18


***Valuation
      of Accounts Receivable***





Our
      allowance for doubtful accounts reflects our best estimate of probable losses,
      determined principally on the basis of historical experience and specific
      allowances for known troubled accounts.





***Inventories***





Inventories
      consist almost entirely of finished goods. We account for inventory using a
      first-in-first-out system in which we record inventory on our balance sheets
      at
      the lower of our cost or net realizable value. A product’s cost is comprised of
      the amount that we pay our manufacturer for product, tariffs and duties
      associated with transporting product across national borders and freight costs
      associated with transporting the product from our manufacturers to our warehouse
      locations. When circumstances dictate that we use net realizable value in lieu
      of cost, we base our estimates on expected future selling prices less expected
      disposal costs. The Cost of goods sold line item on the Statements of Operations
      is comprised of the book value (lower of cost or net realizable value) of
      inventory sold to customers during the reporting period.




**Off-Balance
      Sheet Arrangements**




We
      do not
      have any off-balance sheet arrangements.




**Item
      3.**  **Controls
      and Procedures.**




Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission's rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed by us in the reports that we file under the Exchange
      Act is accumulated and communicated to our management, including our principal
      executive and financial officers, as appropriate to allow timely decisions
      regarding required disclosure.




**Evaluation
      of Disclosure Controls and Procedures**





As
      of
      September 30, 2007, our President, Chief Financial Officer and Director carried
      out an evaluation, of the effectiveness of the design and operation of our
      system of disclosure controls and procedures pursuant to Rule 13a-15(d) and
      15d-15(d) promulgated under the Exchange Act.  Based on this evaluation,
      our President, Chief Financial Officer and Director concluded that our controls
      and procedures were not effective in ensuring that information required to
      be
      disclosed by us in our periodic reports is recorded, processed, summarized
      and
      reported, within the time periods specified for each report and that such
      information is accumulated and communicated to our management, including our
      principal executive and principal financial officer, or persons performing
      similar functions, as appropriate to allow timely decisions regarding required
      disclosure.





During
      the course of the preparation of our September 30, 2007 financial statements,
      we
      identified certain material weaknesses relating to our internal controls and
      procedures within the areas of revenue recognition and inventory accounting.
      Some of these internal control deficiencies may also constitute deficiencies
      in
      our disclosure controls.





In
      addition, we have a limited number of employees and is not able to have proper
      segregation of duties based on the cost benefit of hiring additional employees
      solely to address the segregation of duties issue. We determined the risks
      associated with the lack of segregation of duties are insignificant based on
      the
      close involvement of management in day-to-day operations (i.e. tone at the
      top,
      corporate governance, officer oversight and involvement with daily activities,
      and other company level controls). We limited resources available and the
      limited amount of transactions and activities allow for compensating
      controls.





It
      should
      be noted that any system of controls, however well designed and operated, can
      provide only reasonable, and not absolute, assurance that the objectives of
      the
      system will be met. In addition, the design of any control system is based
      in
      part upon certain assumptions about the likelihood of future
      events.





19


In
      addition, our President, Chief Financial Officer and Director has determined
      that no change in our internal control over financial reporting occurred during
      the three months ended September 30, 2007 that has materially affected, or
      is
      (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities
      Exchange Act of 1934) reasonably likely to materially affect, our internal
      control over financial reporting.





Our
      President, Chief Financial Officer and Director is in the process of
      implementing a more effective system of controls, procedures and other changes
      in the areas of revenue recognition and inventory accounting to insure that
      information required to be disclosed in this quartely report on Form 10-QSB
      has
      been recorded, processed, summarized and reported accurately. Our management
      acknowledges the existence of this problem, and intends to developed procedures
      to address them to the extent possible given limitations in financial and
      manpower resources.





The
      Company is required to be in compliance with the certification requirements
      of
      Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control
      for
      the year ending June 30, 2008. Since inception, the Company has experienced
      severe cash flow problems and as a result has not had the resources to address
      fully the certification requirements of Section 404 of the Sarbanes-Oxley Act
      of
      2002. While management is working on a plan, no assurance can be made at this
      point that the implementation of such controls and procedures will be completed
      in a timely manner or that they will be adequate once implemented . Failure
      to
      develop adequate internal control and hiring of qualified accounting personnel
      may result in a “material weakness” in the Company’s internal control relating
      to the above activities.




**PART
      II - OTHER INFORMATION**




**Item
      1.**  **Legal
      Proceedings.**




On
      March
      26, 2007, Diet Coffee, Inc. (the “Company”) received a letter from the U.S.
      Federal Trade Commission (“FTC”) whereby the Company was informed that the FTC
      is conducting an investigation into advertising claims made for the Company’s
      weight loss product known as “Slim Coffee”. The purpose of the investigation was
      to determine whether the Company, in connection with its sales of Slim Coffee,
      engaged in unfair or deceptive acts or practices and false advertising. The
      FTC
      threatened to file a complaint in the United States District Court, Southern
      District of New York, alleging False Advertising, unless the Company and the
      FTC
      could reach a satisfactory resolution to the matter. A negotiated settlement
      has
      been reached with the FTC under which the Company, its officers and directors
      did not admit any wrongdoing. On October 5, 2007, the Company executed a
      stipulation to a final order and judgment in the amount of $923,910. The full
      amount of the judgment, and payment of any portion of it is suspended and cannot
      be reinstated so long as the Company abides by the reporting and monitoring
      requirements of the judgment; does not make false advertising claims in
      connection with any of its products in the future; and its past financial
      disclosures to the FTC were materially accurate. The Company expects stipulation
      will be executed by the FTC and filed with the United States District Court,
      Southern District of New York. The Company expects to comply with terms of
      the
      stipulation and does not anticipate incurring a liability for the
      judgment.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds.**




On
      July
      20, 2007, we issued 181,819 shares of our common stock as a compensatory stock
      grant relating to certain royalty obligations under our License and Supply
      Agreement. Our board valued the shares at $0.30 for a value of $54,546. The
      issuance was exempt under Section 4(2) of the Securities Act of 1933, as
      amended.





**Item
      3.**  **Defaults
      Upon Senior Securities.**




None.




**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders.**




None.




20


**Item
      5.**  **Other
      Information.**




None.





**Item
      6.**  **Exhibits.**




3.1
            Registrant’s
                Certificate of Incorporation.(1)3.2
            Certificate
                of Amendment to Registrant’s Certificate of
                Incorporation.(1)3.3
            Certificate
                of Designation, Powers, Preferences and Rights of Series A Preferred
                Stock.(1)3.4
            Registrant’s
                By-Laws.(1)4.1
            Form
                of Warrant.(1)4.2
            2007
                Stock Incentive Plan (2)10.1
            Employment
                Agreement by and between David Stocknoff and Diet Coffee, Inc., dated
                as
                of July 16, 2006.(1)10.2
            Employment
                Agreement by and between David Attarian and Diet Coffee, Inc., dated
                as of
                July 16, 2006.(1)10.3
            Form
                of Subscription Agreement.(1)10.4
            License
                and Supply Agreement dated as of May 18, 2007 by and among Diet Coffee,
                Inc. and Jason Ryu. (3)10.5
            Letter
                Agreement dated October 5, 2007 between Diet Cofee, Inc. and David
                Stocknoff (4)10.6
            Letter
                Agreement dated October 5, 2007 between Diet Coffee, Inc. and David
                Attarian (4)10.7
            Consulting
                Agreement dated October 12, 2007 between Diet Coffee, Inc. and David
                Stocknoff (4)10.8
            Consulting
                Agreement dated October 12, 2007 between Diet Coffee, Inc. and David
                Attarian (4)14
            Code
                of Ethics (4)21
            Subsidiaries
                (4)31.1
            Certification
                of Adam J. Engel, President and Chief Financial Officer of Diet Coffee,
                Inc., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302
                of
                the Sarbanes-Oxley Act of 2002. (5)32.1
            Certification
                of Adam J. Engel, President and Chief Financial Officer of Diet Coffee,
                Inc., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906
                of
                the Sarbanes-Oxley Act of 2002 (5)


________


(1)
            Filed
                as an exhibit to our Registration Statement on Form SB-2 (File No.
                333-137210), as amended, originally filed with the SEC on September
                8,
                2006 and incorporated herein by
                reference.


(2)
            Filed
                as an exhibit to our Registration Statement on Form S-8 (File No.
                333-145985) filed with the SEC on September 11, 2007 and incorporated
                herein by reference.


(3)
            Filed
                as an exhibit to our Current Report on Form 8-K dated May 18, 2007and
                incorporated herein by reference.


(4)
            Filed
                as an exhibit to our Annual Report on Form 10KSB for the year ended
                June
                30, 2007 and incorporated herein by
                reference.


(5)
            Filed
                herewith.





21


**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the Small business issuer
      caused this report to be signed on its behalf by the undersigned, thereunto
      duly
      authorized.




**DIET
              COFFEE, INC.**Date: November
              19, 2007
            By:
            /s/ Adam
              EngelAdam
                Engel
              President
                and Chief Executive Officer




22