Filed Pursuant to Rule 424(b)(3)
Registration No. 333-129579

PROSPECTUS
ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
39,709,879 Shares of Common Stock, $0.001 Par Value

o This Prospectus relates to the resale of our common stock by the
selling security holders of up to 39,709,879 shares of our common
stock of which 13,008,821 shares of common stock have been previously
issued; 2,502,500 shares of common that may be issued upon the
exercise of 2,502,500 warrants issued to certain selling stockholders
with an exercise price of $0.90 per warrant; 385,000 shares of common
stock that may be issued upon the exercise of 385,000 warrants issued
to certain selling stockholders with an exercise price of $2.00 per
warrant; 385,000 shares of common stock that may be issued upon the
exercise of 385,000 warrants issued to certain selling stockholders
with an exercise price of $3.00 per warrant; 12,200,000 shares of
common stock that may be issued upon the conversion of $6,100,000 of
debentures previously issued to certain selling security holders; up
to 1,045,713 shares of our common stock being issued for interest
earned on debentures, as well as a good faith estimate of additional
shares that may be issued for interest earned on the debentures;
3,050,000 shares of common stock that may be issued upon the exercise
of 3,050,000 warrants previously issued to certain selling
stockholders with an exercise price of $0.85 per warrant; 3,366,178
shares of common that may be issued upon the exercise of 6,732,356
warrants issued to certain selling stockholders, with two (2) warrants
exercisable at a cumulative exercise price of $0.30 for one share of
common stock; 750,000 shares of common stock that may be issued upon
the exercise of 750,000 warrants issued to certain selling
stockholders with an exercise price of $0.17 per warrant; and
3,016,667 shares of common that may be issued upon the exercise of
3,016,667 options issued to certain officers, directors, employees and
consultants with exercise prices ranging from of $0.45 to $0.66 per
option.

o We will not receive any proceeds from the sale of these shares as we
previously received payment from selling stockholders when they
purchased their shares, debentures and warrants from us. We may
however receive proceeds from the exercise of warrants and options
issued to the selling stockholders and those proceeds will be used for
general corporate purposes.

o Certain selling stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended, in connection
with their sales.

o Our common stock is traded on the Over-the-Counter Bulletin Board
under the symbol "ESWW". The last reported sales price for our common
stock on December 14, 2005 was $0.71 per share.

Each of the selling stockholders may offer the shares from time to time and in
any of several different ways, including:

o through brokers or other agents;

o to underwriters or dealers on a "firm commitment" or "best efforts"
basis;

o directly to one or more purchasers; or by a combination of these
methods of sale; and

o in any other lawful manner.

All of the common shares, debentures and warrants were previously issued in
private placement transactions. Our common stock is registered under Section
12(g) of the Securities Exchange Act of 1934, and is listed on the Over the
Counter Bulletin Board Market under the symbol "ESWW".

See "Plan of Distribution" for a further description of how generally selling
security holders may dispose of the shares covered by this prospectus.

The selling stockholders may sell their shares at whatever prices are current at
the time of a sale or at other prices to which they agree.

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.

We may amend or supplement this Prospectus from time to time by filing
amendments or supplements as required. You should read the entire Prospectus and
any amendments or supplements carefully before you make your investment
decision.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this Prospectus is December 23, 2005

TABLE OF CONTENTS

Page
SUMMARY INFORMATION 1

RISK FACTORS 3

FORWARD-LOOKING STATEMENTS 7

USE OF PROCEEDS 8

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 8

DESCRITPITON OF BUSINESS 9

DESCRIPTION OF PROPERTY 15

MANAGEMENT'S DISCUSSION AND ANALYSIS 16

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 25

EXECUTIVE COMPENSATION 26

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 29

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 31

DESCRIPTION OF SECURITIES 32

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES 32

PLAN OF DISTRIBUTION 32

SELLING STOCKHOLDERS 34

SUBSEQUENT EVENT 38

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 38

LEGAL MATTERS 39

EXPERTS 39

WHERE YOU CAN FIND MORE INFORMATION 39

INDEX TO FINANCIAL STATEMENTS F-1

You should rely only on the information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document. However, in the event of a material change, this
prospectus will be amended or supplemented accordingly.

SUMMARY INFORMATION

The following summary is qualified in its entirety by the more detailed
information, financial statements and other data appearing elsewhere in this
Prospectus. At various places in this Prospectus, we may make reference to the
"company" or "us" or "we." When we use those terms, unless the context otherwise
requires, we mean Environmental Solutions Worldwide, Inc. and its subsidiaries.

About Environmental Solutions Worldwide, Inc.

Environmental Solutions Worldwide, Inc. ("ESW"), was formed in 1987 in the State
of Florida as BBC Stock Market, Inc. ("BBC") as a development stage enterprise.
ESW did not engage in any significant business until January 1999 when it
acquired all the issued and outstanding shares of BBL Technologies Inc., a
private company based in Ontario, Canada ("BBL"). BBC subsequently changed its
name to Environmental Solutions Worldwide, Inc. From 1999 to 2001, ESW was a
development stage company based in Ontario Canada. In 2005, ESW relocated its
principal executive offices and commenced the preparation for manufacturing at
its facility located at 335 Connie Crescent, Concord, Ontario L4K 5R2 Canada
while maintaining manufacturing and testing facilities in Telford, Pennsylvania
and Montgomeryville, Pennsylvania. ESW's telephone number is (905)695-4142.

ESW, through its wholly owned subsidiaries, is the assignee of Canadian and U.S.
patents and/or patent pending applications covering catalytic converter
technology for automotive and non-automotive uses. ESW's subsidiaries also are
the assignee of both Canadian and U. S. patents on spark plug/fuel injector
technology for automotive use.

ESW's performance and growth is directly related to certain trends, within the
global market, for the need to reduce emissions emanating from internal
combustion engines. This need is directly related to the global response and
efforts by world governments, at all levels, to implement the legislative
requirements upon sellers of internal combustion engines, to comply with the
more stringent requirements, they demand, for reducing emissions being emitted
from these engines into our environment.

ESW's primary business objective is to capitalize on the growing global
requirement of reducing emissions, by offering catalyst technology solutions to
the market. We intend to execute on the following key strategies in order to
leverage our strengths and position ourselves for long-term growth and success:

o Focusing on our core business, ESW intends to continue to strengthen
its growth strategy by seeking complimentary partnerships and
investments that provide a competitive advantage and growth
opportunities for its core businesses.

o Investing in new product and process technologies, ESW intends to
accelerate its investments in new product and manufacturing process
technologies to strengthen and differentiate its product portfolio.
ESW also intends to continue its efforts to develop innovative
products and manufacturing processes to serve its customers better
globally and improve its product mix and profit margins.

o Maximizing production capabilities, ESW is currently implementing
strategic initiatives designed to improve product quality while
reducing manufacturing costs. In addition, ESW periodically evaluates
opportunities to maximize its facility and asset utilization. ESW also
evaluates on opportunities to expand its manufacturing capabilities in
low-cost regions of the world, which are projected to develop into
future domestic sales to emerging markets.

o ESW intends to focus on strategic partnerships and alliances that do
not require significant upfront cash investments to pursue new
business opportunities in other environmental products and sectors.

o ESW will continue to invest in development opportunities across the
Company and strive to achieve the best practices in organizational
vitality, diversity, and sales force strength.

About the Offering

We are registering the resale of our common stock by certain selling
stockholders. The selling stockholders and the specific number of shares that
they each may resell through this prospectus are listed on page 35. The shares
offered for resale by this prospectus include the following:

o 13,008,821 shares of common stock that is currently issued and
outstanding.

o a maximum of 3,272,500 shares of common stock issuable upon exercise
of warrants previously issued in connection with our spring 2005 unit
private placement;

o a maximum of 12,200,000 shares of common stock issuable upon
conversion of debentures previously issued in connection with our
September 2004 private placement;

o a maximum of 1,045,713 shares of common stock of which 348,571 shares
have been issued for interest earned on debentures, as well as a good
faith estimate of 697,142 additional shares that may be issued for
interest earned on the debentures.

o a maximum of 3,050,000 shares of common stock issuable upon exercise
of warrants previously issued in connection with our September 2004
private placement;

o a maximum of 3,366,178 shares of common stock issuable upon exercise
of warrants previously issued in connection with our 2002 unit private
placement;

o a maximum of 750,000 shares of common stock issuable upon exercise of
warrants previously issued in connection with our 2000 unit private
placement; and

o a maximum of 3,016,667 shares of common stock issuable upon exercise
of options previously have issued to officers, directors, employees
and consultants.

Information on Outstanding Shares

The number of shares of our common stock outstanding before and after this
offering is set forth below:

o Common stock outstanding before this offering: 55,219,001 shares

o Common stock outstanding after this offering, assuming the exercise or
conversion of all outstanding derivative securities which underlying
shares are subject to this registration, would be 81,571,488 shares.

RISK FACTORS

The shares of our common stock being offered for sale are highly speculative and
involve a high degree of risk. Only those persons able to lose their entire
investment should purchase these shares. Before purchasing any of these shares,
you should carefully consider the following factors relating to our business and
prospects. You should also understand that this prospectus contains
"forward-looking statements." These statements appear throughout this prospectus
and include statements as to our intent, belief or current expectations or
projections with respect to our future operations, performance or position. Such
forward-looking statements are not guarantees of future events and involve risks
and uncertainties. Actual events and results, including the results of our
operations, could differ materially from those anticipated by such
forward-looking statements as a result of various factors, including those set
forth below and elsewhere in this prospectus.

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING, WE MAY HAVE TO SIGNIFICANTLY
CURTAIL THE SCOPE OF OUR OPERATIONS AND ALTER OUR BUSINESS MODEL.

Management believes that profitable operations are essential for ESW to become
viable. However, our sales and revenues continue to be unpredictable. In the
event that profitable operations are not achieved, our present financial
resources should allow us to continue operations through at least the next
twelve months. Should we receive a large order (defined by management as one in
which monthly production and deliveries would exceed $1 million), we believe
that we would need to either negotiate extremely favorable payment terms
providing for at least some advance payment or we will need to obtain either
debt or equity financing to allow us to purchase sufficient raw materials and
meet our working capital needs. If additional financing is required and not
available when required or is not available on acceptable terms, we may be
unable to continue our operations at current levels or satisfy the requirements
necessary to fill a large order. We are engaged in seeking additional financing
in a variety of venues and formats and we continue to impose actions designed to
minimize our operating loses. We would consider strategic opportunities,
including investment in us, a merger or other acceptable transactions, to
sustain our operations. There can be no assurances that additional capital will
be available to us on acceptable terms, or at all. If we are unable to obtain
additional financing or to arrange a suitable strategic opportunity, our
business may be placed in significant financial jeopardy.

OUR FORMER INDEPENDENT PUBLIC ACCOUNTANTS, RESIGNED EFFECTIVE OCTOBER 20, 2004
WHICH MAY LIMIT YOUR ABILITY TO SEEK RECOURSE AGAINST THEM IN THE EVENT OF A
CLAIM.

On October 20, 2004, our former public accountants informed us that they were
resigning as our independent registered public accounting firm as they were no
longer able to service our needs as a public company. The resignation was not
sought or recommended by our audit committee or our Board of Directors. We
subsequently learned that our prior auditor discontinued its accounting practice
and no longer is an active operating entity engaged in the practice of public
accounting and auditing work. Due to our prior auditor's resignation and
discontinuation of public practice, investors and shareholders of our common
stock may have limited recourse against our prior auditor in the event of any
claims associated with prior work performed on behalf of the Company.

WE HAVE INCURRED LOSSES IN THE PAST AND WE EXPECT TO INCUR LOSSES IN THE FUTURE.

We have incurred losses in each year since our inception. Our net loss for the
fiscal year ended December 31, 2004 was $1,721,313 and our accumulated deficit
as of December 31, 2004 was $11,561,282. As our sales and revenue continue to be
unpredictable, we expect to experience additional periods with operating losses.

THE PRICE OF OUR SHARES MAY BE ADVERSELY AFFECTED BY THE PUBLIC SALE OF A
SIGNIFICANT NUMBER OF THE SHARES ELIGIBLE FOR FUTURE SALE.

Of the 39,709,879 shares included in this registration, the 13,008,821 shares of
common stock as issued, and the 348,571 shares of common stock issued for
interest earned on debentures, may under certain circumstances be eligible for
resale pursuant to Rule 144. Sales of our common stock in the public market
could materially adversely affect the market price of our common stock. Such
sales may also inhibit our ability to obtain future equity or equity-related
financing on acceptable terms. At our Annual Meeting of Stockholders on June 23,
2005, our stockholders approved an increase in the number of authorized shares
of the common stock from 100,000,000 to 125,000,000. The issuance of additional
shares could have a significant adverse effect on the trading price of our
common stock.

WE HAVE PREVIOUSLY ISSUED CERTAIN WARRANTS THAT CONTAIN PRICE ADJUSTMENT
PROTECTION THAT MAY HAVE AN ADVERSE EFFECT ON THE TRADING PRICE OF OUR COMMON
STOCK.

We have previously issued warrants that if exercised would result in 9,801,031
shares of our common stock being issued, which are included in this
registration. These warrants have various price protections that allow for
reduction in the exercise price in the event we undertake an offering with more
favorable terms.

THE SALE OF MATERIAL AMOUNTS OF OUR COMMON STOCK TO FINANCE THE CONTINUING
OPERATIONS OF THE COMPANY MAY SUBSTANTIALITY DILUTE OUR COMMON STOCK AND PLACE
SIGNIFICANT DOWNWARD PRESSURE ON ITS TRADING PRICE.

Our need to raise funds through the sale of equity may result in the issuance of
a significant number of shares of common stock in relation to the number of
shares currently outstanding. In the past, we have raised money through the sale
of shares of our common stock and derivative securities at a discount to the
current market price of our common stock. These arrangements have taken various
forms including Private Investments in Public Equities or "PIPE" transactions.
The perceived risk of dilution may cause our existing stockholders and other
holders to sell their shares of stock, which would contribute to a decrease in
our stock price. In that regard, significant downward pressure on the trading
price of our stock may also cause investors to engage in short sales, which
would further contribute to significant downward pressure on the trading price
of our stock.

RISKS RELATED TO THE MARKET FOR OUR COMMON STOCK

THE PRICE OF OUR COMMON STOCK HAS BEEN HIGHLY VOLATILE.

Our common stock has traded as low as $0.21 per share and as high as $0.66 per
share in the twelve (12) month ended December 31, 2004 and as high as $1.24 per
share in our current fiscal year. Some of the factors leading to the volatility
include:

o price and volume fluctuation in the stock market at large which did
not relate to our operating performance;

o fluctuation in our operating results;

o concerns about our ability to finance our continuing operations;

o financing arrangements which may require the issuance of a significant
number of shares in relation to the number shares of our common stock
currently outstanding;

o announcements of agreements, technological innovations or new products
which we or our competitors make;

o costs and availability of precious metals used in the production of
our products; and

o fluctuations in market demand and supply of our products.

OUR COMMON STOCK IS CURRENTLY TRADED ON THE OVER-THE-COUNTER-BULLETIN-BOARD AND
AN INVESTOR'S ABILITY TO TRADE OUR COMMON STOCK MAY BE LIMITED BY TRADING
VOLUME.

The trading volume in our common stock has been relatively limited. A
consistently active trading market for our common stock may not continue on the
Over-The-Counter-Bulletin-Board. The average daily trading volume in our common
stock on the Over-The-Counter-Bulletin-Board for the month ended November 30,
2005 was approximately 99,571 shares.

RISKS RELATED TO OUR BUSINESS

OUR QUARTERLY RESULTS MAY FLUCTUATE DUE TO CERTAIN REGULATORY, MARKETING AND
COMPETITIVE FACTORS OVER WHICH WE HAVE LITTLE OR NO CONTROL.

The factors listed below some of which we cannot control may cause our revenues
and result of operations to fluctuate significantly:

o Actions taken by foreign regulatory bodies relating to the
certification of our products.

o The extent to which our "Clean Cat(R)" and "Quite Cat(TM)" catalytic
converter products obtain market acceptance.

o The timing and size of customer purchases.

o Customer concerns about the stability of our business which could
cause them to seek alternatives to our product.

WE ARE CURRENTLY DEPENDENT ON A FEW MAJOR CUSTOMERS FOR A SIGNIFICANT PORTION OF
OUR REVENUES.

While we began commercial sales of our products during the first quarter of
fiscal 2001, we recorded sales from approximately 27 customers in fiscal 2004.
Two of these customers accounted for 30 % and 17 %, respectively of our revenue
in fiscal 2004. 23 other customers each accounted for approximately 5 % or less.
We intend to establish long-term relationships with our customers and continue
to expand our customer base. While we diligently seek to become less dependent
on any one customer, it is likely that certain contractual relationships may
result in one or more customers contributing to a significant portion of our
revenue in any given year for the foreseeable future. The loss of one or more of
these significant customers may result in a material adverse effect on our
revenues and our ability to become profitable or our ability to continue our
business operations.

WE HAVE AN EXCLUSIVE SUPPLY AND DISTRIBUTION AGREEMENT WITH CUMMINS FLEETGUARD.

While we have entered into exclusive marketing, supply and distribution
agreements with Fleetguard Emissions Solutions, a subsidiary of Cummins Inc.,
whereby we will serve as the preferred supplier to Fleetguard Emissions
Solutions for our Particulate Reactor(TM) and Clean Cat(TM) for retrofit
applications for the United States, Canada and select countries to be determined
on a country by country basis. There can be no assurances regarding revenues to
be derived from this relationship or that the exclusive preferred supplier
agreement will have a beneficial effect on the development of our products and
our business. Additionally, there can be no assurance that we will be able to
satisfy any demand of Fleetguard Emissions Solutions for products under the
agreements or that our products will meet required standards as set by
Fleetguard in certain instances.

WE HAVE LIMITED EXPERIENCE SELLING AND MARKETING OUR PRODUCTS.

Although we have entered into exclusive marketing and distribution agreements
with Fleetguard Emission Solutions, at the current time, we have limited
marketing capability as compared with many of our competitors and we do not have
a large sales, promotion and marketing budget as we are constrained by our lack
of working capital and our ability to raise the necessary cash flow from our
business operations to re-invest in our marketing programs. As a result of our
limited marketing capabilities, we are forced to rely upon customer referrals,
trade publications and a small sales force. Our competitors have direct
advertising and sales promotion programs for their products as well as sales and
marketing personnel that may have a competitive advantage over us in contacting
prospective customers. Our position in the industry is considered minor in
comparison to that of our competitors, and while we continue to develop and
explore new marketing methods and techniques such as, trade show representation
and programs directed toward foreign customers, our ability to compete at the
present time is limited. Our success depends upon the ability to market,
penetrate and expand markets and form alliances with third party international
distributors. However, there can be no assurances that:

o our direct selling efforts will be effective;

o we will obtain an expanded degree of market acceptance;

o our exclusive marketing and distribution agreements with Fleetguard
Emission Solutions will result in increased sale of our products; or

o we will be able to successfully form relationships with international
distributors to market our products.

WE DEPEND UPON THE MARKETABILITY OF TWO PRIMARY PRODUCTS -CLEAN CAT(R) AND QUIET
CAT.(TM)

Our Clean Cat(R) and Quiet Cat(TM) catalytic converters are our two primary
products. We may have to cease operations if either of our primary products
fails to achieve market acceptance and/or generates significant revenues.
Additionally, the marketability of our products is dependent upon obtaining
certifications as well as the effectiveness of the product in relation to
various environmental regulations in the various jurisdictions we market and
sell our products.

WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP AND MARKET NEW PRODUCTS THAT WE PLAN
TO INTRODUCE OR OBTAIN DIRECT OR INDIRECT CERTIFICATION APPROVALS WITH RESPECT
TO OUR PRODUCTS.

We plan to develop other catalytic converter products and technologies. There
are numerous developmental and certification issues that may preclude the
introduction of these products into commercial sale. If we are unable to
demonstrate the feasibility of these products or obtain certifications for our
products from such agencies as the Environmental Protection Agency (EPA), the
Mexico Department of Ecology, or the California Air Resources Board (CARB), we
may have to abandon them or alter our business plan. Such modifications to our
business plan will likely delay achievement of milestones related to revenue
increases and achievement of profitability.

WE FACE CONSTANT CHANGES IN GOVERNMENTAL STANDARDS BY WHICH OUR PRODUCTS ARE
EVALUATED.

We believe that due to the constant focus on the environment and clean air
standards throughout the world, we will be required in the future to adhere to
new and more stringent regulations both domestically and abroad as governmental
agencies seek to improve standards required for certification of products
intended to promote clean air. In the event our products fail to meet these ever
changing standards, some or all of our products may become obsolete.

WE HAVE LIMITED EXPERIENCE IN MANUFACTURING OUR PRODUCTS AND LITTLE EXPERIENCE
IN MANUFACTURING OUR PRODUCTS IN COMMERCIAL QUANTITIES.

We may encounter difficulties in ramping up our production of our current and
any future products due to such reasons as:

o lack of working capital necessary to gain market acceptance;

o quality control and assurance;

o raw material supplies;

o shortages of qualified personnel;

o equipment capable of producing large quantities; and

o sufficient manufacturing space.

Any of the foregoing would effect our ability to meet increases in demand should
our products gain market acceptance and reduce growth in our sales revenues.

WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL ADVANCES BY COMPETITORS.

Competition among companies that provide solutions for pollutant emissions from
diesel, leaded and unleaded engines is intense. Several companies market
products that compete directly with our products. Other companies offer products
that potential customers may consider to be acceptable alternatives to our
products and services. We face direct competition from companies with far
greater financial, technological, manufacturing and personnel resources,
including Corning, NGK and Emitec. Corning and NGK are the two major
manufacturers of ceramic cores, which are integral components in current
catalytic converter production, and Emitec is the major manufacturer of metal
cores. We also face direct competition with companies like Engelhard and Johnson
Matthey, who purchase their substrates from others, and do further processing
with their own formulas and fabrication for direct sale to the market place.
Newly developed products could be more effective and cost efficient than our
current products or those we may develop in the future. Many of our current and
potential future competitors have substantially more engineering, sales and
marketing capabilities, substantially greater financial technological and
personnel resources, and broader product lines than we do. We also face indirect
competition in the form of alternative fuel consumption vehicles such as those
using methanol, hydrogen, ethanol and electricity.

WE CLAIM CERTAIN PROPRIETARY RIGHTS IN CONNECTION WITH THE DESIGN AND
MANUFACTURE OF OUR PRODUCTS.

The protections provided by patents and those sought by pending patents are
important to our business, although we believe that no individual right is
material to our business at the present time. There can be no assurance that
these patents, combined with pending patent applications or existing or future
trade secret protections that we seek will survive legal challenge, or provide
meaningful levels of protection. Additionally, there can be no assurances when
these patents or pending patents may be assigned to ESW directly. The Canadian
patent only affords protection against the manufacture, use or sale of the
patented technology within Canada. The US patent application for our diesel
catalytic converter, Clean Cat(R) was filed on October 31, 2000 and has not been
challenged as of this date. We do not presently have any worldwide patent
protection nor do we have any immediate plans to file for protection in any
foreign countries other than Canada. There can be no assurances that any patents
we may have or have applied for or any agreements we have in place or enter into
will protect our technology and or prevent competitors from employing the use of
our design and production information.

ATTRACTION AND RETENTION OF KEY PERSONNEL.

Our future success depends in significant part on the continued services of key
technical sales and senior management personnel. The loss of any of our
executive officers or other key employees could have materially adverse effects
on our business, results of operations and financial condition. Our success
depends upon our continued ability to attract and attain highly qualified
technical sales and managerial personnel. There can be no assurances that we can
attract, assimilate or retain other highly qualified technical, sales and
managerial personnel in the future.

WE ARE DEPENDANT UPON KEY SUPPLIERS FOR CERTAIN PRECIOUS METALS WHICH ARE A
NECESSARY COMPONENT OF OUR PRODUCTS.

An element of the production process of our products includes certain raw
materials including:

o stainless steel;
o steel tubing;
o precious metals; and
o components.

An extended interruption of the supply of precious metals necessary for the
production of our products could have an adverse effect on us. Further, a
substantial price increase of the raw materials that are components of our
products could also have an adverse effect on our business. We currently rely on
third party vendors to provide certain components of our products. We currently
do not have any fixed commitments from suppliers to provide supplies.

WE DO NOT HAVE A SIGNIFICANT LEVEL OF PRODUCT LIABILITY INSURANCE DUE TO ITS
HIGH COST.

We develop, market and sell catalytic converter products. Any failure of our
products may result in a claim against us. Due to the high cost of product
liability insurance, we do not maintain significant amounts of insurance to
protect against claims associated with use of our product. Any claim against us,
whether or not successful, may result in our expenditure of substantial funds
and litigation. Further, any claims may require management's time and use of our
resources and may have a materially adverse impact on us.

FORWARD LOOKING STATEMENTS

Except for historical information, the information contained in this prospectus
and in our reports filed with the SEC are "forward looking" statements about our
expected future business and financial performance. These statements involve
known and unknown risks, including, among others, risks resulting from economic
and market conditions, the regulatory environment in which we operate, pricing
pressures, accurately forecasting operating and capital expenditures and trial
costs, competitive activities, uncertainties of litigation and other business
conditions, and are subject to uncertainties and assumptions contained elsewhere
in this prospectus. We base our forward-looking statements on information
currently available to us, and , in accordance with the requirements of federal
securities laws, we will disclose to you material developments affecting such
statements. Our actual operating results and financial performance may prove to
be very different from what we have predicted as of the date of this prospectus
due to certain risks and uncertainties. The risks described above in the section
entitled "Risk Factors" specifically address factors that may affect our future
operating results and financial performance.

USE OF PROCEEDS

We will not realize any proceeds from the sale of the common stock by the
selling stockholders; rather, the selling stockholders will receive those
proceeds directly. However, we will receive cash upon the exercise of warrants
and options by selling stockholders. We intend to use the proceeds received from
the exercise of the warrants and options, if any, for general working capital
purposes including the development of new products and services.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted under the symbol "ESWW.OB" on the OTC Bulletin Board
operated by the National Association of Securities Dealers, Inc. Our stock is
considered penny stock. Penny stock is defined as any equity security not traded
on a national stock exchange or quoted on NASDAQ and that has a market price of
less than $5.00 per share. Additional disclosure is required in connection with
any trades involving a stock defined as a penny stock (subject to certain
exceptions); including the delivery, prior to any such transaction, of a
disclosure schedule explaining the penny stock market and the associated risks.
Broker-dealers who recommend such low-priced securities to persons other than
established customers and accredited investors satisfy special sales practice
requirements, including a requirement that they make an individualized written
suitability determination for the purchase and receive the purchaser's written
consent prior to the transaction.

The following table sets forth the high and low bid prices for our common stock
for the fiscal years ended December 31, 2004 and 2003 as well as the quarters
indicated, as reported by Bloomberg Reporting Service. Such market quotations
reflect inter-dealer prices, without retail mark-up, markdown or commission and
may not necessarily represent actual transactions:

Fiscal 2005 HIGH LOW

1ST QUARTER $1.24 $0.44
2ND QUARTER 1.01 0.59
3RD QUARTER 0.85 0.63

FISCAL 2004 HIGH LOW

1ST QUARTER $ 0.62 $ 0.45
2ND QUARTER 0.48 0.21
3RD QUARTER 0.66 0.25
4TH QUARTER 0.58 0.38

FISCAL 2003 HIGH LOW

1ST QUARTER $ 0.43 $ 0.09
2ND QUARTER 1.04 0.22
3RD QUARTER 0.95 0.50
4TH QUARTER 1.06 0.52

At December 14, 2005, there were approximately 276 holders of record of our
common stock. We estimate that there are approximately 4,500 additional
stockholders with stock held in street name. On December 14, 2005, there were
55,219,001 shares of common stock outstanding.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.

DESCRIPTION OF BUSINESS

ESW is an ISO 9001:2000 certified and is engaged through its wholly owned
subsidiaries in the design, development, manufacture and sale of environmental
technologies currently focused on the international automotive and
transportation industries. ESW currently manufactures and markets a line of
catalytic emission control products and catalytic conversion technologies for a
number of applications. Our main line of business is the production of catalyzed
substrates. Catalyzed substrates are an integral part of catalytic converter
systems sold worldwide.

In 2001, ESW formed three wholly owned subsidiaries:

o ESW America, Inc. (a Delaware corporation) is our technical, research
and development division. ESW America houses our U.S. Environmental
Protection Agency ("EPA")/ California Air Resources Board ("CARB")
recognized engine emissions testing laboratory and certification
services "Air Testing Services(TM)" ("ATS"). ESW America also
currently manufactures our Quiet Cat(TM) line of utility engine
catalysts as well as the various custom heavy-duty on and off road
catalysts for our customers. ESW America is an ISO 9001:2000 certified
manufacturing facility.

o ESW Canada, Inc. (an Ontario corporation) serves as our sales
division, managing all sales and marketing globally for our catalytic
product lines. ESW Canada also serves as a manufacturing facility
producing catalysts for our Original Equipment Manufacturers ("OEM")
and distribution partners worldwide.

o ESW Technologies, Inc. (a Delaware corporation) is intended to hold
our intellectual property, and or rights to same.

INDUSTRY TRENDS

Our performance and growth is directly related to certain trends, within the
global market, for the need to reduce emissions emanating from all types of
internal combustion engines. This need is directly related to the global
response and efforts by world governments, at all levels, to implement the
legislative requirements upon sellers of internal combustion engines, to comply
with the more stringent requirements, they demand, for reducing emissions being
emitted from these engines into our environment.

The internal combustion engines relate to on road applications such as cars,
trucks and busses, as well as numerous off road applications such as
construction equipment, farm equipment, industrial equipment, lawn and garden
equipment, railway trains and recreational vehicles. Pressure continues to build
for lower emissions being emitted from engines in all of these sectors, with
diesel Particulate Matter ("PM") standing out as a major contributor to these
toxic emissions.

The EPA, CARB and individual country environmental agencies continue to place
great emphasis on compliance of emission reductions. Since PM is now recognized
as a toxic air contaminant, there has been a push to further reduce PM emissions
from existing diesel vehicles.

Both the U.S. federal and California governments currently impose stringent
emission control requirements on motor vehicles sold in their respective
jurisdictions, and it is anticipated that these emission requirements will
become even more stringent in the future. As a result, we believe that the
markets for off-road vehicles, utility engines and retrofitting existing
vehicles will also have great potential for our products in future years.

The global expansion into emerging market regions such as Asia, Latin America
and Eastern Europe are expected to experience significant growth in vehicle
demand over the next ten years. Suppliers and OEMs of internal combustion
engines are looking for cost effective ways to have their engines meet the
emissions reduction targets demanded upon them. OEMs, resellers of engines and
buyers of retrofit applications, increasingly are requiring their suppliers to
have the capability to design and manufacture their products to help meet with
this demand.

BUSINESS STRATEGY

Our primary business objective is to capitalize on the growing global
requirement of reducing emissions, by offering catalyst technology solutions to
the market. We intend to continue to execute on the following key strategies in
order to leverage our strengths and position ourselves for long-term growth and
success:

o Focusing on our core business, we intend to continue to strengthen its
growth strategy by seeking complimentary partnerships and investments
that provide a competitive advantage and growth opportunities for our
core businesses.

o Investing in new product and process technologies, we intend to
accelerate our investments in new product and manufacturing process
technologies to strengthen and differentiate our product portfolio. We
also intend to continue our efforts to develop innovative products and
manufacturing processes to serve our customers better globally and
improve our product mix and profit margins.

o Maximizing production capabilities, we are currently implementing
strategic initiatives designed to improve product quality while
reducing manufacturing costs. In addition, we periodically evaluate
opportunities to maximize facility and asset utilization. We also
evaluate our opportunities to expand our manufacturing capabilities in
low-cost regions of the world, which are projected to develop into
future domestic sales to emerging markets.

o We intend to focus on strategic partnerships and alliances that do not
require significant upfront cash investments to pursue new business
opportunities in other environmental products and sectors.

o We will continue to invest in development opportunities and strive to
achieve the best practices in organizational vitality, diversity, and
sales force strength.

COMPANY HISTORY

We initially sought to develop ceramic based catalytic converter technologies
based on the manufacture of catalytic converters with a reduced or no use of
precious metals. Changes in environmental legislation and the progressive needs
of the industry presented an opportunity for us to refocus our business plan.
During late 2000 and early 2001, we acquired specific equipment and technology
that helped us implement a new business model which focused on the production of
unique metallic based catalytic converter products containing metallic wire
based substrates, chemical formulas and precious metals.

In early 2001, we launched our first commercially viable product, The Quiet
Cat(TM), a product for small engine applications, which serves as a catalytic
converter within the muffler unit. We also developed commercially viable
catalytic converter technologies both for diesel and gasoline products. The
Clean Cat(R) product line is utilized in diesel applications and the Enviro
Cat(TM) product line is employed in gasoline applications. The market for our
products include OEM of engines for automotive, off-road and utility products
and other manufacturers of equipment using internal combustion engines together
with the replacement and retrofit markets for these products. We also launched
our Air Sentinel(TM) product line targeted at the large-scale off-road diesel
engine market in late 2001. Pro Cat(TM) was also launched during 2001, this
catalyst product was designed specifically for CNG/LPG (alternative fuels)
engines for the customers in the utility, on-road, off-road and heavy-duty
markets.

PRINCIPAL PRODUCTS AND THEIR MARKETS

The combined technologies of our wire mesh substrate and chemical wash coat form
the basis for our woven stainless steel mesh catalytic converter. This product
can be produced in almost any size and shape. The wire mesh substrate creates a
turbulent environment, which increases catalytic activity, and when manufactured
for diesel applications are designed to serve as a partial filter of particulate
matter, important in diesel emission control. We believe that our chemical wash
coat formula is proprietary.

Our customers have applied our products to meet their own needs, and have, where
appropriate, received certification by the EPA, the CARB and other authorities
for engine products containing our catalyst products as a component in the
certification. Customers have had their engines certified using the our Clean
Cat (R), Pro Cat (TM), Quiet Cat (TM) products. Our products are now being
marketed both domestically and internationally, including Asia, Europe and
Mexico. We offer, and are developing catalyst products which we believe will
permit our customers to comply with environmental regulations in effect now and
to become effective in the future.

Our catalyst products have been EPA/CARB certified in numerous customer diesel
and gas powered engines. Our product has been used for third party engine /
vehicle certification programs by the Mexico Government for a 1.4; 1.6; 1.8; 2.8
liter on-road application, as well as certification programs by the Mexico
Government for a 5.7; 5.9; 6.8 liter on-road application utilizing CNG/LPG
fuels. In March 2003, we became the first company to receive a Performance
Verification from ETV Canada for our High Performance Diesel Oxidation Catalyst
("DOC"), for utility engines, achieving a 66.7% PM reduction by weighted
average. In 2004 we received an ETV Canada Certificate in an award ceremony at
the Globe 2004 Environmental Exposition. We received a Gasoline Passenger
Vehicle CARB Verification in August 2004.We are the first company in the world
to achieve the Level II designation and received in September 2004 an over the
road Heavy Duty Diesel DOC Level II CARB Verification.

The EPA's Voluntary Diesel Retrofit Program signed a Memorandum of Agreement
("MOA") with the State of California Air Resources Board ("ARB") for the
coordination and reciprocity in diesel retrofit device verification. The EPA
recognizes and accepts those retrofit hardware strategies or device-based
systems that have been verified by CARB.

Our target markets are in the following sectors:

o On road vehicle sector generally comprised of on road trucks, school
buses and waste haulers regulated in North America by EPA and CARB
standards.

o Small engine utility sector comprised of lawn and garden utility
diesel engines and regulated in North America by EPA and CARB
standards.

o Off road engine / vehicle sector defined as construction equipment,
tractors, power generators, trains and others.

Through our subsidiaries we possess the rights to U.S. and Canadian patents
and/or pending patent applications, which combine spark plug and fuel injector
technology. By combining the two devices to work together, it is believed that
greater fuel efficiency and reduced toxic emissions can be achieved. However
this device has not been confirmed in laboratory emissions tests to date. We
believe that a successfully developed product combining spark plug and fuel
injector technology could be less expensive than separate individual devices.
Direct injection is widely recognized by many OEM's as "next generation"
technology that substantially boosts the efficiency of conventional gasoline
internal combustion engines enabling them to run a highly stratified, lean-burn
combustion process over a wider operating range.

We market our catalyst products using the trade names, Clean Cat(R),
Enviro-Cat(TM), Quiet Cat(TM), Pro Cat(TM) and Air Sentinel(TM). These products
are marketed for spark ignited gasoline, CNG/LPG (alternative fuels) and diesel
engine emissions control, and range in sizes from utility applications to large
industrial uses. Some of our products are presently being used by customers who
have had their engines certified using ESW catalysts. In addition to
manufacturing our own products, we have established relationships with outside
catalytic converter assemblers and marketers that fabricate ready to install
products that can incorporate our substrates. This has allowed us to concentrate
on what we believe is our core technological competency, which is in the
development and manufacture of catalyzed substrates.

Prior to 2001, we were a development stage company. Since 2001, when we began
selling our spark and compression ignited engine emission control products, we
have introduced:

o Clean Cat(R) is a High Performance DOC designed to be utilized on
diesel engines.

o Particulate Reactor(TM) is a high efficiency CARB certified Level II
(greater than 50% PM) diesel substrate designed to reduce particulate
matter in diesel exhaust. It is also designed to reduce hydrocarbons,
carbon monoxide and unpleasant odors.

o Quiet Cat(TM) is a combination of our catalyst substrates products
with a muffler. These systems can be manufactured for diesel, gasoline
propane and natural gas fueled internal combustion utility engines.

o Enviro Cat(TM) is a three-way gasoline catalytic converter
specifically designed for spark ignited internal combustion engine
applications.

o Pro Cat(TM) is a three-way catalytic converter specifically designed
for internal combustion engine applications that use liquid propane
gas or liquid natural gas.

o Air Sentinel(TM) is a heavy-duty industrial catalytic
converter/silencer for stationary engines. The Air Sentinel(TM) can be
used on diesel, propane, natural gas and diesel fuel.

o RC-2 Cleaning Console(TM) is our patented catalyst cleaning system. It
was designed to remove carbon buildup (masking) from the surface of
our catalyst substrate.

DISTRIBUTION METHODS OF PRODUCTS

We have developed certain relationships with OEM's of engines for both
automotive and other markets. ESW has developed and employs a strategy whereby
it sells products in three principal markets; direct to OEM, producers such as
automotive and industrial equipment manufacturers, and in sales to the retrofit
and aftermarket or the replacement equipment market through centralized
distributors with existing distributions within their individual countries. We
also utilize our own sales personnel, local trade magazines and trade shows to
complement distribution of our products globally into key markets.

We have entered into exclusive marketing, supply and distribution agreements
with Fleetguard Emissions Solutions, a wholly-owned subsidiary of Cummins Inc.,
whereby we will serve as a preferred supplier to Fleetguard Emissions Solutions
for our Particulate Reactor(TM) and Clean Cat(TM) for retrofit applications.
While we believe that this relationship will have a beneficial effect on the
development of our products and our business, there can be no assurance of this.

We have also allied ourselves with other distribution and engine groups in other
parts of world. ESW is currently working with key OEM's to develop first fit
catalyst applications. We also are currently working with key distributors in
both the European and Asian Markets at the government and local levels to
develop retrofit catalyst applications.

COMPETITION

Currently there is intense competition among companies that provide solutions
for pollutant emissions for diesel, gasoline and CNG/LPG alternate fueled
engines. We compete primarily on the basis of technology, performance, price,
quality, reliability, distribution, customer service, and support. We face
direct competition from companies that market products that compete directly
with our products with stronger financial, technological, manufacturing and
personnel resources. Other companies offer products that potential customers may
consider to be acceptable alternatives to our products and services. ESW also
faces direct competition with companies who purchase their substrates from
others, and do further processing with their own formulas and fabrication for
direct sale to the market place. Newly developed products could be more
effective and cost efficient than our current products or those we may develop
in the future. ESW also faces indirect competition in the form of alternative
fuel consumption vehicles, such as those using methanol, hydrogen, ethanol and
electricity.

ESW believes that Corning Industries is a competitor to ESW products as Corning
produces ceramic substrates on a worldwide basis. ESW believes it is cost
competitive to Corning's ceramic laminar/flow based substrates and that our
product uses less precious metals to achieve similar emission reductions when
compared to many Corning based catalyzed substrates. ESW's Particulate
Reactor(TM) has proven it has higher emissions reductions compared to
conventional catalyzed ceramic Diesel oxidation catalyst (DOC) substrates.

RAW MATERIALS

The primary raw materials used in the manufacture of our products includes, but
is not limited to stainless steel, aluminized steel tubing, precious metals such
as platinum and palladium and other components. ESW does not carry large
inventories of raw materials or finished products in excess of those reasonably
required to meet production and shipping schedules. Overall, raw steel and
precious metals accounted for the most significant component of ESW's raw
materials costs in 2004. We do spot buys of steel from suppliers to meet

customer demand. Steel prices increased significantly during 2004 to historical
highs. This increase had a negative impact on ESW's gross profit in 2004. Due to
increased steel and precious metal prices in 2004 and continuing into 2005, we
expect to implement a strategy in an effort to mitigate the effect of rising
steel prices on our results of operations. This strategy includes delaying
increases from raw material suppliers; selling steel off cuts and scrap at the
highest possible price; increase cost reduction programs throughout the
business; and lastly negotiate price relief from customers. We do not currently
hedge any of our raw materials; however we would consider this approach as
demand for our products increase. ESW's results of operations will continue to
be adversely affected by higher steel and precious metal prices unless it is
successful in passing along these increases to customers or otherwise offset
these operating costs.

Other raw materials or components purchased by ESW include tools, jigs,
fasteners, and other steel and chemical products, all of which are available
from numerous sources.

CUSTOMERS

While we only began the commercial sale of our products during Fiscal 2001, we
recorded sales from approximately 26 customers in Fiscal 2004 as compared to 35
in Fiscal 2003. One of these customers accounted for 30% and three other
customers each accounted for between 10% and 20% of our revenue in Fiscal 2004.
In Fiscal 2003, one customer accounted for 37% and two other customers each
accounted for between 10% and 20% of our revenue. We anticipate continuing our
program of establishing long-term relationships with our existing customers. Our
sales and marketing efforts are designed to create overall awareness of our
technology solutions and our manufacturing capabilities in order to have ESW
considered and selected to supply its products for new and retrofit
applications. Most of our sales and marketing personnel have engineering
backgrounds which enable them to understand and participate in the design and
engineering aspects of acquiring new business as well as ongoing customer
service. When deemed appropriate, ESW also participates in industry trade shows.
The loss of, or major reduction in business from, one or more of our major
customers could have a material adverse effect on our liquidity, financial
position, or results of operations.

PATENT AND TRADEMARKS

We are developing technologies or furthering the development of acquired
technologies through internal research and development efforts by our engineers.
Where practical we are seeking to obtain the exclusive rights to use technology
related to our industry through patents or licenses for proprietary technologies
or processes.

Through our wholly owned subsidiaries, we hold both Canadian and US patents and
pending applications covering our catalytic converter technology. The
protections provided by patents and those sought by pending patents are
important to our business, although management believes that no individual right
is material to our business at the present time. We own assignable patent
rights. There can be no assurance that these patents, combined with pending
patent applications or existing or future trade secret protections that we seek
will survive legal challenge, or provide meaningful levels of protection.

The Canadian patent only affords protection against the manufacture, use or sale
of the patented technology within Canada. The US patent application for our
diesel catalytic converter, Clean Cat(R) was filed on October 31, 2000 and has
not been challenged as of this date. There can be no assurances that any patents
we may have or have applied for or any agreements we have in place or enter into
will protect our technology and or prevent competitors from employing the use of
our design and production information. Moreover, there is no guarantee that our
proprietary rights will provide any significant competitive advantages.

Additionally, we possess certain registered and pending trademarks. We consider
the goodwill associated with our trademarks to be an important part of our
developing product identity.

PRODUCT CERTIFICATION

To date, our customers have acquired, where necessary, engine certifications and
catalyst certifications using our products from such authorities as the EPA,
Mexico Department of Ecology, and CARB; ESW currently has certification in its
own name from the EPA, CARB and the Canada ETV for gasoline and diesel products.

We have become the first catalytic substrate manufacturer and catalyst coating
company in North America to verify a metallic wire mesh substrate based
catalytic converter system as a gasoline retrofit replacement device. It is
believed that the receipt of this exemption may allow for potential sales
opportunities into the replacement catalytic converter and retrofit market in
California.

ESW has become the first catalytic substrate manufacturer and catalyst coating
company in the world to verify a metallic wire mesh substrate based catalytic
converter system as a passive stand alone Level II diesel retrofit replacement
device. To date, no other catalyst manufacturer has received this status without
the usage of secondary technologies.

The California Air Resource Board ("CARB") has established three primary
technology levels for diesel catalyst verifications.

LEVEL I: Particulate Matter (PM) reduction greater than 25%
-------------
LEVEL II: PM reduction greater than 50%
------------
LEVEL III: PM reduction greater than 85%
------------

In September 2004, we received a Level II CARB Executive Order for our advanced
Diesel Catalyst (Particulate Reactor (TM)) for all diesel engine models from the
1991 through 1993 model years used in on-road applications operating on standard
CARB diesel fuel, and subsequently requested the Executive Order be expanded to
include Medium Heavy Duty applications (up to and including 8 liter) for engine
models from 1994 through 1997. CARB is presently reviewing this request.
Additionally, we received an Executive Order from CARB which permits sale of
catalytic converters for use on 4 liter or smaller gas engines for all model
years up to 1995 on which GVW (gross vehicle weight) is 3,750 pounds or less.

ESW is currently pursuing the expansion of its current product verification for
a wider vehicle application range.

Our metallic wire mesh substrate catalytic converter system has been used by a
customer to obtain verification as a gasoline retrofit device in the Mexico
Government initiated on-road PIREC program. This verification covers engine
sizes from 1.4 displacement liter to 2.8 liter.

Our metallic wire mesh substrate catalytic converter system has been used by a
customer to obtain verification as a CNG/LPG retrofit device. This certification
is valid when our product is used in conjunction with an IMPCO or a LOVATO fuel
management technology. This certification has been issued by the Mexico
Government for on-road vehicles with engine sizes ranging from 5.7 liter
displacement to 6.8 liter.

ESW's products are generally sold according to appropriate government
application regulations; however, we do not necessarily need government approval
to sell our products into unregulated markets.

WARRANTY MATTERS

We may face an inherent business risk of exposure to product liability and
warranty claims in the event that our products fail to perform as expected. We
cannot assure that we will not experience any material warranty or product
liability losses in the future or that we will not incur significant costs to
defend such claims. In addition, if any of the products are or are alleged to be
defective; we may be required to participate in a recall involving such
products. Each of our customers has its own policy regarding product recalls and
other product liability actions relating to its suppliers. A successful claim
brought against ESW or a requirement to participate in a product recall may have
a material adverse effect on our business. Some OEMs and emission solution
customers are also increasingly requiring their outside suppliers to guarantee
or warrant their products and bear the costs of repair and replacement of such
products. Depending on the terms under which we supply products to these
customers, the customer may hold us responsible for some or all of the repair or
replacement costs of defective products, when the product supplied did not
perform as represented.

We carry insurance for certain legal matters including product liability;
however, we do not carry insurance for recall matters, as the cost and
availability for such insurance, in the opinion of management, is cost
prohibitive or not available.

To date we have not had any product warranty matters.

MANUFACTURING

We are making capital investments in manufacturing capability to support our
products. We are in the process of setting up the production line equipment
necessary to produce our metallic substrates from the base materials, along with
the equipment needed to apply the final chemical wash coat and catalyst
materials. Our new substrate manufacturing plant located in Concord Ontario,
Canada, is intended to enable us to control the complete manufacturing process
required for production of catalyzed substrates. Catalyzed substrates are the
integral part of all catalytic converter systems sold worldwide.

We are also making a capital investment in our Tech Center based in
Montgomeryville Pennsylvania. This facility will be manufacturing and providing
the catalytic and chemical wash coat solutions for the new Concord Ontario
plant. As well all of our emission testing laboratories and testing capabilities
are located there. The new 40,200 sq ft facility will house a state of the art
18,000 sq ft expansion of "Air Testing Services", our EPA/CARB recognized
engine/vehicle emissions testing lab. The new facilities will include several
new testing systems. In addition to our existing laboratory testing
capabilities, we have acquired a new heavy duty and an additional light duty
truck chassis dynamometer. In addition a 500 horse power heavy-duty-diesel
transient engine emissions test dynamometer and additional analytical test
instruments has been purchased.

It is believed that the Air Testing Services ("ATS") group will now be equipped
to better service our clientele for engine testing as well as EPA/CARB emissions
testing and certification programs. ATS will also be in a better position to
provide additional testing support for our internal research and development
("R&D") programs.

The upgrading of our manufacturing and testing capabilities are required to
increase the flexibility, efficiency and improve the operating quality, while
minimizing the overall effective costs, to produce our products.

We utilize our ISO 9001:2000 protocols and structured communication meetings at
all levels of manufacturing to provide training and instruction as well as to
assure a cohesive, focused effort toward common goals. ESW encourages employee
involvement in all aspects of its business and views such involvement as a key
element in its future success. ESW also pursues involvement from its suppliers
and customers, which it believes is necessary to assure a consistent high
quality and on time delivery of raw materials, components and finished products.

RESEARCH AND DEVELOPMENT

Prior to fiscal 2001, we were a research and development company. Starting in
fiscal 2001, we began the transition from a development stage to an operating
(manufacturing) company. During the last three fiscal years, $50,375 was spent
on research and development activities. We believe that, through a combination
of proprietary methods for improving our catalyzed substrates there are
prospects for the development of innovative applications outside of our present
product line. We continue to expense further resources on new research and
development projects.

ENVIRONMENTAL MATTERS

ESW is presently engaged in a business that does not generate significant
hazardous wastes. Our facilities may have tanks for storage of diesel fuel and
other petroleum products that are subject to laws regulating such storage tanks.
Federal, state, and local provisions relating to the protection of the
environment have not had, and are not expected to have, a material adverse
effect on our liquidity, financial position, and results of operations. However,
like all manufacturers, if a release of hazardous substances occurs ESW may be
held liable for the contamination, and the amount of such liability could be
material. While ESW devotes resources designed to maintaining compliance with
these requirements, there can be no assurance that ESW operates at all times in
complete compliance with all such requirements.

EMPLOYEES

ESW and its subsidiaries presently employ 37 full-time and 10 part-time
employees. We do not have any collective bargaining agreements and considers our
relationship with our employees to be good.

DESCRIPTION OF PROPERTY

We do not own real property. Through our subsidiary ESW Canada, Inc. we lease
our executive, sales and marketing offices as well as our production center
which total approximately 50,000 square feet located at 335 Connie Crescent
Court, Concord, Ontario Canada under an offer to lease that expires July 14,
2010. Additionally, our wholly owned subsidiary ESW America, Inc. leases
approximately 40,220 square feet at 2 Bethlehem Pike Industrial Center,
Montgomery Township, Pennsylvania. The leasehold space is intended to house our
research and development facilities. The lease expires January 31, 2010. We also
currently lease our office and factory located at 132 Penn Avenue, in Telford,
Pennsylvania on a month-to-month basis.

MANAGEMENT DISCUSSION AND ANALYSIS

This Registration Statement contains forward-looking statements that involve a
number of risks and uncertainties as well as assumptions that if they never
materialize or prove incorrect, could cause our results to differ materially
from those expressed or implied by such forward-looking statements. Although our
forward looking statements reflect the good faith judgment of our management,
these statements can only be based on facts and the factors currently known by
us. Consequently, forward looking statement are inherently subject to risks and
uncertainties, and actual results and outcomes may differ materially from
results and outcomes discussed in the forward looking statements.

GENERAL

ESW develops, manufactures and sells environmental technology solutions, and is
currently focused on the international automotive, transportation and utility
engine industries. We manufacture and market a line of catalytic control
products including a line of finished catalytic muffler products, proprietary
catalytic converter substrates and catalytic conversion technologies for a
number of applications. We also offer emissions testing and certification
services.

We have developed commercially viable proprietary catalytic converter
technologies for diesel, gasoline and alternative (CNG/LPG) fueled combustion
engines. The unique technology consists of a wire based mesh substrate and wash
coat formulas, which form the basis for the catalyzed substrate. The finished
product can be produced in a myriad of sizes and shapes. The substrate creates a
turbulent flow environment. This increases catalytic activity and serves as a
filter of particulate matter, important in diesel emission control.

Our catalyst products have been extensively tested in house, as well as by
Original Equipment Manufactures (OEM's) and by independent third parties.
Management believes they demonstrate superior performance to comparable
competing products. ESW's customers have incorporated our products to meet their
own needs, and have, in specific instances, received certification for their
product applications from the Environmental Protection Agency (EPA) and the
California Air Resources Board (CARB). Customers have had their engines
certified using our Clean Cat (R), Pro Cat (TM), Quiet Cat (TM) catalyst
products and services. Our catalyst products are being marketed both
domestically and internationally, including in such continents as Asia, Europe
and countries as Canada and Mexico.

In September 2004, we received a Level II California Air Resources Board (CARB)
Executive Order for our proprietary advanced Diesel Catalyst (Particulate
Reactor TM) for all diesel engine models from the 1991 through 1993 model years
used in on-road applications operating on standard CARB diesel fuel, and
subsequently requested the Executive Order be expanded to include Medium Heavy
Duty applications (up to and including 8 liter) for engine models from 1994
through 1997. CARB is presently reviewing this request. Additionally, we have
received an Executive Order from CARB which permits sale of catalytic converters
for use on 4 liter or smaller gas engines for all model years up to 1995 on
which GVW (gross vehicle weight) is 3,750 pounds or less.

ESW is in full compliance with ISO 9001:2000, the ISO standards developed by the
International Organization for Standardization which provide an international
benchmark for quality systems and foundation for continuous improvement and
assurance in design, development and manufacturing. The ISO mandates that ESW
follow strict quality guidelines, administrative protocol and safety procedures
to a recognized international standardized code. ISO auditors confirm compliance
by auditing ESW periodically. ESW passed its most recent surveillance audit in
June 2005, and is in full compliance with the ISO requirements. We currently
hold a full registration certificate effective until March of 2007. Management
considers an ISO certification essential to doing business with many export
customers.

COMPARISON OF YEAR ENDED DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31, 2003

RESULTS OF OPERATIONS

Revenues for the year ended December 31, 2004 increased by $166,988, or 10
percent, to $1,906,704 from $1,739,715 for 2003. ESW experienced an overall
revenue growth in both the gas and diesel finished converter lines of $215,634.
Factors that favorably impacted revenue in 2004 are attributable to our
continuing efforts at gaining acceptance of our products by our customers and
the CARB certification of one of our products, which lead to two orders from new
customers, based on this certification. The factor that offset these favorable
items was the impact of lower revenue from our ATS testing services of $48,646
as ESW focused much of its attention and effort at completing and subsequently
in the second half of 2004 obtaining two CARB executive exemption orders for its
products.

Cost of sales for the year ended December 31, 2004 increased by $313,555, or
36.7 percent, to $1,166,653 from $853,098 for 2003. Cost of sales as a
percentage of revenues for the year ended December 31, 2004 was 61.1 percent,
which is up compared to 49.0 percent for 2003. The increase is due to an
elevation of prices across the board for both steel prices and precious metals
that are the two main components used in our products. An increase in direct
labor costs also contributed to the higher overall costs, leading to a lower
gross margin. The gross margin for 2004 was 38.9 percent as compared to a gross
margin of 51.0 percent for 2003. Due to increased steel and precious metal
prices in 2004 and continuing into 2005, we expect to implement a strategy in an
effort to mitigate the effect of rising steel prices on our results of
operations. This strategy includes delaying increases from raw material
suppliers; selling steel off cuts and scrap at the highest possible price;
increase cost reduction programs throughout the business; and lastly negotiate
price relief from customers. We do not currently hedge any of our precious
metals materials; however we would consider this approach as demand for its
products increase. Our results of operations will continue to be adversely
affected by higher steel and precious metal prices unless it is successful in
passing along these increases to our customers or otherwise offset these
operating costs.

Marketing, office and general expenses for the year ended December 31, 2004
increased by $390,381, or 42.5 percent, to $1,308,788 from $918,407 in 2003. As
a percentage of revenue, marketing, office and general expenses increased to
68.6 percent for 2004, compared to 52.8 percent for 2003. The increase as a
percentage of sales is primarily the result of an increase in payroll costs of
$193,653 as we added employees in conjunction with its certification programs
and sales efforts, as well as the result of higher wages paid. An increase of
$46,096 from investor relations and warrant amortization interest as it related
to the issuance of the convertible debentures in September 2004. An increase of
$78,677 related to travel and general costs as the company planned its expansion
of two new facilities and an increase of $71,957 due to higher shop and research
and development related costs.

Officer's compensation and director's fees for the year ended December 31, 2004
increased by $172,178, or 77.5 percent, to $394,178 from $222,222 in 2003. As a
percentage of revenue, officer's compensation and director's fees increased to
20.6 percent for 2004, compared to 12.8 percent for 2003.The increase was due to
employment contracts that became effective in 2004.

Consulting and professional fees for the year ended December 31, 2004 increased
by $163,597, or 81 percent, to $365,715 from $202,118 in 2003. As a percentage
of revenue, consulting and professional fees increased to 19.2 percent for 2004,
compared to 11.6 percent for 2003. The increase is due in part to consulting
fees related for the work necessary for the CARB certifications received by ESW
in September 2004 as well as costs related to the development and implementation
of our two new facilities.

Interest expense on long-term debt was $72,364 in 2004 as opposed to nil in
2003. In September 2004, we issued $6.1 million of convertible debentures in
which the basis of conversion into our common stock is $0.50 per share, which
includes warrants to purchase an additional 3.05 million shares of common stock
at $1.00 per share which were subsequently reset to an exercise price of $0.85
per share. The debentures are for a term of three (3) years and earn interest at
the rate of 4%.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of operating capital have been the proceeds of our various
financing transactions. As of December 31, 2004, we had cash and cash
equivalents of $4,633,013. Our cash and cash equivalents increased by $4,546,127
to $4,633,013 from $86,886 at December 31, 2003.

Net Cash used in operating activities in 2004 amounted to $1,476,229 which was
mainly attributable to the loss, net of depreciation, amortization, amortization
of the fair value of the debenture warrant, and the compensation value of option
grants of $1,295,870 and the increase in operating assets and liabilities of
$180,359.

Net Cash used in investing activities was $355,807 for 2004 as compared to
$46,204 in 2003. The capital expenditures in 2004 were primarily dedicated to
the purchase of equipment and leaseholds for the our research and development
facilities located in Montgomery Township, Pennsylvania.

Net cash provided in financing activities totaled $6,362,607 for 2004 as
compared to $ 247,000 for 2003. The net cash provided in 2004 was primarily to
support general corporate purposes, including capital expenditures and for
working capital needs. Net cash provided in 2004 was primarily related to
financing activities during 2004 as a result of cash received from the offering
of 4 percent unsecured convertible debentures due September 13, 2007 of
$6,100,000 and proceeds from warrant exercises of $262,607.

ESW made substantial capital investments in manufacturing capability to support
its products. We are in the process of setting up the production line equipment
necessary to produce our proprietary metallic substrates from the base
materials, along with the equipment needed to apply the final chemical wash coat
and catalyst materials. When complete, this new substrate manufacturing plant
located in Concord Ontario, Canada, is intended to enable ESW to control the
complete manufacturing process required for production of catalyzed substrates.
Catalyzed substrates are the integral part of all catalytic converter systems
sold worldwide.

We are also making a capital investment in our new Tech Center based in
Montgomeryville Pennsylvania. This facility will be manufacturing and providing
the catalytic and chemical wash coat products for the new Concord Ontario plant.
As well all of our emission testing laboratories and testing capabilities will
be located there. The new 40,200 sq ft facility will house a state of the art
18,000 sq ft expansion of "Air Testing Services", our EPA/CARB recognized
engine/vehicle emissions testing lab. The new facilities will include several
new testing systems. In addition to ESW's existing laboratory testing
capabilities, we have acquired additional heavy duty and light duty truck
chassis dynamometers, as well as a heavy-duty-diesel transient engine emissions
test dynamometer, and additional analytical test instruments.

ESW has proposed a budget for an estimated capital expenditure of $1,500,000 to
put into operation the new manufacturing facility in Concord Ontario Canada. As
well, an estimated budget of $800,000 has been proposed to upgrade our emissions
testing and research and development department in Montgomeryville Pennsylvania.
Both these plans are currently being implemented and as at the end of December
31, 2004, approximately $350,000 has been spent on these projects. We believe
this capital expenditure will improve our retention of small to medium-sized
customers while at the same time provide us with added sales capacity for
higher-end selling solutions. It is anticipated that the expansion of our
testing facilities will bring increase revenue, as ATS will now have the
capacity to service larger customers.

The proposed capital expenditures and our intent to capitalize on an anticipated
increase in demand for our products are the steps that we are taking to try to
become profitable and generate positive cash flow. However, there can be no
assurances that these steps will be completed or that we will become profitable.

Should we not become profitable before this money is expensed, we will need to
continue to finance our operations through other capital financings. We continue
to seek, equity financing and/or debt financing in the form of private
placements at favorable terms, or the exercise of currently outstanding options
or warrants that would provide additional capital in order to make available all
opportunities and keep our options flexible. However, such additional financing
may not be available to us, when and if needed, on acceptable terms or at all.
We intend to retain any future earnings to retire debt, finance the expansion of
our business and any necessary capital expenditures, and for general corporate
purposes.

A top priority for us in fiscal 2005 is core growth which is the gaining of
market share in underrepresented markets, and the targeting of our product
segments in which demand is growing the fastest. We are seeking to expand into
markets such as Europe and Asia, as new opportunities within that region are
opening up, in an effort to build solidly on our core business. To ensure that
we capture the fastest growing product technologies, we continue to explore
possible joint venture agreements and or the introduction of new products and or
technologies. Our success is dependent upon our ability to charge adequate
prices for the products and services we offer. Depending on competitive market
factors, future prices we can charge for our products and services we offer may
vary and may impact our profitability. Competition is based largely upon
technology, performance, pricing, quality, reliability, distribution, and
customer support. A number of companies worldwide with significant financial
resources or customer relationships compete with us to provide similar products
and services, such as Johnson Matthey, Engelhard and OMG (Degussa) Our
competitors may be positioned to offer more favorable product and service terms
to the marketplace, resulting in reduced profitability and loss of market share
for us. Financial pressures faced by our competitors may cause them to engage in
uneconomic pricing practices, which could cause the prices that we are able to
charge in the future for our products and services to be less than we have
historically charged. Our future success is based in large part upon our ability
to successfully compete in the markets we currently serve and to expand into
additional product and service offerings. Our failure to do so could lead to a
loss of market share for us, resulting in a material adverse effect on our
results of operations.

ESW's operating profitability requires that we increase our sales and lower our
overall cost to manufacture our products and improve both sales and
administrative productivity through process, and system enhancements. This will
be largely dependent on the success of our initiatives to streamline our
infrastructure and drive our operational efficiencies across our company. Our
failure to successfully implement these initiatives, or the failure of such
initiatives to result in improved profit margins, could have a material adverse
effect on our liquidity, financial position, and results of operations.

The principal raw materials that we use are steel, and precious metals such as
platinum. The metals industry as a whole is cyclical and at times pricing and
availability of raw materials in the metals industry can be volatile due to
numerous factors beyond our control, including general, domestic and
international economic conditions, labor costs, production levels, competition,
import duties and tariffs and currency exchange rates. This volatility can
significantly affect the availability and cost of raw materials, and may,
therefore, adversely affect our net sales, and operating margin. During periods
of rising raw materials pricing, there can be no assurance that we will be able
to pass any portion of such increases on to our customers. When raw material
prices decline, customer demands for lower prices could result in lower sale
prices and, as we use existing inventory, resulting in lower margins. Changing
steel and platinum prices could adversely affect our operating margin and net
income.

We expect an increase in consulting and audit fees related to the impact of our
Sarbanes-Oxley internal control certification efforts, with which we are
required to be in compliance by December 31, 2006.

ESW has 700,000 Class A special shares of $ 453,900 (based on the historical
exchange rate at the time of issuance.), authorized, issued, and outstanding.
The Class A special shares are issued by ESW's wholly-owned subsidiary BBL
Technologies, Inc. ("BBL") without par value, and are redeemable on demand by
the Holder of the shares which is a private Ontario Corporation at $700,000 CDN
(which translates to ($583,333 USD) at December 31, 2004. As the Class A special
shares were issued by ESW's wholly-owned subsidiary BBL, the maximum value upon
which ESW is liable is the net book value of BBL. At December 31, 2004 BBL had
an accumulated deficit and therefore would be unable to redeem the Class A
special shares at their ascribed value.

DEBT STRUCTURE

In September 2004, we issued $6.1 million of convertible debentures in which the
basis of conversion into our common stock is $0.50 per share, which includes
warrants to purchase an additional 3.05 million shares of common stock at $1.00
per share. The debentures are for a term of three (3) years and earn interest at
the rate of 4% per annum. We have computed the fair-value of the warrants
utilizing the Black-Scholes method and apportioned the fair value of the debt
and warrants accordingly. As a result, the debentures were discounted by
$528,000, which is being amortized over the three (3) year life of the
debentures. The effective yield on the debenture is 4.38%.

The principal of this debenture is payable in U.S. currency or, at the option of
ESW, in shares of common stock, par value $0.001 per share, at $.50 per share.
At ESW's option, interest on the debenture will be payable in cash or shares of
common stock under a conversion formulas as provided in the debenture.

ESW's ability to service its indebtedness in cash will depend on its future
performance, which will be affected by prevailing economic conditions and
financial, business, regulatory and other factors. Certain of these factors are
beyond ESW's control. ESW believes that, based upon its current business plan,
it will be able to meet its debt service obligations when due. Significant
assumptions underlie this belief, including, among other things, that ESW will
be successful in implementing its business strategy and that there will be no
material adverse developments in its business, liquidity or capital
requirements. If ESW cannot generate sufficient cash flow from operations to
service its indebtedness and to meet its other obligations and commitments, ESW
might be required to refinance its debt or to dispose of assets to obtain funds
for such purpose. There is no assurance that refinancing or asset dispositions
could be effected on a timely basis or on satisfactory terms, if at all, or
raise funds through asset sales, sales of equity or otherwise, its ability to
pay principal of, and interest on, its debt would be impaired. On such
circumstance, ESW would have to issue shares of its Common stock as repayment of
this debt which would be of a dilutive nature to its present shareholders.

CONTRACTUAL OBLIGATIONS

Effective November 24, 2004, our wholly owned subsidiary ESW America, Inc.
entered into a lease agreement for approximately 40,220 square feet of leasehold
space, intended to house our research and development facilities in Montgomery
Township, Pennsylvania. The lease commenced on January 15, 2005 and expires
January 31, 2010. Effective December 20, 2004, our wholly owned subsidiary ESW
Canada, Inc. entered into a lease agreement for approximately 50,000 square feet
of leasehold space intended to house the Company's executive offices and a
manufacturing plant located in Concord, Ontario Canada.

The following breakdown (as of March 31, 2005) is the total, of the minimum
annual lease payments, for both leases.

2005 $342,079
2006 $433,569
2007 $433,569
2008 $440,585
2009 $444,093
2010 $102,784

FOREIGN CURRENCY TRANSACTIONS

None of ESW's revenues during the year ended December 31, 2004 were derived from
manufacturing operations in Canada. The results of operations and the financial
position of ESW's operations in Canada is principally measured in Canadian
currency and translated into U.S. dollars. The future effects of foreign
currency fluctuations between U.S. dollars and Canadian dollars will be somewhat
mitigated by the fact that expenses will be generally incurred in the same
currency in which revenues will be generated. The future reported income of our
Canadian subsidiary will be higher or lower depending on a weakening or
strengthening of the U.S. dollar against the Canadian currency.

A small portion of ESW's assets at December 31, 2004 are based in its foreign
operation and are translated into U.S. dollars at foreign currency exchange
rates in effect as of the end of each period, Accordingly, ESW's consolidated
stockholders' investment will fluctuate depending upon the weakening or
strengthening of the U.S. dollar against the Canadian currency.

ESW's strategy for management of currency risk relies primarily upon conducting
its operations in the countries' respective currency and ESW may, from time to
time, engage in hedging intended to reduce ESW's exposure to currency
fluctuations. At December 31, 2004, ESW had no outstanding forward exchange
contracts.

YEARS ENDED DECEMBER 31, 2003 AND 2002

RESULTS OF OPERATIONS

Revenue for 2003 decreased to $1.7 million from $1.9 million in 2002, or 8.5%.
Much of the decrease in revenue occurred in the second half of the year as
compared to the year-ago period, and is attributable to our focus on completing
the gas and diesel certifications of our products. Cost of sales decreased
disproportionately by 15%, and as a result gross profit actually improved by
nearly 8% to 50.9% as compared to 47.3% in 2002.

Operating costs continued to decrease by $366 thousand or 18.1% to $1.65
million, as we reduced our dependence on outside professionals and consultants
($194 thousand) and continued its efforts to reduce other operating expenses as
reflected by the reduction in marketing, office and general and administrative
costs ($127 thousand).

Due to the continued reduction in operating costs, we were able to reduce our
loss from operations to $770 thousand, a reduction of $353 thousand or more than
31% from fiscal 2002 when we reported a loss of $1.12 million.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and equivalents decreased by $24 thousand and our working capital
decreased by $236 thousand in Fiscal 2003 as a result of our continuing
operating losses.

The operating loss of $770 thousand was substantially funded through non-cash
expenses of $333 thousand, the sale of common stock of $247 thousand and the
collection of accounts receivable of $250 thousand offset by an increase in
inventory of $103 thousand. Relatively insignificant increases in property,
patents and trademarks were offset by similar increases in accounts payable.

While we diligently pursue viable operations, we may need to obtain either
additional equity or debt financing to enable us to sustain the level of
operations that we believe will be necessary to achieve and maintain profitable
operations.

COMPARISON OF NINE MONTH PERIOD ENDED SEPTEMBER 30, 2005 TO NINE MONTH PERIOD
ENDED SEPTEMBER 30, 2004

RESULTS OF OPERATIONS

Revenues for the nine month period ended September 30, 2005 increased by
$1,007,135, or 82.8 percent, to $2,223,605 from $1,216,470 for the nine month
period ended September 30, 2004. Factors that favorably impacted revenue during
the nine months ended September 30, 2005 included repeat orders from existing
customers for the company's diesel substrate products.

Cost of sales for the nine month period ended September 30, 2005 increased by
$539,531, or 76.2 percent, to $ 1,247,290 from $707,759 for the nine month
period ended September 30, 2004. Cost of sales as a percentage of revenues for
the nine month period ended September 30, 2005 was 56.1 percent, compared to
58.2 percent for the nine month period ended September 30, 2004. The gross
margin for the nine month period ended September 30, 2005 was 43.9 percent
compared to a gross margin of 41.8 percent for the nine month period ended
September 30, 2004.

Marketing, office and general expenses for the nine month period ended September
30, 2005 increased by $1,366,376, or 151.1 percent, to $2,270,617 from $ 904,241
for the nine month period ended September 30, 2004. The increase is primarily
the result of an increase in payroll costs of $ 560,044 as the Company added
employees in conjunction with its Research and Development certification
programs, sales efforts, and office staff. An increase of $ 215,033 from
investor relations and warrant amortization interest, as it related to the
issuance of the convertible debentures in September 2004. An increase of $61,821
related to general costs as the company continues to complete it's expansion of
two new facilities and an increase of $ 529,478 due to higher rent and utility
costs for the new facility in Montgomeryville PA. and Concord Ontario, Canada,
non-employee related engineering development costs supporting new research and
development programs and the increase general and administrative expenses to
further support organic growth. As a percentage of revenue, marketing, office
and general expenses increased to 102.1 percent for the nine month period ended
September 30, 2005, compared to 74.3 percent for the nine month period ended
September 30, 2004.

Officer's compensation and director's fees for the nine month period ended
September 30, 2005 decreased by $39,772, or 13.0 percent, to $266,731 from $
306,503 for the nine month period ended September 30, 2004. As a percentage of
revenue, officer's compensation and director's fees decreased to 12.0 percent
for the nine month period ended September 30, 2005, compared to 25.2 percent for
the nine month period ended September 30, 2004.The decrease was due to a change
in management.

Consulting and professional fees for the nine month period ended September 30,
2005 increased by $ 46,212, or 16.8 percent, to $ 321,953 from $ 275,741 for the
nine month period ended September 30, 2004. The increase is due in part to fees
related to the development and implementation of the Companies two new
facilities currently underway. As a percentage of revenue, consulting and
professional fees decreased to 14.5 percent for the nine month period ended
September 30, 2005, compared to 22.7 percent for the nine month period ended
September 30, 2004.

Interest expense on long-term debt was $183,000 for the nine month period ended
September 30, 2005 as opposed to $19,719 for the nine month period ended
September 30, 2004. In September 2004, the Company issued $6.1 million of
convertible debentures in which the basis of conversion into the Company's
common stock is $0.50 per share, which includes warrants to purchase an
additional 3.05 million shares of common stock exercisable at $1.00 per share
which subsequently have been adjusted to an exercise price of $0.85 a share
effective April 21, 2005. The debentures are for a term of three (3) years and
earn interest at the rate of 4%.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of operating capital have been the proceeds of our various
financing transactions. As of September 30, 2005, the Company had cash and cash
equivalents of $3,862,740.

Net Cash used in operating activities for the nine month period ended September
30, 2005 amounted to $ 2,289,408 as compared to $ 909,976 for the nine month
period ended September 30, 2004. The increase was mainly attributable to the
loss, net of depreciation, amortization, provision for uncollectible accounts,
amortization of the fair value of the debenture warrant of $ 1,868,284. As well
as an increase in operating assets and liabilities of $ 421,124 which was
primarily due to an increase of inventory as the company begins to position
itself for ongoing manufacturing, offset by an increase in accounts payable and
accrued liabilities.

Net Cash used in investing activities was $ 2,325,239 for the nine month period
ended September 30, 2005 as compared to $ 62,412 for the nine month period ended
September 30, 2004. The capital expenditures in the first three quarters of 2005
were primarily dedicated to the purchase of equipment and leaseholds for the
Company's research and development facility located in Montgomery Township,
Pennsylvania, and the manufacturing facility in Concord Ontario, Canada.

Net cash provided in financing activities totaled $ 3,844,374 for the nine month
period ended September 30, 2005 as compared to $ 6,362,607 for the nine month
period ended September 30, 2004. On April 21, 2005, the Company closed an
initial traunche of a private placement offering. Pursuant to a subscription
agreement with one accredited investor, the Company received $2 million and
issued 2,352,941 shares of common stock; three year warrants to purchase
1,300,000 shares of common stock at $0.90 per share; three year warrants to
purchase 200,000 shares of common stock at $2.00 per share; and three year
warrants to purchase 200,000 shares of common stock at $3.00 per share pursuant
to Regulation D of the Securities Act of 1933, as amended. Effective April 21,
2005, in conjunction with the offering, the Company adjusted the exercise price
of 3,050,000 three year warrants previously issued to nine (9) accredited
investors including AB Odnia an entity affiliated with Bengt Odner a director of
the Company from $1.00 per share to $0.85 per share in accordance with the terms
of the warrants previously issued by the Company September 15, 2004.

On July 5, 2005, the Company completed a second traunche of a private placement
offering. Pursuant to subscription agreements with three accredited investors,
the Company received an aggregate of $1,850,000 and issued 2,176,470 shares of
common stock; three year warrants to purchase 1,202,500 shares of common stock
at $0.90 per share; three year warrants to purchase 185,000 shares of common
stock at $2.00 per share; and three year warrants to purchase 185,000 shares of
common stock at $3.00 per share pursuant to Regulation D of the Securities Act
of 1933, as amended. In connection with the offering, the Company entered into
registration rights agreements with the investors and agreed to use its best
efforts to file a registration statement for the resale of the common stock and
the shares of common stock issuable upon exercise of the warrants within one
hundred and twenty (120) days of the date of the agreement.

The Company intends to use the proceeds from these placements for due diligence
and investigating compliance issues for potential listing of the Company's
securities on new exchanges and for general corporate purposes.

ESW's principal source of liquidity is cash provided by financing activities.
ESW's principal use of liquidity will be to finance capital expenditures and to
provide working capital availability. ESW expects that total capital
expenditures for 2005 will be approximately $3.7 million. These capital
expenditures will be used primarily for equipment and facility improvements.

These capital expenditures and our intent to capitalize on an anticipated
increase in demand for our products are the steps that we are taking to try to
become profitable and generate positive cash flow. However, there can be no
assurances that these steps will be completed or that we will become profitable.
Based on ESW's current operating plan, management believes cash at September 30,
2005 is sufficient to meet operating needs for at least the next twelve months.

In December 2004, the Financial Accounting Standards Board (the "FASB") issued
its final standard on accounting for share-based payments, SFAS 123R (Revised
2004), "Share-Based Payments" ("SFAS 123R"). SFAS 123R requires companies to
expense the fair value of employee stock options and other similar awards,
effective for interim and annual periods beginning on or after December 15,
2005. Accordingly, we have not yet determined the impact on our consolidated
financial statements of adopting SFAS 123R.

DEBT STRUCTURE

In September 2004, the Company issued $6.1 million of convertible debentures in
which the basis of conversion into the Company's common stock is $0.50 per
share, which includes warrants to purchase an additional 3.05 million shares of
common stock at $1.00 per share which was subsequently adjusted to $0.85 on
April 21, 2005, in accordance with the terms of the warrants previously issued
by the Company September 15, 2004. The debentures are for a term of three (3)
years and earn interest at the rate of 4% per annum. The Company has computed
the fair-value of the warrants utilizing the Black-Scholes method and
apportioned the fair value of the debt and warrants accordingly. As a result,
the debentures were discounted by $528,000, which is being amortized over the
three (3) year life of the debentures. The effective yield on the debenture is
4.38%.

The principal of this Debenture is payable in U.S. currency or, at the option of
the Company, in shares of Common Stock, par value $0.001 per share (the "Common
Stock"), at $.50 per share. At the Company's option, interest on the Debenture
will be payable in cash or shares of Common Stock under a conversion formulas as
provided in the debenture. On November 7, 2005, the Company elected to issue
shares of common stock as payment of interest earned on our 4% convertible
debentures. A total of 348,571 shares of common stock were issued to 10
debenture holders for the $244,000 of accrued interest, as per the terms of the
debentures.

NEW ACCOUNTING PRONOUNCEMENTS.

In May 2005, the FASB issued SFAS 154, which replaces APB Opinion No. 20,
"Accounting Changes," and FASB Statement No. 3, "Reporting Accounting Changes in
Interim Financial Statements." The statement applies to all voluntary changes in
accounting principle and changes resulting from adoption of a new accounting
pronouncement that does not specify transition requirements. SFAS 154 requires
retrospective application to prior periods' financial statements for changes in
accounting principle unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. SFAS 154 also
requires that retrospective application of a change in accounting principle be
limited to the direct effects of the change. Indirect effects of a change in
accounting principle should be recognized in the period of the accounting
change. SFAS 154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005 with early implementation
permitted for accounting changes and corrections of errors made in fiscal years
beginning after the date this statement is issued. SFAS 154 is effective for us
beginning January 1, 2006 and will be applied when applicable.

In December 2004, FASB Statement No.123 (revised), "Share-based Payment" was
issued. This Statement requires an entity to recognize the grant-date fair value
of stock options and other equity-based compensation issued to employees in the
income statement. FASB 123 (revised) eliminates the ability to account for
share-based compensation transactions using the intrinsic value method in APB
Opinion No.25. The Company will as required adopt as of the first interim or
annual reporting period that begins after December 15th, 2005, FASB Statement
123, "Accounting for Stock-based Compensation" as amended by FASB Statement 148,
"Accounting for Stock-based Compensation Transition and Disclosure". The
adoption of the provisions of SFAS No.148 did not have a material impact on the
Company's consolidated financial statements, and the Company modified its
disclosures in its quarterly reports commencing with the quarter ended March,
2003 as provided for in that standard.

No new accounting pronouncements have been issued during the three-month period
ended September 30, 2005 that would have a material impact on the Company's
financial statements. The Company has reviewed the status of its accounting
pronouncements and believes there are no significant changes from that disclosed
in the Company's Annual Report on Form 10-KSB for the year ended December 31,
2004, except as provided in this Form 10-QSB.

FOREIGN CURRENCY TRANSACTIONS

None of ESW's revenues during the nine month period ended September 30, 2005
were derived from manufacturing operations in Canada. It is anticipated that
revenue from the Canadian operation will be generated in the fourth quarter. The
results of operations and the financial position of ESW's operations in Canada
is principally measured in Canadian currency and translated into U.S. dollars.
The future effects of foreign currency fluctuations between U.S. dollars and
Canadian dollars will be somewhat mitigated by the fact that expenses will be
generally incurred in the same currency in which revenues will be generated. The
future reported income of our Canadian subsidiary will be higher or lower
depending on a weakening or strengthening of the U.S. dollar against the
Canadian currency.

A portion of ESW's assets at September 30, 2005 are based in its foreign
operation and are translated into U.S. dollars at foreign currency exchange
rates in effect as of the end of each period, Accordingly, ESW's consolidated
stockholders' investment will fluctuate depending upon the weakening or
strengthening of the U.S. dollar against the Canadian currency.

ESW's strategy for management of currency risk relies primarily upon conducting
its operations in the countries' respective currency and ESW may, from time to
time, engage in hedging intended to reduce ESW's exposure to currency
fluctuations. At September 30, 2005, ESW had no outstanding forward exchange
contracts.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Name Position Date Elected/Appointed
- ---- -------- ----------------------

Nitin Amersey Chairman January 2003

David J. Johnson Director, President and September 2000
Chief Executive Officer

Stan Kolaric Director, Chief June 2005
Operating Officer

Bengt G. Odner Director September 2000

Joey Schwartz Director, Chief June 2005
Financial Officer
and Corporate
Secretary

NITIN M. AMERSEY, age 53, has over thirty years of experience in international
trade, marketing and corporate management. Mr. Amersey was elected as a director
in November 2002 and was appointed interim Chairman of the Board in May 2004 and
subsequently was appointed Chairman of the Board in December 2004. Mr. Amersey
has served as a member of our board since January 2003. He has successfully
developed and implemented corporate strategic and financial plans for a wide
variety of companies. Since 1978, Mr. Amersey has been President of Scothalls
Limited, a general trading agency firm. Mr. Amersey has served as President of
Circle Tex Corp., a web site development and management firm since 2001. From
1988 to 2000, he was Chairman and CEO of The Caribbean Sea Island Cotton Company
Ltd. He is also a partner of Amersey Damoder, a raw cotton merchant firm,
located in Bombay, India. Mr. Amersey is also Chairman of Door to Door
Settlement Services Inc., a real estate notary firm. Mr. Amersey is Chairman and
CEO of Ugomedia Interactive Corp., an Over the Counter Bulletin Board company.
Mr. Amersey has a Masters of Business Administration degree from the University
of Rochester, Rochester, N. Y. and a Bachelor of Science in Business from Miami
University, Oxford, Ohio.

DAVID J. JOHNSON, age 43, served as our Chief Operating Officer from August 2000
through November 2001 and served as Senior Vice President of Sales and Marketing
from November 2001 until May 2004. Mr. Johnson was elected as a director in
September 2000. In addition to serving as a director, On May 1, 2004 he was
appointed as the Interim Chief Executive Officer and president and was
subsequently appointed President, CEO, and acting Chief Financial Officer in
December 2004. From 1989 to 1999, Mr. Johnson was a strategy and marketing
consultant to National Warehousing, Inc. Toronto, Ontario. Mr. Johnson attended
Tollgate Tech. Secondary, Mohawk Collage and Devry Institute of Technologies.

STAN KOLARIC, age 58, was appointed as Chief Operating Officer effective May 23,
2005. Prior to that Mr. Kolaric served as a consultant to ESWW and it's wholly
owned subsidiary ESW Canada Inc. since September 2004. Over the past thirty
years, Mr. Kolaric has worked with BIC Incorporated as the Engineering Manager
for North America from 1972 to 1984, Sommerville Belkin Group (currently Cascade
Inc.) as their Engineering-Operation Manager from 1984 to 1996 and Thermo Tech
Technologies (TTRIF) as Vice-President of Engineering 1996 to 1997. Mr. Kolaric
successfully managed many key projects from the design and development stage
through construction and manufacturing, including design and start up of a new
facilities in Mexico City for BIC Inc. Mr. Kolaric's also managed the relocation
and setup of a new 350,000 sq. ft. production facility for Sommerville Belkin in
Mississauga Ontario and was responsible for designing Thermo Tech Technologies,
"Thermo Master Plan", equipment and systems which recycled organic waste into
commercial products. Since 1997 Mr. Kolaric has consulted with various
companies. He currently is a director of IBL Structural Steel, Inc. Mr. Kolaric
graduated from the University of Ljubljana with Master Degree of Science and
Mechanics.

BENGT G. ODNER, age 53, has served as a director since September 2000. He served
as our Chairman from September 2000 through October 2002. Mr. Odner has also
served as our Chief Executive Officer from August 1999 to September 2000 and as
interim Chief Executive Officer from February 2002 to July 2002. Mr. Odner was a
director of Crystal Fund Ltd., a Bermuda mutual fund, and was a director of
Crystal Fund Managers, Ltd. from 1996 until January 2003. From 1990 through
1995, Mr. Odner was the Chairman of Altus Nord AB, a property holding company
specializing in Scandinavian properties and a wholly owned subsidiary of Credit
Lyonais Bank Paris. Mr. Odner holds a masters degree in Business Administration
from Babson College.

JOEY SCHWARTZ, age 45, has 23 years experience in financial management, business
strategy development and marketing. Mr. Schwartz was appointed as Chief
Financial Officer effective May 23, 2005. Prior to that Mr. Schwartz has served
in various consulting positions involving organizational development, corporate
compliance, legal affairs and finance for ESW and it's wholly owned subsidiary
ESW Canada, Inc. Mr. Schwartz served as a Senior Vice President of ESW Canada,
and Chief Financial Officer, during various periods from February 2001 to
February 2003 and currently from September 2004 where he directed all financial
affairs of our subsidiary including financial planning, tax, treasury and risk
management. Prior to his association with ESW and its subsidiary, Mr. Schwartz
consulted for several companies in different industries including Identicam
Systems Canada Ltd., which was recently acquired under the GE Infrastructure
security group of companies. He was President and strategic partner of Empereau
Manufacturing, for over 18 years, a manufacturing company supplying products to
the commercial specification and construction industry as well as government
procurement. Mr. Schwartz graduated on the dean's honor roll from York
University where he received a Bachelor of Arts Degree in Economics and
Mathematics.

EXECUTIVE COMPENSATION

The following table sets forth the compensation for each of the last three (3)
fiscal years earned by the Chief Executive Officer and each of the most highly
compensated executive officers (the "Named Executives").

Long Term Compensation
Annual Compensation Awards

- --------------------- ------------- ------------ ------------ ------------- ------------ ------------- -------------
Name and principal Year Salary Bonus Other Stock Securities Underlying
position ($) ($) annual award(s) Options/SARs Securities
compensation ($) (#) Options
($)
- --------------------- ------------- ------------ ------------ ------------- ------------ ------------- -------------

David Johnson (1) 2004 $150,000 $3,125 $17,538 600,000
Director, Chief 2003 $72,000
Executive Officer, 2002 $72,000 150,000
President and
Acting Chief
Financial Officer
- --------------------- ------------- ------------ ------------ ------------- ------------ ------------- -------------

- --------------------- ------------- ------------ ------------ ------------- ------------ ------------- -------------
Robert R. Marino (2) 2004 $150,000 $3,125 $7,325 150,000
2003 $75,000 $300 150,000
2002 $75,000
- --------------------- ------------- ------------ ------------ ------------- ------------ ------------- -------------

- --------------------- ------------- ------------ ------------ ------------- ------------ ------------- -------------
Bengt Odner (3) 2004 850,000
2003 50,000
2002
- --------------------- ------------- ------------ ------------ ------------- ------------ ------------- -------------

<FN>

(1) Mr. Johnson initially received consulting fees. He subsequently became a
full time employee of the Company's wholly owned subsidiary, ESW Canada, Inc.
and was paid at the annual rate of $72,000. He also received options for 150,000
shares from the Company's 2002 Stock Option Plan ratified in August 2003 with a
per share exercise price of $0.27 (fair market value at the date of grant). The
options expire ten years from the date of issuance and vest over three years. In
2001 Mr. Johnson received 350,000 options at a per share exercise price of $0.50
of which 100,000 lapsed. In August 2004, Mr. Johnson also received options for
600,000 shares with a per share exercise price of $0.50 (fair-market value on
the date of grant). The options expire five years from issuance.

(2) Prior to becoming a member of the Company's Board of Directors and an
Executive Officer, Mr. Marino had been issued certain restricted shares of
common stock and options from the Company in connection with the sale of certain
assets acquired by the Company. In January 2001, Mr. Marino received a total of
1,000,000 restricted shares of common stock. Additionally, he was granted
500,000 contingent options exercisable at $0.01 per share that have been
exercised. Prior to 2002, Mr. Marino served as a consultant to the Company under
a consulting agreement, which provided for annual compensation of $75,000 and
allowed Mr. Marino to acquire 500,000 shares of common stock at $0.01 per share.
In fiscal 2002, Mr. Marino became a full time employee of the Company's
subsidiary, ESW America, Inc. and continues to be paid compensation at the
current rate of $150,000 per annum. Mr. Marino also received options for 150,000
shares from the Company's 2002 Stock Option Plan ratified in August 2003 with a
per share exercise price of $0.27 (fair market value at the date of grant). The
options expire ten years from the date of issuance and vest over three years. In
August 2004, Mr. Marino was granted options for 150,000 shares with a per share
exercise price of $0.50. (fair-market value on the date of grant). The options
expire five years from issuance. Mr. Marino elected not to stand for re-election
to the Company's Board of Directors at the Company's annual meeting held June
23, 2005. Concurrent with the annual meeting, Mr. Marino resigned his position
as an executive officer of the Company. Mr. Marino does not have any disputes or
disagreements with the Company and its business practices or policy.

(3) Mr. Odner, a prior consultant and officer and current Director of the
Company previously received reimbursement ranging from $6,000 to $8,500 monthly
for verified expenses incurred on behalf of the Company. He also was granted
options for 50,000 shares from the Company's 2002 Stock Option Plan ratified in
August 2003 with a per share exercise price of $0.27 (fair market value at the
date of grant). The options expire ten years from the date of issuance and vest
over three years. In August 2004, Mr. Odner was granted options for 850,000
shares of common stock with a per share exercise price of $0.50. (fair-market
value on the date of grant). The options expire five years from issuance.
</FN>

The foregoing table does not include the Company's former Chief Executive
Officer and President Mr. John Donohoe who resigned from his position as Chief
Executive Officer, President, Interim Chief Financial Officer and as a member of
the Company's Board of Directors on April 30, 2004. Upon Mr. Donohoe's
resignation, any options that he was not vested in lapsed. Mr. Donohoe resigned
from his positions without any dispute or disagreement with the Company and its
business practices or policies. Mr Donohoe received compensation of $75,240 in
2004. He entered into an employment contract with the Company as of September
10, 2003; which, in addition to salary and bonus, provided for the issuance of
2,000,000 stock options with an exercise price of $0.66 (110% of the fair-market
value on the date of grant) and vested 1/3 on the effective date, 1/3 on the
first anniversary of the effective date of the agreement and the balance on the
second anniversary with said options expiring five years from the date of award,
and 500,000 incentive stock options with an exercise price of $0.66 which vest
only upon the Company achieving two consecutive quarters of at least $50,000
pre-tax profit during the term of the agreement. Mr. Donohue also was granted
options for 150,000 shares from the Company's 2002 Stock Option Plan with an
exercise price of $0.27. The options granted under the Company's 2002 Stock
Option Plan expire ten years from the date of issuance and vest over three
years. Of the preceding options, only 666,667 options exercisable at $0.66 are
currently vested, the balance have lapsed or have been cancelled with the
resignation of Mr. Donohoe. In addition, in May, 2004, the Company awarded
50,000 options to Mr. Donohoe to purchase 50,000 shares of common stock at $0.45
per share (fair market value on the date of grant) for consulting services
subsequent to his resignation.

EMPLOYMENT AGREEMENTS

Effective September 10, 2003, the Company entered into Employment Agreements
with Robert R. Marino, Vice President and Technical Director of Research and
Development and David J. Johnson, Senior Vice President of Sales and Business
Development of the Company for a period of two (2) years and twenty (20) days
from the effective date. Messrs. Marino and Johnson were paid a base salary of
$150,000 in accordance with the Company's payroll practices. Additionally,
Messrs. Marino and Johnson are entitled to a vehicle allowance of $6,000
annually. Mr. Johnson was appointed interim President and Chief Executive
Officer in May 2004, and was subsequently appointed President, Chief Executive
Officer, and acting Chief Financial Officer in December 2004.

APPOINTMENT/ RESIGNATION OF OFFICERS AND DIRECTORS

Effective the close of business April 30, 2004, John A. Donohoe, Jr. resigned
from his position as Chief Executive Officer, President, Interim Chief Financial
Officer and as a member of the Company's Board of Directors to pursue other
business opportunities. Mr. Donohoe resigned from his positions without any
dispute or disagreement with the Company and its business practices or policies.

On May 3, 2004 the Company appointed David J. Johnson as its Interim President
and Chief Executive Officer and Nitin M. Amersey as its Interim Chairman of its
Board of Directors. Both appointments were effective May 1, 2004. Subsequently
in December 2004, Mr. Johnson was appointed President, Chief Executive Officer
and acting Chief Financial Officer and Mr. Amersey was appointed Chairman of the
Board.

On July 12, 2004 Messrs. Barry Gross and William Sifer tendered their
resignations from the Board of Directors. Neither Mr. Gross nor Mr. Sifer had
any disputes or disagreements with the Company and its business practices or
policies.

On May 23, 2005 Mr. Joey Schwartz was appointed Chief Financial Officer of the
Company and Mr. Stan Kolaric was appointed Chief Operating Officer of the
Company.

Mr. Robert Marino elected not to stand for election as a member at the annual
meeting of shareholders on June 23, 2005. Concurrent with the annual meeting,
Mr. Marino resigned as an executive officer of ESW without dispute or
disagreement with the Company and its business practices.

OPTION GRANTS DURING FISCAL 2004

In May, 2004, the Company awarded 50,000 options to its former Chairman,
President and Chief Executive Officer to purchase 50,000 shares of common stock
at $0.45 per share (fair market value on the date of grant) for consulting
services subsequent to his resignation as a director and executive officer of
the Company.

In August 2004 the board of directors approved the aggregate award of 1,750,000
stock options to two (2) executive officer/directors and two (2) outside
directors. The options had immediate vesting with an exercise price of $0.50 per
share (fair market value on date of grant) and expire five years from the date
of grant.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

- --------------------------------------------------------------------------------------
NAME NUMBER OF PERCENT OF TOTAL EXERCISE OR EXPIRATION DATE
SECURITIES OPTIONS/SAR'S BASE PRICE
UNDERLIYING GRANTED TO ($/SH)
OPTIONS/SAR'S EMPLOYEES IN
GRANTED (#) FISCAL YEAR
- -----------------------------------------------------------------------------------

David J. Johnson 600,000 22.64% $0.50 August 11, 2009
Robert R. Marino 150,000 5.66% $0.50 August 11, 2009
Bengt Odner 850,000 32.07% $0.50 August 11, 2009
Nitin Amersey 150,000 5.66% $0.50 August 11, 2009
John Donohoe* 50,000 1.88% $0.50 August 20, 2009
- --------------------------------------------------------------------------------------

<FN>

* Denotes options granted to Mr. Donohoe as a consultant following his
resignation as an officer and director.

</FN>

OPTION EXERCISES AND HOLDINGS

The following table sets forth information concerning the exercise of options
during the last fiscal year and unexercised options held as of the end of the
fiscal year with respect to each of the named directors and executives:

Aggregate Option Exercises In Last Fiscal Year And Fiscal Year End Option Values

NUMBER OF VALUE OF
AQUIRED VALUE SHARES UNEXERCISED
ON REALIZED UNDERLYING IN-THE-MONEY
EXERCISE OPTIONS OPTIONS
# $ AT DECEMBER 31, 2004 AT DECEMBER 31, 2004 (1)
EXERCISABLE/UNEXERCISIBLE EXERCISABLE/UNEXERCISIBLE
- ----------------------------------------------------------------------------------------------------------------
EXERCISABLE/ UNEXERCISABLE
- --------------------------

David Johnson -- -- 900,000 100,000 $ 9,500 $19,000
Bengt Odner -- -- 866,667 33,332 $ 3,166 $ 6,333
Nitin Amersey -- -- 166,667 33,332 $ 3,166 $ 6,333
Robert Marino -- -- 200,000 100,000 $ 9,500 $19,000
William Sifer* -- -- 50,000 -- $ 9,500 --
Barry Gross* -- -- 50,000 -- $ 9,500 --
John Donohoe* -- -- 716,667 -- $ 500 --

* DENOTES A FORMER DIRECTOR OR EXECUTIVE OFFICER WHO RESIGNED DURING
FISCAL YEAR 2004

(1) Calculated by multiplying the number of shares underlying options by the
difference between the closing price of the Common Stock as quoted on the
Over-The-Counter Bulletin Board on December 31, 2004 and the exercise price of
the options.

REMUNERATION OF NON-MANAGEMENT DIRECTORS

The Company does not presently compensate its directors for their attendance at
meetings of the Board of Directors, however, non-management directors are
reimbursed for verifiable expenses incurred during the course of service to the
board and/or Company provided said expenses are approved by the Company.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, to the best knowledge of the Company, as of
December 14, 2005, certain information with respect to (1) beneficial owners of
more than five percent (5%) of the outstanding common stock of the Company, (2)
beneficial ownership of shares of the Company's common stock by each director
and named executive, (3) beneficial ownership of shares of common stock of the
Company by all directors and officers as a group.

Unless otherwise noted, all shares are beneficially owned and the sole voting
and investment power is held by the persons/entities indicated.

Based upon the aggregate of all shares of common stock issued and outstanding as
of December 14, 2005 in addition to shares issuable upon exercise of options or
warrants currently exercisable or becoming exercisable within 60 days and which
are held by the individuals named on the table.

SHARES OF TOTAL % OF
COMMON OPTIONS/ BENEFICIAL COMMON STOCK
NAME OF BENEFICIAL OWNER STOCK OTHER OWNERSHIP(1) OUTSTANDING
- ---------------------------------------------------------------------------------------------------

Nitin M. Amersey, Chairman 155,000 183,333(2) 338,333 0.61%
335 Connie Crescent
Concord, ON L4K 5R2

David Johnson, Director -- 950,000(3) 950,000 1.71%
335 Connie Crescent
Concord, ON L4K 5R2

Bengt Odner, Director 4,259,899 4,596,568 8,856,467(4) 14.84%
335 Connie Crescent
Concord, ON L4K 5R2

Joey Schwartz, 10,000 400,000(14) 410,000 0.81%
Chief Financial Officer and
Director
335 Connie Crescent
Concord, ON L4K 5R2

Stan Kolaric 20,000 150,000(15) 170,000 0.34%
Chief Operation Officer and
Director
335 Connie Crescent
Concord, ON L4K 5R2

Black Family 1997 Trust (5) 1,614,286 5,000,000(13) 6,614,286 10.98%
1301 Avenue of the Americas
New York, NY 10019

Leon D. Black (6) 178,571 7,900,000 8,078,571 13.3%
1301 Avenue of the Americas
New York, NY 10019

Leon D. Black Trust UAD (8) 517,648 333,823(7) 851,470 1.6%
11/30/92 FBO Alexander Black
1301 Avenue of the Americas
New York, NY 10019

Leon D. Black Trust UAD (9) 517,648 333,823(7) 851,470 1.6%
11/30/92 FBO Benjamin Black
1301 Avenue of the Americas
New York, NY 10019

Leon D. Black Trust UAD (10) 517,648 333,823(7) 851,470 1.6%
11/30/92 FBO Joshua Black
1301 Avenue of the Americas
New York, NY 10019

Leon D. Black Trust UAD (11) 517,648 333,823(7) 851,470 1.6%
11/30/92 FBO Victoria Black
1301 Avenue of the Americas
New York, NY 10019

Robert C. Fanch(12) 2,924,789 3,768,235 6,693,024 11.35%

All current directors and 4,444,899 6,279,901 10,724,800 17.44%
executive officers as a group
(five persons)

(1) On the basis of 55,219,001 shares of common stock outstanding, plus, in the
case of any person deemed to own shares of common stock as a result of owning
options, warrants, or rights to purchase common stock exercisable within 60 days
of December 14, 2005.

(2) Includes options to purchase 33,333 shares of common stock at $0.27 per
share expiring August 6, 2013 and options to purchase 150,000 shares of common
stock at $0.50 per share expiring August 11, 2009.

(3) Includes 250,000 options exercisable at $0.50, which expire May 1, 2006.
Also includes options to purchase 100,000 shares of common stock at $0.27 per
share expiring August 6, 2013. Also includes options to purchase 600,000 shares
of common stock at $0.50 per share expiring August 11, 2009

(4) Mr. Bengt George Odner is a director of Environmental Solutions Worldwide,
Inc. as well as AB Odnia and the beneficiary of a trust that controls Ledelle
Holdings Limited. Includes 2,096,429 shares of common stock, 2,500,000 shares of
common stock underlying a convertible debenture and 625,000 shares of common
stock underlying warrants directly beneficially owned by AB Odnia. Also includes
517,000 shares of common stock directly owned by Ledelle Holdings Limited, a
corporation organized under the Laws of Cyprus. Further includes: (i) 1,646,470
shares of common stock; (ii) 883,333 shares of common stock underlying options
and (iii) 588,235 shares of common stock underlying warrants owned directly by
Bengt George Odner.

(5) Includes shares and warrants owned by Leon D. Black, Leon D. Black Trust UAD
11/30/92 FBO Alexander Black, Leon D. Black Trust UAD 11/30/92 FBO Benjamin
Black, Leon D. Black Trust UAD 11/30/92 FBO Joshua Black and Leon D. Black Trust
UAD 11/30/92 FBO Victoria Black for which beneficial ownership is disclaimed.

(6) Includes shares and warrants owned by Black Family 1997 Trust, Leon D. Black
Trust UAD 11/30/92 FBO Alexander Black, Leon D. Black Trust UAD 11/30/92 FBO
Benjamin Black, Leon D. Black Trust UAD 11/30/92 FBO Joshua Black and Leon D.
Black Trust UAD 11/30/92 FBO Victoria Black which the beneficial ownership is
disclaimed.

(7) Warrants to purchase 333,823 shares of common stock.

(8) Excludes shares and warrants owned by Black Family 1997 Trust, Leon D.
Black, Leon D. Black Trust UAD 11/30/92 FBO Benjamin Black, Leon D. Black Trust
UAD 11/30/92 FBO Joshua Black and Leon D. Black Trust UAD 11/30/92 FBO Victoria
Black for which beneficial ownership is disclaimed.

(9) Excludes shares and warrants owned by Black Family 1997 Trust, Leon D.
Black, Leon D. Black Trust UAD 11/30/92 FBO Alexander Black, Leon D. Black Trust
UAD 11/30/92 FBO Joshua Black and Leon D. Black Trust UAD 11/30/92 FBO Victoria
Black for which beneficial ownership is disclaimed.

(10) Excludes shares and warrants owned by Black Family 1997 Trust, Leon D.
Black, Leon D. Black Trust UAD 11/30/92 FBO Alexander Black, Leon D. Black Trust
UAD 11/30/92 FBO Benjamin Black, Leon D. Black Trust UAD 11/30/92 FBO Victoria
Black for which beneficial ownership is disclaimed.

(11) Excludes shares and warrants owned by Black Family 1997 Trust, Leon D.
Black, Leon D. Black Trust UAD 11/30/92 FBO Alexander Black, Leon D. Black Trust
UAD 11/30/92 FBO Benjamin Black and Leon D. Black Trust UAD 11/30/92 FBO Joshua
Black for which beneficial ownership is disclaimed.

(12) Includes (i) 750,000 shares of Common Stock beneficially owned by Robert C.
Fanch., (ii) 2,174,789 shares of Common Stock directly beneficially owned by
Robert C. Fanch Revocable Trust ("Trust"), a trust of which Robert C. Fanch is
the trustee and beneficiary, (iii) 1,768,235 shares of Common Stock issuable
upon the exercise of warrants directly beneficially owned by Trust and(iv)
2,000,000 shares of Common Stock issuable upon conversion of convertible
debentures directly beneficially owned by the Trust.

(13) Includes 1,000,000 shares of Common Stock issuable upon the exercise of
warrants, and 4,000,000 shares of Common Stock issuable upon conversion of
convertible debentures.

(14) Includes 250,000 options exercisable at $0.50, which expire May 4, 2006 and
150,000 options exercisable at $0.50 which expire December 1, 2009.

(15) Includes 150,000 options exercisable at $0.50 which expire December 1,
2009.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. John A. Donohoe, Jr., the Company's former Chairman, Chief Executive
Officer, and President, is the owner of JADCO Enterprises, Inc., a personal
holding company. JADCO, in turn, owns Sterling Limousine and Sterling
Specialties, which have provided services to the Company during fiscal years
2003 and 2004 During the fiscal years ended December 31, 2003 and 2004, the
Company paid $29,288 and $8,741 respectively to JADCO for office and secretarial
services and $4,124 and $400 respectively to Sterling Limousine for
transportation services provided on behalf of the Company.

Mr. Bengt G. Odner a member of the Company's Board of Directors was a director
of Crystal Fund Ltd. a Bermuda Mutual Fund until his resignation in January
2003. Crystal Fund holds 625,000 shares of the Company's common stock.
Additionally, Mr. Odner, as an outside Director, receives reimbursement for
expenses incurred on behalf of the Company. Mr. Odner has disclaimed any
beneficial ownership to the shares held by Crystal Fund Ltd.

In August 2004 the Company issued a $1.25 million unsecured subordinated
promissory note to AB Odnia, an entity that is affiliated with Mr. Odner, a
director of the Company. AB Odnia subsequently exchanged its unsecured
subordinated promissory note to a $1.25 million convertible debenture, in
September 2004 as a part of the $6.1 million in convertible debentures issued by
the Company.

As a part of the Company's Unit Private Placement in November, 2002, Mr. Robert
R. Marino, a director at the time, converted $35,000 in monies owed him into
units under the placement whereby each unit had a subscription price of $0.17
with each unit comprised of one share of common stock and one warrant to
purchase a one half a share of common stock at $0.15. Warrants under the Unit
Placement are exercisable in even lots at an aggregate exercise price for two
Warrants of $0.30 for one share of common stock. Warrants are exercisable for a
three-year period and have been extended to April 27, 2006.

In October 2002, Mr. Odner, a current director of the Company and Mr. Donohoe a
former officer and director, converted certain loans and advances, specifically
$204,000 and $200,000 respectively made by them to the Company into units under
the Company's 2002 Unit Private Placement whereby each unit had a subscription
price of $0.17 and each unit is comprised of one share of common stock and one
warrant to purchase a one half share of common stock at $0.15. Warrants under
the Unit Placement are exercisable in even lots at an aggregate exercise price
for two Warrants of $0.30 for one share of common stock. Warrants are
exercisable for a three-year period. Effective October 3, 2005, the Company
extended the expiry date from October 3, 2005 to April 27, 2006.

Also in October 2002, Mr. Barry Gross and Mr. William Sifer, who subsequently
were elected to the Board and assumed membership on the Company's Board from
January 2003 through July, 2004, purchased 220,588 and 236,000 units under the
Company's Unit Private Placement, respectively at the unit subscription price of
$0.17. They received shares and 220,588 and 236,000 warrants respectively to
purchase a one half share of common stock at $0.15. Warrants under the Unit
Placement are exercisable in even lots at an aggregate exercise price for two
Warrants of $0.30 for one share of common stock. Warrants are exercisable for a
three-year period. Effective October 3, 2005, the Company extended the expiry
date for 220,588 warrants from October 3, 2005 to April 27, 2006.

Mr. Amersey the Company's Chairman of the Board is the owner of Langford
Business Services LLC, a company that is party to a sales representative
agreement dated March 15, 2002, with the Company's wholly owned subsidiary, ESW
Canada, Inc. whereby Langford and its subagent, Hudson Engineering Industries
Pvt. Ltd. (Bombay), also owned by Mr. Amersey and his family, serve as ESW
Canada's exclusive representative in India for the sale and after sale support
of certain products of the Company in India. To date, no sales transactions have
taken place under the agreement between ESW Canada and Langford.

DESCRIPTION OF SECURITIES

Common Stock

We have 125,000,000 shares of common stock $.001 par value authorized. Each
holder of common stock is entitled to one vote for each share held of record on
all matters submitted to a vote of the stockholders. The holders of common stock
are not entitled to cumulative voting rights with respect to the election of
directors, and, as a consequence, minority stockholders will not be able to
elect directors on the basis of their votes alone. Holders of common stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefore.

In the event of a liquidation, dissolution or winding up of the company, holders
of our common stock would be entitled to share ratably in all assets remaining
after payment of liabilities and the satisfaction of any liquidation preference
of any then outstanding series of preferred stock. Holders of common stock have
no preemptive rights and no right to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
nonassessable.

As of December 14, 2005, there were 55,219,001 shares of common stock
outstanding held by approximately 276 shareholders of record and approximately
4500 additional shareholders in street name. 13,008,821 shares which are subject
to this registration statement are already included in the shares of common
stock that are issued and outstanding, as of December 14, 2005.

COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.

PLAN OF DISTRIBUTION

ESW is registering the shares of common stock on behalf of the selling security
holders. A selling security holder may sell its shares from time to time by any
method permitted by the Securities Act of 1933. Each selling security holder
will act independently of ESW in making decisions with respect to the timing,
manner and size of each sale.

The shares of our common stock covered by this prospectus will be sold, if at
all, by each of the selling security holders named herein or their respective
pledges, donees, transferees or other successors in interest and not by us.

Each selling security holder may sell the shares of common stock covered by this
prospectus from time to time at market prices prevailing at the time of sale, at
prices related to market prices, at a fixed price or prices subject to change or
at negotiated prices, by a variety of methods including the following:

o in the over-the-counter market or on a national securities exchange
(any of which may include crosses and block transactions);

o in privately-negotiated transactions;

o through broker dealers, who may act as agents or principals, including
through ordinary brokerage transactions and transactions in which
broker solicits purchasers;

o in a block trade in which a broker-dealer will attempt to sell a block
of shares of common stock as agent but may position and resell a
portion of the block as principal to facilitate the transaction;

o through one or more underwriters, dealers and agents, on a firm
commitment or best effort basis, who may receive compensation in the
form of underwriting discounts, concessions or omissions from a seller
and/or the purchasers of the shares for whom they may act as agent;

o through exchange distributions in accordance with applicable rules;

o directly to one or more purchasers;

o through agents;

o through option transactions, forward contracts, equity swaps or other
derivative transactions relating to the securities;

o to cover permissible short sales made of the securities;

o in any combination of the above; and

o in any other lawful manner.

To the extent required, this prospectus may be amended or supplemented from time
to time to describe a specific plan of distribution. In effecting sales,
broker-dealers engaged by a selling security holder may arrange for other
broker-dealers to participate in a resale.

Certain shares may also be sold pursuant to Rule 144. The selling security
holder shall have the sole and absolute discretion not to accept any purchase
offer or make any sale of shares if it deems the purchase price to be
unsatisfactory at any particular time.

The selling security holders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling security
holders and/or the purchasers of shares for whom such broker-dealers may act as
agents or to whom they sell as principal or both, which compensation as to a
particular broker-dealer might be in excess of customary commissions. Market
makers and block purchasers purchasing the shares will do so for their own
account and at their own risk. It is possible that the selling security holders
will attempt to sell shares of common stock in block transactions to market
makers or other purchasers at a price per share which may be below the then
market price. The selling security holders cannot assure that all or any of the
shares offered in this Prospectus will be issued to, or sold by, the selling
security holders. The selling security holders and any brokers, dealers or
agents, upon effecting the sale of any of the shares offered in this Prospectus,
may be deemed "underwriters" as that term is defined under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, or the
rules and regulations under such acts.

As noted above, the selling security holders, alternatively, may sell all or any
part of the shares offered in this prospectus through an underwriter. The
selling security holders have not entered into any agreement with a prospective
underwriter and there is no assurance that any such agreement will be entered
into. If the selling security holders enter into such an agreement or
agreements, the relevant details will be set forth in a supplement or revisions
to this prospectus.

Each selling security holder and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations under
such act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales of
any of the shares by, a selling security holder. Furthermore, under Regulation
M, persons engaged in a distribution of securities are prohibited form
simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of the shares.

We will not receive any of the proceeds from the sale of these shares of common
stock, although we have paid the expenses of preparing this prospectus and the
related registration

We have agreed to indemnify certain selling security holder, and its transferees
or assignees, against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments a selling
security holder and its respective pledgees, donees, transferees or other
successors in interest, may be required to make in respect of such liabilities.

SELLING STOCKHOLDERS

The number of shares set forth in the table for the selling security holders
represents the number of shares of common stock to be offered by each selling
security holder, assuming that all warrants and options are exercised, and
debentures are converted. The actual exercise price of warrants may be subject
to adjustment (See Risk Factors). The actual number of shares of common stock
offered in this prospectus, and included in the registration statement of which
this prospectus is a part, includes such additional number of shares of common
stock as may be issued or issuable upon exercise of related warrants by reason
of any stock split, stock dividend or similar transaction involving the common
stock, in accordance with Rule 416 under the Securities Act of 1933, as amended.

The applicable percentage of ownership listed below is based on 55,219,001
shares of common stock outstanding as of December 14, 2005.

Common Stock Common Stock to be Sold Common Stock Beneficially Owned
Beneficially Owned After Offering*
Prior to Offering
Holder Number Number Number Percent

AB Odnia 5,221,429 3,196,429 (1) 2,025,000 3.50%
Anthony C. Naso 100,000 100,000 (2) -0- -0-
Arthur Sagoskin 44,118 44,118 (3) -0- -0-
Arthur V. Conover, III 15,000 15,000 (4) -0- -0-
Arvind Peehal 15,000 15,000 (5) -0- -0-
Barry Gross 110,294 110,294 (6) -0- -0-
Bengt G. Odner 3,635,038 2,614,705 (7) 1,020,333 1.76%
Black Family 1997 Trust 6,614,286 6,614,286 (8) -0- -0-
David J. Johnson 600,000 600,000 (9) -0- -0-
Duane Gulick 1,430,881 100,000 (10) 1,330,881 2.41%
Ernie L. Green 150,000 150,000 (11) -0- -0-
Financial Trust Company Inc. 4,052,941 4,052,941 (12) -0- -0-
Frank Haas 324,750 250,000 (13) 74,750 0.14%
Jack T. and Judith E. Pottle Trust 895,428 558,370 (14) 337,058 0.61%
Joseph Baratta 15,000 15,000 (15) -0- -0-
Joe Marino 25,000 25,000 (16) -0- -0-
John A. Donohoe, Jr. 1,316,667 1,316,667 (17) -0- -0-

John J Hannan 1,278,571 1,278,571 (18) -0- -0-
Leon D. Black 1,578,571 1,578,571 (19) -0- -0-
Leon D. Black Trust UAD 11/30/92 851,471 851,471 (20) -0- -0-
FBO Alexander Black
Leon D. Black Trust UAD 11/30/92 851,471 851,471 (20) -0- -0-
FBO Benjamin Black
Leon D. Black Trust UAD 11/30/92 851,471 851,471 (20) -0- -0-
FBO Joshua Black
Leon D. Black Trust UAD 11/30/92 851,471 851,471 (20) -0- -0-
FBO Victoria Black
Linda Smith 100,000 100,000 (21) -0- -0-
LMWW Cust. FBO John S. Newsome 255,714 255,714 (22) -0- -0-
Traditional IRA
Louis E. Edmondson, Trust Dated 2,026,470 2,026,470 (23) -0- -0-
July 26th 2000
Louis E. Edmondson 2,550,488 153,429 (24) 2,397,059 4.37%
Michael J. Doyle 477,286 102,286 (25) 375,000 0.68%
Nitin M. Amersey 305,000 150,000 (26) 155,000 0.28%
Rae Cowan 344,118 344,118 (27) -0- -0-
Richard Ressler 1,278,571 1,278,571 (28) -0- -0-
Robert C. Fanch 750,000 750,000 (29) -0- -0-
Robert C. Fanch Revocable Trust 5,943,024 5,943,024 (30) -0- -0-
Robert J. and Linda M. Smith 450,000 450,000 (31) -0- -0-
Robert R. Marino 1,358,823 1,358,823 (32) -0- -0-
Sheldon Sagoskin 29,412 29,412 (33) -0- -0-
Teena D'Alessio 15,000 15,000 (34) -0- -0-
Tom Ferello 15,000 15,000 (34) -0- -0-

<FN>

* Assumes the exercise of all warrants, options and /or convertible debentures,
and the sale of all shares offered by the selling security holder.

(1) Includes 2,500,000 shares of common stock underlying a $1,250,000
convertible debenture. The Debenture is for a term of three (3) years and issued
as of September 13, 2004 and is convertible into shares of the Company's common
stock at the option of the holder by dividing the principal amount of the
Debenture to be converted by $0.50. Also includes 625,000 shares of common stock
underlying 625,000 warrants issued in connection with the September 2004 PIPE.
Each warrant is exercisable for one (1) share of common stock at $0.85 per
share. These warrants expire on September 13, 2007. Also includes 71,429 shares
of common stock issued for interest earned on a Debenture and a good faith
estimate of 142,858 additional shares that may be issued for interest earned on
the debenture.

(2) Includes 100,000 shares of common stock subscribed to in the Company's 2002
unit private placement. These shares may be eligible for resale by selling
security holder pursuant to Rule 144 of the Securities Act.

(3) Includes 44,118 shares of common stock underlying 88,235 warrants. Two
warrants are exercisable at the aggregate price of $0.30 for one (1) share of
common stock. Warrants are only exercisable in even lots. These warrants expire
on April 27, 2006.

(4) Includes 15,000 options to purchase 15,000 shares of common stock at $0.50
per share expiring August 11, 2007.

(5) Includes 15,000 options to purchase 15,000 shares of common stock at $0.50
per share expiring August 11, 2007.

(6) Includes 110,294 shares of common stock underlying 220,588 warrants. Two
warrants are exercisable at the aggregate price of $0.30 for one (1) share of
common stock. Warrants are only exercisable in even lots. These warrants expire
on April 27, 2006.

(7) Includes 1,176,470 shares of common stock subscribed to in the Company's
2002 unit private placement. These shares may be eligible for resale by selling
security holder pursuant to Rule 144 of the Securities Act. Also includes
588,235 shares of common stock underlying 1,176,470 warrants. Two warrants are
exercisable at the aggregate price of $0.30 for one (1) share of common stock.
Warrants are only exercisable in even lots. These warrants expire on April 27,
2006. Also includes 850,000 options to purchase 850,000 shares of common stock
at $0.50 per share expiring August 11, 2009.

(8) Includes 1,500,000 shares of common stock subscribed to at $0.40 per share
in the Company's 2001 private placement. Shares may be eligible for resale by
selling security holder pursuant to Rule 144 of the Securities Act. Also
includes 4,000,000 shares of common stock underlying a $2,000,000 convertible
debenture. The Debenture is for a term of three (3) years and issued as of
September 13, 2004 and is convertible into shares of the Company's common stock
at the option of the holder by dividing the principal amount of the Debenture to
be converted by $0.50. Also includes 1,000,000 shares of common stock underlying
1,000,000 warrants issued in connection with the September 2004 PIPE. Each
warrant is exercisable for one (1) share of common stock at $0.85 per share.
These warrants expire on September 13, 2007. Also includes 114,286 shares of
common stock issued for interest earned on a Debenture and a good faith
estimate of 228,572 additional shares that may be issued for interest earned on
the debenture.

(9) Includes 600,000 options to purchase 600,000 shares of common stock at $0.50
per share expiring August 11, 2009.

(10) Includes 100,000 options to purchase 100,000 shares of common stock at
$0.50 per share expiring August 11, 2007.

(11) Includes 150,000 shares of common stock subscribed to in the Company's 2002
unit private placement. These shares may be eligible for resale by selling
security holder pursuant to Rule 144 of the Securities Act.

(12) Includes 2,352,941 shares of common stock, issued in connection with the
spring 2005 PIPE. Also includes 1,300,000 shares of common stock underlying
1,300,000 warrants exercisable at $0.90 per share, includes 200,000 shares of
common stock underlying 200,000 warrants at $2.00 per share and includes 200,000
shares of common stock underlying 200,000 warrants at $3.00 per share, issued in
connection with the Spring 2005 PIPE. Each warrant is exercisable for one (1)
share of common stock. These warrants expire on April 21, 2008.

(13) Includes 250,000 options to purchase 250,000 shares of common stock at
$0.50 per share expiring August 11, 2007.

(14) Includes 73,529 shares of common stock underlying 147,058 warrants. Two
warrants are exercisable at the aggregate price of $0.30 for one (1) share of
common stock. Warrants are only exercisable in even lots. These warrants expire
on April 27, 2006. Also includes 300,000 shares of common stock underlying a
$150,000 convertible debenture. The Debenture is for a term of three (3) years
and issued as of September 13, 2004 and is convertible into shares of the
Company's common stock at the option of the holder by dividing the principal
amount of the Debenture to be converted by $0.50. Also includes 75,000 shares of
common stock underlying 75,000 warrants issued in connection with the September
2004 PIPE. Each warrant is exercisable for one (1) share of common stock at
$0.85 per share. These warrants expire on September 13, 2007. Also includes
8,571 shares of common stock issued for interest earned on a Debenture and
a good faith estimate of 17,142 additional shares that may be issued for
interest earned on the debenture. Also includes 58,824 shares of common stock,
issued in connection with the spring 2005 PIPE. Also includes 32,500 shares of
common stock underlying 32,500 warrants exercisable at $0.90 per share, includes
5,000 shares of common stock underlying 5,000 warrants at $2.00 per share and
includes 5,000 shares of common stock underlying 5,000 warrants at $3.00 per
share, issued in connection with the Spring 2005 PIPE. Each warrant is
exercisable for one (1) share of common stock. These warrants expire on July 5,
2008.

(15) Includes 15,000 options to purchase 15,000 shares of common stock at $0.50
per share expiring August 11, 2007.

(16) Includes 25,000 options to purchase 25,000 shares of common stock at $0.50
per share expiring August 11, 2007.

(17) Includes 600,000 shares of common stock underlying 1,200,000 warrants. Two
warrants are exercisable at the aggregate price of $0.30 for one (1) share of
common stock. Warrants are only exercisable in even lots. These warrants expire
on April 27, 2006. Also includes 666,667 options to purchase 666,667 shares of
common stock at $0.66 per share expiring September 10, 2008. Also includes
50,000 options to purchase 50,000 shares of common stock at $0.45 per share
expiring April 20, 2009.

(18) Includes 1,000,000 shares of common stock underlying a $500,000 convertible
debenture. The Debenture is for a term of three (3) years and issued as of
September 13, 2004 and is convertible into shares of the Company's common stock
at the option of the holder by dividing the principal amount of the Debenture to
be converted by $0.50. Also includes 250,000 shares of common stock underlying
250,000 warrants issued in connection with the September 2004 PIPE. Each warrant
is exercisable for one (1) share of common stock at $0.85 per share. These
warrants expire on September 13, 2007. Also includes 28,571 shares of common
stock issued for interest earned on a Debenture and a good faith estimate of
57,142 additional shares that may be issued for interest earned on the
debenture.

(19) Includes 150,000 shares of common stock subscribed to in the Company's
October 10, 2000 unit private placement. Shares may be eligible for resale by
selling security holder pursuant to Rule 144 of the Securities Act. Also
includes 150,000 shares of common stock underlying warrants issued October 10,
2000, in the Company's unit private placement. These warrants are currently
exercisable at $0.17 per warrant share and expire April 27, 2006. Also includes
1,000,000 shares of common stock underlying a $500,000 convertible debenture.
The Debenture is for a term of three (3) years and issued as of September 13,
2004 and is convertible into shares of the Company's common stock at the option
of the holder by dividing the principal amount of the Debenture to be converted
by $0.50. Also includes 250,000 shares of common stock underlying 250,000
warrants issued in connection with the September 2004 PIPE. Each warrant is
exercisable for one (1) share of common stock at $0.85 per share. These warrants
expire on September 13, 2007. Also includes 28,571 shares of common stock
issued for interest earned on a Debenture and a good faith estimate of 57,142
additional shares that may be issued for interest earned on the debenture.

(20) Includes 150,000 shares of common stock subscribed to in the Company's
October 10, 2000 unit private placement. Shares may be eligible for resale by
selling security holder pursuant to Rule 144 of the Securities Act. Also
includes 150,000 shares of common stock underlying warrants issued October 10,
2000, in the Company's unit private placement. These warrants are currently
exercisable at $0.17 per warrant share and expire April 27, 2006. Also includes
367,647 shares of common stock subscribed to in the Company's 2002 unit private
placement. These shares may be eligible for resale by selling security holder
pursuant to Rule 144 of the Securities Act. Also includes 183,824 shares of
common stock underlying 367,647 warrants. Two warrants are exercisable at the
aggregate price of $0.30 for one (1) share of common stock. Warrants are only
exercisable in even lots. These warrants expire on April 27, 2006.

(21) Includes 100,000 options to purchase 100,000 shares of common stock at
$0.50 per share expiring August 11, 2007.

(22) Includes 200,000 shares of common stock underlying a $100,000 convertible
debenture. The Debenture is for a term of three (3) years and issued as of
September 13, 2004 and is convertible into shares of the Company's common stock
at the option of the holder by dividing the principal amount of the Debenture to
be converted by $0.50. Also includes 50,000 shares of common stock underlying
50,000 warrants issued in connection with the September 2004 PIPE. Each warrant
is exercisable for one (1) share of common stock at $0.85 per share. These
warrants expire on September 13, 2007. Also includes 5,714 shares of common
stock issued for interest earned on a Debenture and a good faith estimate of
11,428 additional shares that may be issued for interest earned on the
debenture.

(23) Includes 1,176,470 shares of common stock, issued in connection with the
spring 2005 PIPE. Also Includes 650,000 shares of common stock underlying
650,000 warrants exercisable at $0.90 per share, includes 100,000 shares of
common stock underlying 100,000 warrants at $2.00 per share and includes 100,000
shares of common stock underlying 100,000 warrants at $3.00 per share, issued in
connection with the Spring 2005 PIPE. Each warrant is exercisable for one (1)
share of common stock. These warrants expire on July 5, 2008.

(24) Includes 120,000 shares of common stock underlying a $60,000 convertible
debenture. The Debenture is for a term of three (3) years and issued as of
September 13, 2004 and is convertible into shares of the Company's common stock
at the option of the holder by dividing the principal amount of the Debenture to
be converted by $0.50. Also includes 30,000 shares of common stock underlying
30,000 warrants issued in connection with the September 2004 PIPE. Each warrant
is exercisable for one (1) share of common stock at $0.85 per share. These
warrants expire on September 13, 2007. Also includes 3,429 shares of common
stock issued for interest earned on a Debenture and a good faith estimate of
6,858 additional shares that may be issued for interest earned on the debenture.

(25) Includes 80,000 shares of common stock underlying a $40,000 convertible
debenture. The Debenture is for a term of three (3) years and issued as of
September 13, 2004 and is convertible into shares of the Company's common stock
at the option of the holder by dividing the principal amount of the Debenture to
be converted by $0.50. Also includes 20,000 shares of common stock underlying
20,000 warrants issued in connection with the September 2004 PIPE. Each warrant
is exercisable for one (1) share of common stock at $0.85 per share. These
warrants expire on September 13, 2007. Also includes 2,286 shares of common
stock issued for interest earned on a Debenture and a good faith estimate of
4,572 additional shares that may be issued for interest earned on the debenture.

(26) Includes 150,000 options to purchase 150,000 shares of common stock at
$0.50 per share expiring August 11, 2009.

(27) Includes 344,118 shares of common stock underlying 688,235 warrants. Two
warrants are exercisable at the aggregate price of $0.30 for one (1) share of
common stock. Warrants are only exercisable in even lots. These warrants expire
on March 31, 2006.

(28) Includes 1,000,000 shares of common stock underlying a $500,000 convertible
debenture. The Debenture is for a term of three (3) years and issued as of
September 13, 2004 and is convertible into shares of the Company's common stock
at the option of the holder by dividing the principal amount of the Debenture to
be converted by $0.50. Also includes 250,000 shares of common stock underlying
250,000 warrants issued in connection with the September 2004 PIPE. Each warrant
is exercisable for one (1) share of common stock at $0.85 per share. These
warrants expire on September 13, 2007. Also includes 28,571 shares of common
stock issued for interest earned on a Debenture and a good faith estimate of
57,142 additional shares that may be issued for interest earned on the
debenture.

(29) Includes 750,000 shares of common stock subscribed to at $0.40 per share in
the Company's 2001 private placement. Shares may be eligible for resale by
selling security holder pursuant to Rule 144 of the Securities Act.

(30) Includes 1,176,470 shares of common stock subscribed to in the Company's
2002 unit private placement. These shares may be eligible for resale by selling
security holder pursuant to Rule 144 of the Securities Act. Also includes
588,235 shares of common stock underlying 1,176,470 warrants. Two warrants are
exercisable at the aggregate price of $0.30 for one (1) share of common stock.
Warrants are only exercisable in even lots. These warrants expire on April 27,
2006. Also includes 2,000,000 shares of common stock underlying a $1,000,000
convertible debenture. The Debenture is for a term of three (3) years and issued
as of September 13, 2004 and is convertible into shares of the Company's common
stock at the option of the holder by dividing the principal amount of the
Debenture to be converted by $0.50. Also includes 500,000 shares of common stock
underlying 500,000 warrants issued in connection with the September 2004 PIPE.
Each warrant is exercisable for one (1) share of common stock at $0.85 per
share. These warrants expire on September 13, 2007. Also includes 57,143 shares
of common stock issued for interest earned on a Debenture and a good faith
estimate of 114,286 additional shares that may be issued for interest earned on
the debenture. Also includes 941,176 shares of common stock, issued in
connection with the spring 2005 PIPE. Also includes 520,000 shares of common
stock underlying 520,000 warrants exercisable at $0.90 per share, includes
80,000 shares of common stock underlying 80,000 warrants at $2.00 per share and
includes 80,000 shares of common stock underlying 80,000 warrants at $3.00 per
share, issued in connection with the Spring 2005 PIPE. Each warrant is
exercisable for one (1) share of common stock. These warrants expire on July 5,
2008.

(31) Includes 300,000 shares of common stock subscribed to in the Company's 2002
unit private placement. These shares may be eligible for resale by selling
security holder pursuant to Rule 144 of the Securities Act. Also includes
150,000 shares of common stock underlying 300,000 warrants. Two warrants are
exercisable at the aggregate price of $0.30 for one (1) share of common stock.
Warrants are only exercisable in even lots. These warrants expire on April 27,
2006.

(32) Includes 900,000 shares of common stock and also includes 205,882 shares of
common stock subscribed to in the Company's 2002 unit private placement. All
these shares may be eligible for resale by selling security holder pursuant to
Rule 144 of the Securities Act. Also includes 102,941 shares of common stock
underlying 205,882 warrants. Two warrants are exercisable at the aggregate price
of $0.30 for one (1) share of common stock. Warrants are only exercisable in
even lots. These warrants expire on April 27, 2006. Also includes 150,000
options to purchase 150,000 shares of common stock at $0.50 per share expiring
August 11, 2009.

(33) Includes 29,412 shares of common stock underlying 58,824 warrants. Two
warrants are exercisable at the aggregate price of $0.30 for one (1) share of
common stock. Warrants are only exercisable in even lots. These warrants expire
on April 27, 2006.

(34) Includes 15,000 options to purchase 15,000 shares of common stock at $0.50
per share expiring August 11, 2007.
</FN>

SUBSEQUENT EVENT

On November 7, 2005, we elected to issue shares of our common stock as payment
of interest earned on our 4% convertible debentures issued in September 2004. A
total of 348,571 shares of common stock were issued to 10 debenture holders per
the debentures.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

On October 20, 2004, our former certified accountants, Goldstein and Morris
Certified Public Accountants, P.C. resigned as they advised us that they no
longer had the resources available to service the company. Goldstein and Morris
was previously appointed as our certifying accountants on February 5, 2001.
Goldstein and Morris' reports on the financial statements for our fiscal years
ended December 31, 2003 and 2002 did not contain an adverse opinion or a
disclaimer of opinion nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principles except as previously disclosed
in our 10-KSB reports for our fiscal years ended December 31, 2003 and 2002
which included the following statement:

"The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has suffered recurring losses
from operations and lacks a sufficient source of revenue, which raises
substantial doubts about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note1. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty."

During the period in which Goldstein and Morris audited our financial statements
and the interim period in which Goldstein and Morris served as our certifying
accountants, there were no disagreement(s) with Goldstein and Morris on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreement(s), if not resolved to the
satisfaction of Goldstein and Morris, would have caused Goldstein and Morris to
make reference to the subject matter of such disagreement(s) in connection with
its audit report.

On November 5, 2004, our Board of Directors engaged Mintz & Partners LLP to
audit our consolidated financial statements. During the two most recent fiscal
years and through November 5, 2004, we had not consulted with Mintz regarding
either the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on our financial statements, and neither a written report nor oral
advice was provided that was an important factor considered in our reaching a
decision as to the accounting, auditing or financial reporting issue; or any
matter that was either the subject of a disagreement.

LEGAL MATTERS

The validity of the issuance of the shares being offered hereby will be passed
upon for us by Baratta & Goldstein, New York, New York. A portion of the shares
being registered herein are being issued to ESW's attorney in such law firm for
services provided to ESW.

EXPERTS

The consolidated financial statements and schedule of Environmental Solutions
Worldwide, Inc. and subsidiaries as of December 31, 2004, have been incorporated
by reference herein and in the registration statement in reliance upon the
reports of Mintz and Partners, Chartered Accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The auditor for the Company's 2002 and 2003 financial statements have
not permitted use of their report in the Company's registration statement. The
Company's prior auditors resigned effective October 20, 2004 as the firm advised
that it was no longer able to service our needs as a public company. The
resignation was not sought or recommended by our audit committee or our Board of
Directors. We subsequently learned that our prior auditors were no longer an
active operating entity engaged in the practice of public accounting and
auditing work. Due to our prior auditor's resignation and discontinuation of its
public practice, investors and shareholders of our common stock may have limited
recourse against our prior auditors in the event of any claims associated with
prior work performed on our behalf. (See Risk Factors).

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933, relating to the shares of our common stock being offered
by this prospectus. For further information pertaining to our common stock and
the shares of common stock being offering by this prospectus, reference is made
to such registration statement. This prospectus constitutes the prospectus we
filed as a part of the registration statement and it does not contain all
information in the registration statement, certain portions of which have been
omitted in accordance with the rules and regulations of the SEC.

In addition, we are subject to the informational requirements of the Securities
Exchange Act of 1934, and, in accordance with such requirements, we file
reports, proxy statements and other information with the SEC relating to our
business, financial statements and other matters.

Reports and proxy and information statements filed under Section 14(a) and 14(c)
of the Securities Exchange Act of 1934 and other information filed with the SEC
as well as copies of the registration statement can be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 100 F Street, N.E. Washington, D.C. 20549, and at the SEC's Midwest
Regional Offices at 500 West Madison Street, Chicago, Illinois 60606. Copies of
such material can also be obtained at prescribed rates from the Public Reference
Section of the SEC at its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1.800.SEC.0330 for further
information on the operation of the public reference room. Such material may
also be obtained electronically by visiting the SEC's web site on the Internet
at http://www.sec.gov. Our common stock is traded on the Over the Counter
Bulletin Board under the symbol "ESWW."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is Heritage Trust Company,
1320-4 King St. West, Toronto, Ontario M5H-1B6 Canada.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm F 2

Consolidated Balance Sheet -- December 31, 2004 F 3

Consolidated Statements of Operations -- Years Ended December 31, 2004
and 2003 F 4

Consolidated Statements of Stockholders' Equity -- Years Ended
December 31, 2004 and 2003 F 5

Consolidated Statements of Cash Flows -- Years Ended December 2004
and 2003 F 6

Notes to Consolidated Financial Statements F 7--F 16

Consolidated Condensed Balance Sheet -- September 30, 2005 (unaudited) F 17

Consolidated Condensed Statements of Operations for the Three Months
Ended and Nine Months Ended September 30, 2005 and 2004 (unaudited) F 18

Consolidated Condensed Statements of Stockholders' Equity for the
Nine Month Period Ended September 30, 2005 (unaudited) F 19

Consolidated Condensed Statements of Cash Flows for the Nine Month
Period Ended September 30, 2005 and 2004 (unaudited) F 20

Notes to Condensed Consolidated Financial Statements (unaudited) F 21--F 30

Mintz & Partners LLP
----------------------
Chartered Accountants

- INDEPENDENT REGISTERED AUDITORS' REPORT -

To The Shareholders Of
Environmental Solutions Worldwide, Inc.

We have audited the consolidated balance sheet of Environmental Solutions
Worldwide, Inc. as at December 31, 2004 and the consolidated statements of
operations, stockholders' equity and cash flow for the year then ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Environmental Solutions Worldwide, Inc.
as of December 31, 2003, and for the year then ended were audited by other
auditors who have ceased operations. Those auditors expressed an unqualified
opinion on those financial statements in their report dated February 26, 2004.

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, these consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Environmental Solutions Worldwide, Inc as at December 31, 2004 and the results
of its operations and the cash flow for the year then ended in conformity with
generally accepted accounting principles in the United States of America.

Toronto, Ontario /s/ MINTZ & PARTNERS LLP
February 25, 2005 ------------------------
CHARTERED ACCOUNTANTS

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEET
As at December 31, 2004

ASSETS

Current Assets

Cash and cash equivalents (Note 4) $ 4,633,013
Accounts receivable (Note 2) 331,604
Inventory (Note 5) 376,678
Prepaid expenses 282,355
-----------

Total current assets 5,623,650

Property, Plant and equipment (Note 6) 688,761

Patents and trademarks, net of accumulated
amortization of $859,745 1,289,617
-----------

$ 7,602,028
===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current Liabilities
Accounts payable and accrued liabilities $ 373,875

Redeemable Class A special shares (Note 7) 453,900
-----------

Total current liabilities 827,775
-----------

Convertible Debentures ( Note 8) 5,624,197

Stockholders' Equity
Common stock, $0.001 par value, 100,000,000
shares authorized; 50,224,843 shares
issued and outstanding 50,224
Additional paid-in capital 12,661,114
Accumulated deficit (11,561,282)
-----------

Total stockholders' equity 1,150,056

$ 7,602,028
===========

See accompanying notes to the consolidated financial statements

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31 2004 2003
------------------ -------------------
Revenue

Net sales $ 1,906,704 $ 1,739,715

Cost of sales 1,166,653 853,098
------------------ -------------------

Gross profit 740,051 886,617
------------------ -------------------

Operating expenses
Marketing, office & general costs 1,308,788 918,407
Officers' compensation and directors fees 394,178 222,000
Consulting and professional fees 365,715 202,118
Interest on long term debt 72,364 -
Foreign exchange gain (24,128) (19,174)
Depreciation and amortization 344,447 333,364
------------------ -------------------

2,461,364 1,656,715
------------------ -------------------

Net loss $ (1,721,313) $ (770,098)
================== ===================

Loss per share $ (0.034) $ (0.016)
================== ===================

Weighted average number of shares outstanding 49,978,095 48,854,089
================== ===================

See accompanying notes to the consolidated financial statements

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

Common Stock Additional Accumulated
Shares Amount Paid-In Capital Deficit Total

January 1, 2003 47,352,194 47,351 11,635,080 (9,069,871) 2,612,560

Net loss (770,098) (770,098)

Exercise of warrants 544,354 544 (544) -

Proceeds from third traunch of private placement 1,452,942 1,453 245,547 247,000
------------- ------------ -------------- ------------- --------------

December 31, 2003 49,349,490 49,348 11,880,083 (9,839,969) 2,089,462

Net loss - - - (1,721,313) (1,721,313)

Common stock issued from exercise of warrants 875,353 876 261,731 - 262,607

Fair value of warrants on convertible debentures 528,000 528,000
net of amortization

Write-off options receivable (37,500) (37,500)

Options issued for services rendered 28,800 28,800
------------- ------------ -------------- ------------- --------------

December 31, 2004 50,224,843 50,224 12,661,114 (11,561,282) 1,150,056
============= ============ ============== ============= ==============

See accompanying notes to the consolidated financial statements

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

2004 2003
--------------- ----------------

Net loss $(1,721,313) $ (770,098)

Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 129,847 118,795
Amortization 214,599 214,569
Provision for uncollectable accounts 15,504 -
Amortization of debenture warrant fair value 52,197 -
Options issued for services provided 28,800 -
Increase (decrease) in cash flows form operating
activities resulting from changes in:
Accounts receivable 24,832 289,964
Option receivable (37,500) -
Inventory (117,707) (103,351)
Prepaid expenses (267,736) (5,425)
Other assets 39,982 -
Accounts payable & accrued liabilities 162,266 30,852

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

Net cash used in operating activities (1,476,229) (224,694)
--------------- ----------------

Investing activities:
Acquisition of property plant and equipment (355,807) (30,971)
Increase in patents and trademarks - (15,233)
--------------- ----------------

Net cash used in investing activities (355,807) (46,204)
--------------- ----------------

Financing activities:
Issuance of common stock 262,607 247,000
Issuance of convertible debenture 6,100,000 -
--------------- ----------------

Net cash provided by financing activities 6,362,607 247,000

Effect of exchange rate change on cash 15,556
--------------- ----------------

Net increase (decrease) in cash 4,546,127 (23,898)

Cash & cash equivalents, beginning of year 86,886 110,784
--------------- ----------------

Cash & cash equivalents, end of year $ 4,633,013 $ 86,886
=============== ================

Supplemental disclosures:
Non cash investing and financing activities
Exercise of warrants $ - $ 544
=============== ================

Interest received $ 24,704 $ 673
=============== ================

See accompanying notes to the consolidated financial statements

NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION

The Company develops, manufactures and sells environmental technology solutions,
and is currently focused on the international automotive, transportation and
utility engine industries. It manufactures and markets a line of catalytic
control products including a boutique line of finished products, proprietary
catalytic converter substrates and catalytic conversion technologies for a
number of applications as well as providing engine testing and certification
services.

The accompanying consolidated financial statements have been prepared in
conformity with U.S. generally accepted accounting principles.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, ESW America, Inc., ESW Technologies, Inc., ESW
Canada, Inc. and BBL Technologies, Inc. All significant inter-company
transactions are eliminated.

ESTIMATES

The preparation of financial statements in conformity with U. S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reported
period. Actual results could differ from those estimates.

CONCENTRATIONS OF CREDIT RISK

The Company's cash balances, which are maintained in various banks, are insured
up to $100,000 for each bank by the Federal Deposit Insurance Corporation. The
balances at times may exceed these limits.

Accounts Receivable and Concentrations of Credit Risk: The Company performs
on-going credit evaluations of its customer's financial condition and generally
does not require collateral from those customers. Four of those customers
accounted for 30%, 17%, 12% and 11%, respectively of the Company's revenue in
Fiscal 2004 and 62%, 9%, 5% and 2%, respectively of its accounts receivable as
of December 31, 2004.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated credit risk by performing credit checks
and actively pursuing past due accounts. An allowance for doubtful accounts is
estimated and recorded based on management's assessment of the credit history
with the customer and current relationships with them. On this basis management
has determined that a reserve of $15,504 was appropriate as of December 31, 2004
and that no allowance for doubtful accounts was required as of December 31,
2003.

INVENTORIES

Inventories are stated at the lower of cost (first-in first-out) or market.
Inventories are periodically reviewed for use and obsolescence, and adjusted as
necessary.

PROPERTY PLANT AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation of property and
equipment is computed on a straight-line basis over the estimated useful lives
of the assets, generally 5 to 7 years. Maintenance and repairs are charged to
operations as incurred. Significant renewals and betterments are capitalized.

PATENTS AND TRADEMARKS

Patents and trademarks consist primarily of the costs incurred to acquire them
from an independent third party. SFAS No. 142 requires intangible assets with a
definite life be tested for impairment whenever events or circumstances indicate
that a carrying amount of an asset (or asset group) may not be recoverable. An
impairment loss would be recognized when the carrying amount of an asset exceeds
the estimated discounted cash flow used in determining the fair value of the
asset.

Patents and trademarks are being amortized on a straight-line basis over their
estimated life of ten years. Amortization expense for the years ended December
31, 2004 and 2003 were $214,599 and $214,569, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value amounts of cash and cash equivalents, prepaid expenses,
accounts payable and accrued expenses approximate fair value because of the
short maturity of these items.

REVENUE RECOGNITION

The Company derives revenue primarily from the sale of its catalytic products.
In accordance with SEC Staff Accounting Bulletin No. 101, "Revenue Recognition
in Financial Statements", revenue is recognized when persuasive evidence of an
arrangement exists, delivery has occurred, the amount is fixed and determinable,
risk of ownership has passed to the customer and collection of the resulting
receivable is reasonably assured.

The Company also derives revenue (less than 10% of total revenue) from providing
air testing and environmental certification services. Revenues from these
services are recognized upon performance.

EARNINGS (LOSS) PER COMMON SHARE

Basic Earnings (loss) per common share is computed by dividing the net income
(loss) by the weighted average number of common shares outstanding during the
year. Common stock equivalents are excluded from the computation of diluted
earnings (loss) per share when their effect is antidilutive. Therefore diluted
loss per share has not been calculated for 2004.

INCOME TAXES

Income taxes are computed in accordance with the provisions of Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes"
("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns.

Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and tax basis of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.

STOCK-BASED COMPENSATION

The Company accounts for common stock purchase options and warrants granted to
non- employees pursuant to Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (FAS No. 123) and Emerging Issues Task
Force ("EITF") No. 96-18, "Accounting for Equity Instruments That Are issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." These standards require that the fair value of equity instruments,
including options and warrants, be recognized in the financial statements.

FAS No. 123 permits a company to account for employee stock options under the
method specified by the previous standard, Accounting Principles Board Opinion
No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees." Under APB No.
25, if the exercise price of fixed employee stock options equals or exceeds the
market price of the underlying stock on the date of grant, no compensation
expense is recorded. For such options, FAS No. 123 requires disclosure of, among
other things, the fair value of options granted, the assumptions used in
determining the fair value and the pro-forma effect on earnings as if the
measurement provisions of FAS No. 123 had been applied.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company follows SFAS No. 144, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the assets' carrying amounts may not be recoverable.

In performing the review for recoverability, if future undiscounted cash flows
(excluding interest charges) from the use and ultimate disposition of the assets
are less than their carrying values, an impairment loss is recognized. No
impairment loss has been required for the years ended December 31, 2004 and
2003.

NOTE 3 - RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, FASB Statement No.153, "Exchanges of Non-monetary Assets - An
Amendment to APB Opinion No. 29" was issued. The Statement eliminates the
exception to fair value for exchanges of similar productive assets and replaces
it with a general exception for exchange transactions that do not have
commercial substance - that is, transactions that are not expected to result in
significant changes in the cash flows of the reporting entity. The requirements
of FASB 153 do not have an effect on the Company's Consolidated Financial
Statements.

In November 2004, FASB Statement No. 151, "Inventory Costs - An Amendment of ARB
No.43, Chapter 4" was issued. The Statement clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling costs and wasted
material. Additionally, allocation of fixed overheads to the costs of conversion
should be based on the normal capacity of production facilities. The
requirements of FASB 151 do not effect on the Company's Consolidated Financial
Statements.

In July 2004, the Financial Accounting Standards Board's ("FASB") Emerging
Issues Task Force ("EITF") reached a consensus on EITF No. 02-14, "Whether an
Investor Should Apply the Equity Method of Accounting to Investments Other Than
Common Stock". EITF 02-14 addresses circumstances in which companies acquire the
right to significantly influence the operations of another entity without owning
a voting interest in that entity. The Financial Accounting Standards Board at
its July 16, 2004 meeting ratified EITF 02-14. The adoption of EITF 02-14 is not
expected to have a material effect on our financial position or results of
operations.

In April 2004, the Financial Accounting Standards Board's ("FASB") Emerging
Issues Task Force ("EITF") reached a consensus on EITF No. 03-06, "Participating
Securities and the Two-class Method Under FASB Statement No. 128, Earnings Per
Share". EITF 03-06 addresses a number of questions regarding the computation of
earnings per share by companies that have issued securities other than common
stock that contractually entitle the holder to participate in dividends and
earnings of the company when, and if, it declares dividends on its common stock.
The issue also provides further guidance in applying the two-class method of
calculating earnings per share, clarifying what constitutes a participating
security and how to apply the two-class method of computing earnings per share
once it is determined that a security is participating, including how to
allocate undisturbed earnings to such a security. EITF 03-06 is effective for
fiscal periods beginning after March 31, 2004. The requirements of EITF 03-06 do
not have an effect on the Company's Consolidated Financial Statements.

NOTE 4- CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and highly liquid investments purchased
with an original or remaining maturity of three months or less at the date of
purchase.

NOTE 5 - INVENTORY

Inventories as of December 31, 2004 are summarized as follows:

Raw materials $ 302,184
Work-In-Process 58,515
Finished goods 15,979
------------
$ 376,678
============

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

Property and equipment at December 31, 2004 consists of the following:

2004
------------
Machinery and equipment $ 874,627
Office equipment 54,078
Furniture & fixtures 159,508
Vehicles 12,015
Leasehold improvements 56,070
------------

1,156,298
Less: accumulated depreciation 467,537
------------

$ 688,761
===========

F10

NOTE 7- REDEEMABLE CLASS A SPECIAL SHARES

2004
----
700,000 Class A special shares $ 453,900
Authorized, issued, and outstanding

NOTE 8- CONVERTIBLE DEBENTURES

NOTE 9 - INCOME TAXES

As of December 31, 2004, there are loss carryforwards for Federal income tax
purposes of approximately $8,078,000 available to offset future taxable income
in the United States. The carryforwards expire in various years through 2023.
The Company does not expect to incur a Federal income tax liability in the
foreseeable future. Accordingly, a valuation allowance for the full amount of
the related deferred tax asset of approximately $2,900,000 has been established
until realizations of the tax benefit from the loss carryforwards are assured.

Additionally, as of December 31, 2004, the Company's two wholly owned Canadian
subsidiaries had net operating losses of approximately $1,549,000 that may be
used, in future periods, to offset taxable income. The deferred tax asset of
approximately $560,000 has been fully offset by a valuation allowance until
realization of the tax benefit from the loss carryforwards are assured.

NOTE 10 - ISSUANCE OF COMMON STOCK

The Company received $210,106 from the exercise of 1,400,706 warrants to
purchase 700,353 shares of common stock in March 2004, an additional $15,000
from the exercise of 100,000 warrants to purchase 50,000 shares in April 2004
and $37,500 from the exercise of 250,000 warrants to purchase 125,000 shares in
July 2004. The warrants were issued as a part of the Unit Placements in 2002 and
2003 in which participants received one warrant for each unit purchased, that
allows for the purchase of one-half share of common stock for each share of
common stock purchased in the Unit Placement. Warrants can only be exercised in
even lots for full shares for an exercise price of $0.30 per share.

F11

NOTE 11 - STOCK OPTIONS AND WARRANT GRANTS

The Company adopted Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), "Accounting for Stock-Based Compensation" since its inception and
adopted Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure, an amendment of FASB No.
123", in December 2002. In conjunction with the adoption of these standards, the
Company will continue to apply the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" with pro forma disclosure of net income and earnings per
share as if the fair-value based method prescribed by SFAS No. 123 had been
applied. In general, no compensation cost related to the Company's non-qualified
stock option plan is recognized as options are issued for no less than 85% of
fair market value on date of grant.

In August 2003, the board of directors ratified the Compensation Committees
granting of 650,000 options in the aggregate at an exercise price of $0.27
(fair-market-value on date of grant) per share to Directors and key employees as
consideration for their service. The options expire ten years from the date of
grant and vest over a three-year period. 150,000 of these options were granted
to the former President and Chief Executive Officer who resigned on May 1, 2004.
As a result, these 150,000 options have lapsed.

In November 2003, the board of directors ratified the employment contract of the
then President and Chief Executive Officer, which included the granting of
2,000,000 options at an exercise price of $0.66 (110% of fair-market value on
the date of grant) per share. The options expire five years from the date of
grant and vest over a two-year period with one-third vesting immediately and
thereafter on the first and second anniversary of the employment contract
provided the contract is in force and effect. On April 30, 2004, the then
Chairman, President and Chief Executive Officer resigned from the Company
effective May 1, 2004. Consequently, all unvested options (1,333,334 of the
2,000,000) granted under the November 2003 contract lapsed and were cancelled.
In addition, the Company awarded 50,000 options to its former Chairman,
President and Chief Executive Officer to purchase 50,000 shares of common stock
at $0.45 per share (fair market value on the date of grant) for consulting
services subsequent to his resignation. The fair-market value for the 2,000,000
options (determined under the Black-Scholes method) was approximately $1,200,000
of which $500,000 was reflected as pro-forma compensation expense in the pro
forma information presented for the year ended December 31, 2003. The $700,000
balance, which will no longer vest, is not reflected in the accompanying pro
forma data.

In December 2003, the board of directors ratified the issuance of 25,000 options
at an exercise price of $0.17 (fair-market value at the date of grant) and
85,000 options at an exercise price of $0.60 (fair-market value at the date of
grant) to certain key employees during the year. These options expire three
years from the date of grant.

In August 2004 the board of directors approved the aggregate award of 2,300,000
stock options to seven (7) employees, two (2) executive officer/directors two
(2) outside directors, and two (2) consultants. The options have immediate
vesting with an exercise price of $0.50 per share with exercise periods ranging
from three to five years from the date of award.

In December 2004, the Company issued 300,000 stock options to two employees at
an exercise price of $0.50 per stock. These options expire five years from the
date of grant.

Had compensation cost for the Company's stock options that were issued, been
determined on the fair value at grant date consistent with the provisions of
SFAS No. 123, the Company's net loss and loss per share would have been as
follows:

F12

PRO FORMA INFORMATION
YEAR ENDED DECEMBER 31,

2004 2003
-------------------------------
Net loss - as reported $(1,721,313) $(770,098)
Deduct: Total stock-based
compensation expense
determined under fair
value based method, net (857,336) (553,099)
-------------------------------
Net loss - pro forma $(2,578,649) $(1,323,197)
===============================
loss per share -
as reported $ (0.034) $ (0.016)
===============================
pro forma $ (0.052) $ (0.027)
===============================

SFAS No. 123 requires that the fair value of options and warrants issued to
non-employees for goods and services be recorded in the financial statements as
an expense.

A summary of option and warrant transactions, including those granted pursuant
to the terms of certain employment and other agreements, is as follows:

STOCK WEIGHTED
PURCHASE AVERAGE
OPTIONS EXERCISE PRICE
---------------- ----------------

Outstanding, January 1, 2003 1,262,500 0.89
Granted 2,760,000 .58
Expired (90,000) (2.00)
--------- -----

Outstanding, December 31, 2003 3,932,500 $0.63
Granted 2,650,000 $0.50
Expired (2,055,833) ($0.72)
----------
Outstanding, December 31, 2004 4,526,667 $0.51

All of the options and warrants granted are exercisable on date of grant, except
500,000 options granted in August of 2003 that vest over a 3 year period. Of
these 500,000 options, 233,334 are currently vested, 133,332 will vest in August
2005 and 133,334 will vest in August 2006.

At December 31, 2004, the outstanding options have a weighted average remaining
life of 49.7 months.

The weighted average fair value of options granted during 2004 and 2003 was
$0.31 and $0.29 respectively and was estimated using the Black-Scholes
option-pricing model, and the following assumptions:

F13

2004 2003
------- -------
Expected volatility 108.00% 199.20%
Risk-free interest Rate 3.00% 3.25%
Expected life 5.0 yrs 5.00 yrs
Dividend yield 0.00% 0.00%
Forfeiture rate 0.00% 0.00%

The Black-Scholes model used by the Company to calculate options and warrant
values, as well as other currently accepted option valuation models, were
developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ from the
Company's stock purchase options and warrants. These models also require highly
subjective assumptions, including future stock price volatility and expected
time until exercise, which greatly affect the calculated values. Accordingly,
management believes that this model does not necessarily provide a reliable
single measure of the fair value of the Company' s stock options and warrants.

At December 31, 2004, the Company had outstanding options and warrants as
follows:

NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
- ---------------- -------------- ---------------
25,000 0.17 February 12, 2006
500,000 0.27 August 6, 2013
50,000 0.45 April 20, 2009
250,000 0.50 April 18, 2006
250,000 0.50 May 4, 2006
550,000 0.50 August 11, 2007
1,750,000 0.50 August 11, 2009
300,000 0.50 December 1, 2009
50,000 0.52 November 23, 2005
85,000 0.60 December 10, 2006
666,667 0.66 September 10,2008
50,000 1.50 March 1, 2005
---------------
4,526,667

In addition, the Company has warrants outstanding as follows:

These warrants, issued in connection with various private placements of equity
securities, are treated as a cost of capital and no income statement recognition
is required.

NUMBER OF WARRANTS EXERCISE PRICE EXPIRATION DATE
- ------------------ -------------- -----------------
750,000 0.17 (A) October 10, 2005
2,107,355 0.30 (B) October 10, 2005
1,047,058 0.30 (B) November 14, 2005
344,118 0.30 (B) March 31, 2006
3,050,000 1.00 (C) September 13, 2007
---------
7,298,531

F14

(A) Originally exercisable at $1.20 per share and repriced in September 2001 and
subsequently in 2002

(A,B &C) Contain certain antidilutive protections.

During 2002, the Company, with shareholder approval terminated its 2000
Nonqualified Stock Option Plan, which was comprised of 10,000,000 shares of
common stock (of which 6,035,000 shares had not been granted), and was replaced
by the 2002 Stock Option Plan with 1,000,000 shares of common stock.

NOTE 12 - RELATED PARTY TRANSACTIONS

During the year ended December 31, 2004 and 2003, the Company paid shareholders
and their affiliates $403,516 and $256,012, respectively for various services
rendered including salary and any bonus. No one transaction or combination
attributed to one individual or entity exceeded $60,000 on an annual basis;
however, in August 2004 the Company issued a $1.25 Million unsecured
subordinated promissory note to AB Odnia, an entity that is affiliated with
Bengt Odner, a director of the Company. AB Odnia subsequently converted its
unsecured subordinated promissory note to a $1.25 million convertible debenture,
in September 2004 as a part of the $6.1 million in convertible debentures
issued.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

LITIGATION

The Company has been advised that a statement of claim has been filed in the
Ontario Superior Court of Justice against it purporting to be a class action on
December 12,2003 in which, a current director and others alleging that it and
other parties released and disseminated false and misleading statements about
its business from on or about March 1999 through March 2000. The complaint seeks
damages of $100,000,000 and punitive damage of $20,000,000. ESWW has not yet
been served with the statement of claim and believes the claims to be without
merit. If served, the Company intends to contest the claims vigorously.

In January 2002, an action was filed in Ontario, Canada against the Company for
breach of an agreement claiming approximately $50,000 plus costs. ESWW is
defending itself against this action. It is the determination of management that
the final determination of this claim will not have a material effect on the
financial position or operating results of the Company.

The Company has received a letter seeking Damages of $500,000 and an amount due
of $192,000 per the terms of a consulting agreement. A legal action has been
instituted against the Company, a current Director, and other unrelated parties.
The Company considers this claim frivolous and intends to vigorously contest any
claims related to this matter.

LEASES

The Company currently leases its office and factory located in Telford,
Pennsylvania for $5,000 per month on a month-to-month basis. In addition, a
wholly-owned subsidiary of the Company leases office space for its sales and
marketing office located in Ontario, Canada for a monthly rent of $2,100 on a
month-to-month basis.

Effective November 24, 2004, the Company's wholly owned subsidiary ESW America,
Inc. entered into a lease agreement with Nappen & Associates for approximately
40,220 square feet of leasehold space at 2 Bethlehem Pike Industrial Center,
Montgomery Township, Pennsylvania. The leasehold space is intended to house the
Company's research and development facilities. The lease commenced on January
15, 2005 and expires January 31, 2010.

F15

Effective December 20, 2004, the Company's wholly owned subsidiary ESW Canada,
Inc. entered into an offer to Lease agreement with Dufcon Developments Inc. for
approximately 50,000 square feet of leasehold space in Concord, Ontario Canada.
The leasehold space is intended to house the Company's executive offices and a
high volume manufacturing plant. It is anticipated that possession of the
leasehold space will be in the second quarter of Fiscal year 2005, and the term
of the lease will run for a period of 5 years from the commencement date.

The following breakdown is the total, of the minimum annual lease payments, for
both leases.

2005 $342,079
2006 $433,569
2007 $433,569
2008 $440,585
2009 $444,093
2010 $102,784

NOTE 14 - COMPARATIVE FIGURES

Certain 2003 figures have been reclassified to conform to the financial
statements adopted in 2004.

F16

ITEM 1. FINANCIAL STATEMENTS

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 2005
(UNAUDITED)

ASSETS

Current assets
Cash and cash equivalents (Note 4) $ 3,862,740
Accounts receivable - net of allowance of $2,343 (Note 2) 582,404
Inventory (Note 5) 1,002,381
Prepaid expenses 340,759
-----------

Total current assets 5,788,284

Property and equipment, net of accumulated (Note 6)
depreciation of $614,305 2,860,903

Patents and trademarks, net of accumulated
amortization of $1,021,211 1,132,558
-----------

$ 9,781,745
===========

LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities
Accounts payable, accrued expenses and
customer deposits $ 630,041

Redeemable Class A special shares (Note 7) 453,900
-----------

Total current liabilities 1,083,941
-----------

Convertible debentures (Note 8) 5,756,197
-----------

Stockholders Equity
Common stock, $0.001 par value, 125,000,000
shares authorized; 54,754,254 shares
issued and outstanding 54,753
Additional paid-in capital 16,500,959
Shares for interest on debenture 244,000
Accumulated deficit (13,858,105)
-----------

Total stockholders' equity 2,941,607
-----------

$ 9,781,745
===========

The accompanying notes are an integral part of these financial statements

F17

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)

Nine Months Three Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
------------ ------------ ------------ ------------

Revenue
Net sales $ 2,223,605 $ 1,216,470 $ 912,779 $ 290,293

Cost of sales 1,247,290 707,759 503,139 182,913
------------ ------------ ------------ ------------

Gross profit 976,315 508,711 409,640 107,380
------------ ------------ ------------ ------------

Operating expenses
Marketing, office & general costs 2,270,617 904,241 952,825 353,836
Officers' compensation and directors fees 266,731 306,503 92,308 78,234
Consulting and professional fees 321,953 275,741 94,059 110,284
Interest on long term debt 183,000 19,719 61,000 19,719
Foreign exchange gain (4,369) (22,433) (658) (10,542)
Depreciation and amortization 310,155 252,358 111,121 84,695
------------ ------------ ------------ ------------

3,348,087 1,736,129 1,310,655 636,226
------------ ------------ ------------ ------------

Loss from operations $ (2,371,772) $ (1,227,418) $ (901,015) $ (528,846)

Interest Income 74,949 1,344 35,261 1,115
------------ ------------ ------------ ------------

Net Loss $ (2,296,823) $ (1,226,074) $ (865,754) $ (527,731)
============ ============ ============ ============

Loss per share $ (0.044) $ (0.025) $ (0.016) $ (0.011)
============ ============ ============ ============

Weighted average number of shares outstanding 52,323,313 49,898,714 54,635,968 50,223,484
============ ============ ============ ============

The accompanying notes are an integral part of these financial statements

F18

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30,2005

Shares for
Common Stock Additional Interest on Accumulated
Shares Amount Paid-In Capital Debentures Deficit Total
--------------------------------------------------------------------------------------

January 1, 2005 50,224,843 $ 50,224 $ 12,661,114 $(11,561,282) $ 1,150,056

Net Loss -- -- -- (2,296,823) (2,296,823)

Proceeds from private
placement April 2005 2,352,941 2,353 1,997,647 -- 2,000,000

Proceeds from private
placement July 2005 2,176,470 2,176 1,842,198 -- 1,844,374

Shares to be issued for
interest on debentures $ 244,000 $ 244,000
---------------------------------------------------------------------------------------

September 30, 2005 54,754,254 $ 54,753 $ 16,500,959 $ 244,000 $(13,858,105) $ 2,941,607
========================================================================================

See accompanying notes to the consolidated financial statements

F19

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30,
(UNAUDITED)

2005 2004
----------- -----------

Net loss $(2,296,823) $(1,226,074)

Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 148,689 91,358
Amortization 161,466 161,000
Provision for uncollectible accounts (recovery) (13,161) 7,500
Amortization of debenture warrant fair value 132,000 8,197
Options issued for services provided -- 28,800
Write off options receivable -- (25,000)
Increase (decrease) in cash flows from operating
Assets and Liabilities:
Accounts receivable (237,638) 51,444
Inventory (625,703) (156,057)
Prepaid expenses (58,404) (3,045)
Other assets -- (23,001)
Accounts payable, accrued liabilities
and customer deposits 500,166 174,902

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

Net cash used in operating activities (2,289,408) (909,976)
----------- -----------

Investing activities:
Acquisition of property, plant and equipment, net (2,320,832) (62,342)
Increase in patents and trademarks (4,407) (70)
----------- -----------

Net cash used in investing activities (2,325,239) (62,412)
----------- -----------

Financing activities:
Issuance of common stock 3,844,374 262,607
Issuance of convertible debentures -- 6,100,000
----------- -----------

Net cash provided by financing activities 3,844,374 6,362,607
----------- -----------

Net increase (decrease) in cash (770,273) 5,390,219

Cash & cash equivalents, beginning of year 4,633,013 86,886
----------- -----------

Cash & cash equivalents, end of period $ 3,862,740 $ 5,477,105
=========== ===========

Supplemental disclosures:
Interest received $ 74,949 $ 1,344
=========== ===========

The accompanying notes are an integral part of these financial statements

F20

NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION

The accompanying consolidated condensed financial statements have been prepared
without audit in conformity with U.S. generally accepted accounting principles.
These statements should be read in conjunction with the financial statements and
the notes thereto included in our Annual Report on Forms 10-KSB, 10-KSB/A (No.
1) and 10-KSB/A (No. 2), as filed with the Securities and Exchange Commission
for the year ended December 31, 2004.

Revenues and operating results for the nine months ended September 30, 2005 are
not necessarily indicative of the results to be expected for the full year.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The Consolidated Condensed financial statements include the accounts of the
Company and its wholly owned subsidiaries, ESW America, Inc., ESW Technologies,
Inc., ESW Canada, Inc. and BBL Technologies, Inc. All significant inter-company
transactions have been eliminated.

ESTIMATES

CONCENTRATIONS OF CREDIT RISK

Accounts Receivable and Concentrations of Credit Risk: The Company performs
on-going credit evaluations of its customer's financial condition and generally
does not require collateral from those customers. Three of those customers
accounted for 47%, 13% and 12%, respectively of the Company's revenue in the
nine month period ended September 30, 2005 and 40%, 17% and 3%, respectively of
its accounts receivable as of September 30, 2005.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated credit risk by performing credit checks
and actively pursuing past due accounts. An allowance for doubtful accounts is
estimated and recorded based on management's assessment of the credit history
with the customer and current relationships with them. On this basis management
has determined that a reserve of $2,343 was appropriate as of September 30, 2005
and that a $7,500 allowance for doubtful accounts was required as of September
30, 2004.

F21

PATENTS AND TRADEMARKS

Patents and trademarks are being amortized on a straight-line basis over their
estimated life of ten years. Amortization expense for the nine month period
ended September 30, 2005 and 2004 were $161,466 and $161,000 respectively.
Amortization expenses for the three month period ended September 30, 2005 and
2004 were $53,876 and $53,642 respectively.

REVENUE RECOGNITION

The Company derives revenue primarily from the sale of its catalytic products.
In accordance with SEC Staff Accounting Bulletin No. 104, "Revenue Recognition
in Financial Statements", revenue is recognized when persuasive evidence of an
arrangement exists, delivery has occurred, the amount is fixed and determinable,
risk of ownership has passed to the customer and collection of the resulting
receivable is reasonably assured.

The Company also derives revenue (less than 2% of total revenue) from providing
air testing and environmental certification services. Revenues from these
services are recognized upon performance.

RESEARCH AND DEVELOPMENT

The Company is engaged in research and development work. Research and
development costs, other than for the acquisition of capital assets, are charged
as operating expense of the Company as incurred.

NOTE 3 - RECENTLY ISSUED ACCOUNTING STANDARDS

F22

NOTE 4 - CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and highly liquid investments purchased
with an original or remaining maturity of three months or less at the date of
purchase.

NOTE 5 - INVENTORY

Inventories as of September 30, 2005 are summarized as follows:

Raw materials $ 688,382
Work-In-Process 154,786
Finished goods 159,213
----------
$1,002,381
==========

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

Property plant and equipment at September 30, 2005 consists of the following:

2005
-----------
Plant, machinery and equipment $ 2,428,610
Office equipment 135,175
Furniture and fixtures 343,324
Vehicles 12,014
Leasehold improvements 556,085
-----------

3,475,208
Less: accumulated depreciation 614,305
-----------

$ 2,860,903
===========

NOTE 7 - REDEEMABLE CLASS A SPECIAL SHARES

700,000 Class A special shares $ 453,900 (based on the historical exchange rate
at the time of issuance.)Authorized, issued, and outstanding.

The Class A special shares are issued by the Company's wholly-owned subsidiary
BBL Technologies, Inc. ("BBL") without par value, and are redeemable on demand
by the Holder of the shares which is a private Ontario Corporation at $700,000
CDN (which translates to $603,448 USD at September 30, 2005). As the Class A
special shares were issued by the Company's wholly-owned subsidiary, BBL the
maximum value upon which the Company is liable is the net book value of BBL. As
at September 30, 2005 BBL has an accumulated deficit of $ 1,166,110 USD
($1,813,002 CDN as at September 30, 2005) and therefore would be unable to
redeem the Class A special shares at their ascribed value.

F23

NOTE 8 - CONVERTIBLE DEBENTURES

In September 2004, the Company issued $6.1 million of convertible debentures in
which the basis of conversion into the Company's common stock is $0.50 per
share. In conjunction with the debentures, the Company issued warrants to
purchase an additional 3.05 million shares of common stock at $1.00 per share.
The debentures are for a term of three (3) years and earn interest at the rate
of 4%. The Company has computed the fair-value of the warrants utilizing the
Black-Scholes method and apportioned the fair value of the debt and warrants
accordingly. As a result, the debentures were discounted by $528,000, which is
being amortized over the three (3) year life of the debentures. The effective
yield on the debentures is 4.38%. The warrant agreements provide that should the
company at any time after the date the warrants are first issued sell additional
shares of common stock or equivalents below the then current exercise price,
then the Company is required to reduce the current exercise price of the warrant
to the price of the new issuance (See Note 10). At the Company's option, the
interest on the debentures can be paid in cash or in shares of common stock. The
Company elected to issue shares of our common stock as payment of interest
earned on our 4% convertible debentures issued in September 2004. A total of
348,571 shares of common stock are being issued to 10 debenture holders for the
$244,000 of accrued interest through September 13, 2005, as per the terms of the
debentures.

NOTE 9 - INCOME TAXES

As of September 30, 2005, there are loss carryforwards for Federal income tax
purposes of approximately $9,731,831 available to offset future taxable income
in the United States. The carryforwards expire in various years through 2023.
The Company does not expect to incur a Federal income tax liability in the
foreseeable future. Accordingly, a valuation allowance for the full amount of
the related deferred tax asset of approximately $3,503,459 has been established
until realizations of the tax benefit from the loss carryforwards are assured.

Additionally, as of September 30, 2005, the Company's two wholly owned Canadian
subsidiaries had loss carryforwards of approximately $2,656,837 that may be
used, in future periods, to offset taxable income. The deferred tax asset of
approximately $956,461 has been fully offset by a valuation allowance until
realization of the tax benefit from the loss carryforwards are assured.

NOTE 10 - ISSUANCE OF COMMON STOCK

On April 21, 2005, the Company closed an initial traunche of a private placement
offering. Pursuant to a subscription agreement with one accredited investor, the
Company received $2 million and issued 2,352,941 shares of common stock; three
year warrants to purchase 1,300,000 shares of common stock at $0.90 per share;
three year warrants to purchase 200,000 shares of common stock at $2.00 per
share; and three year warrants to purchase 200,000 shares of common stock at
$3.00 per share pursuant to Regulation D of the Securities Act of 1933, as
amended. On April 21, 2005, in conjunction with the offering, the Company
adjusted the exercise price of 3,050,000 three year warrants previously issued
to nine (9) accredited investors including AB Odnia an entity affiliated with
Bengt Odner a director of the Company from $1.00 per share to $0.85 per share in
accordance with the terms of the warrants previously issued by the Company
September 15, 2004.

F24

On July 5, 2005, the Company completed a second traunche of the placement.
Pursuant to subscription agreements with three accredited investors, the Company
received an aggregate of $1,850,000 and issued 2,176,470 shares of common stock;
three year warrants to purchase 1,202,500 shares of common stock at $0.90 per
share; three year warrants to purchase 185,000 shares of common stock at $2.00
per share; and three year warrants to purchase 185,000 shares of common stock at
$3.00 per share pursuant to Regulation D of the Securities Act of 1933, as
amended.

NOTE 11 - STOCK OPTIONS AND WARRANT GRANTS

In August 2003, the board of directors ratified the Compensation Committees
granting of 650,000 options in the aggregate at an exercise price of $0.27
(fair-market-value on date of grant) per share to Directors and key employees as
consideration for their service. The options expire ten years from the date of
grant and vest over a three-year period. Of these options 150,000 were granted
to the former President and Chief Executive Officer who resigned on May 1, 2004.
As a result, these 150,000 options have lapsed and were cancelled.

F25

In December 2003, the board of directors ratified the issuance of 25,000 options
at an exercise price of $0.17 (fair-market value at the date of grant) and
85,000 options at an exercise price of $0.60 (fair-market value at the date of
grant) to certain key employees. These options expire three years from the date
of grant.

In August 2004 the board of directors approved the aggregate award of 2,300,000
stock options to seven (7) employees, two (2) executive officer/directors two
(2) outside directors, and two (2) consultants. The options have immediate
vesting with an exercise price of $0.50 per share (fair-market value at the date
of grant) with exercise periods ranging from three to five years from the date
of award.

In December 2004, the Company issued 300,000 stock options to two employees at
an exercise price of $0.50 per share (fair-market value at the date of grant).
These options expire five years from the date of grant.

In January 2005, the Company issued 35,000 stock options to one employee at an
exercise price of $0.50 per share (fair-market value at the date of grant).
These options expire three years from the date of grant.

PRO FORMA INFORMATION
NINE MONTHS ENDED SEPTEMBER 30,

2005 2004
-------------------------------

Number for basic and diluted
earnings (loss) per share available
to common stockholders $ (2,296,823) $ (1,226,074)
Deduct: Total stock-based
Compensation expense
determined under fair
value based method, net (9,800) (758,336)
-------------------------------
Net loss - pro forma $ (2,306,623) $ (1,984,410)

===============================
Denominator for basic earnings
(loss) per share -
Weighted average shares outstanding 52,323,313 49,898,714
Effect of dilutive securities:
Employee stock option -- --
Warrants -- --
Convertible debt conversion -- --
Denominator for basic and diluted
earnings (loss) per share -
Weighted average shares outstanding 52,323,313 49,898,714
Earnings (loss) per share
Basic $ (0.044) $ (0.040)

F26

Potential common shares of 4,378,334 related to ESW's outstanding stock options
and potential common shares of 10,571,031 related to ESW's outstanding Warrants
and potential common shares of 12,200,000 related to ESW's 4 percent Convertible
debentures were excluded from the computation of diluted earnings/(loss) per
share for the nine month period ended September 30, 2005, as the effect of
inclusion of these shares and the related interest expense would have been
anti-dilutive. Potential common shares of 3,910,001 related to ESW's outstanding
stock options and potential common shares of 7,348,528 related to ESW's
outstanding Warrants were and potential common shares of 12,200,000 related to
ESW's 4 percent Convertible debentures were excluded from the computation of
diluted earnings/(loss) per share for the nine month period ended September 30,
2004, as the effect of inclusion of these shares would have been anti-dilutive.

SFAS No. 123 requires that the fair value of options and warrants issued to
non-employees for goods and services be recorded in the financial statements as
an expense.

A summary of option and warrant transactions, including those granted pursuant
to the terms of certain employment and other agreements, is as follows:

STOCK WEIGHTED
PURCHASE AVERAGE
OPTIONS EXERCISE PRICE
---------------- ----------------

Outstanding, January 1, 2004 3,932,500 $0.63
Granted 2,650,000 $0.50
Expired (2,055,833) ($0.72)
---------- --------
Outstanding, December 31, 2004 4,526,667 $0.51
Granted 35,000 $0.50
Expired (50,000) $1.50
---------- --------
Outstanding, September 30, 2005 4,511,667 $0.50

All of the options and warrants granted are exercisable on date of grant, except
500,000 options granted in August of 2003 that vest over a 3 year period. Of
these 500,000 options, 366,666 are currently vested, and 133,334 will vest in
August 2006.

At September 30, 2005, the outstanding options have a weighted average remaining
life of 42 months.

The weighted average fair value of options granted during the first quarter of
2005 was $0.50 and was estimated using the Black-Scholes option-pricing model,
and the following assumptions:

2005
-------
Expected volatility 108.00%
Risk-free interest Rate 3.00%
Expected life 3.0 yrs
Dividend yield 0.00%
Forfeiture rate 0.00%

F27

At September 30, 2005, the Company had outstanding options as follows:

NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
- ---------------- -------------- ---------------
25,000 0.17 February 12, 2006
500,000 0.27 August 6, 2013
50,000 0.45 April 20, 2009
250,000 0.50 April 18, 2006
250,000 0.50 May 4, 2006
550,000 0.50 August 11, 2007
1,750,000 0.50 August 11, 2009
300,000 0.50 December 1, 2009
50,000 0.52 November 23, 2005
85,000 0.60 December 10, 2006
666,667 0.66 September 10,2008
35,000 0.50 January 6, 2008
---------------
4,511,667

In addition, the Company has warrants outstanding as follows:

These warrants, issued in connection with various private placements of equity
securities, are treated as a cost of capital and no income statement recognition
is required.

NUMBER OF WARRANT SHARES EXERCISE PRICE EXPIRATION DATE
- ------------------------ -------------- -----------------
750,000 0.17 (A) April 27, 2006
2,107,355 0.30 (B) April 27, 2006
1,047,058 0.30 (B) November 14, 2005
344,118 0.30 (B) March 31, 2006
3,050,000 0.85 (C)& (D) September 13, 2007
1,300,000 0.90 (B) April 21, 2008
200,000 2.00 April 21, 2008
200,000 3.00 April 21, 2008
1,202,500 0.90 (B) July 5, 2008
185,000 2.00 July 5, 2008
185,000 3.00 July 5, 2008
---------
10,571,031

(A) Originally exercisable at $1.20 per share and repriced in September 2001 and
subsequently in 2002.

(A, B & C) Contain certain antidilutive protections.

(D) Originally exercisable at $1.00 per share and adjusted in April 2005.

F28

During 2002, the Company discontinued its 2000 Nonqualified Stock Option Plan,
which was comprised of 10,000,000 shares of common stock (of which 6,035,000
options had not been granted), and was replaced, with shareholder approval by
the 2002 Stock Option Plan with 1,000,000 shares of common stock.

On June 23, 2005, the company, with shareholder approval, amended its 2002 Stock
Option Plan, to increase the underlying shares available under the plan to
5,000,000 shares of common stock.

NOTE 12 - RELATED PARTY TRANSACTIONS

During the period ended September 30, 2005 and 2004, the Company paid
shareholders and their affiliates nil and $9,141, respectively for various
services rendered in addition to salaries and reimbursement of business
expenses. No one transaction or combination attributed to one individual or
entity exceeded $60,000 on an annual basis.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

LEASES

The Company currently leases its office and factory located in Telford,
Pennsylvania for $5,000 per month on a month-to-month basis.

Effective December 20, 2004, the Company's wholly owned subsidiary ESW Canada,
Inc. entered into an offer to Lease agreement with Dufcon Developments Inc. for
approximately 50,000 square feet of leasehold space in Concord, Ontario Canada.
The leasehold space houses the Company's executive offices and a high volume
manufacturing plant. The possession of the leasehold space took place on May 24,
2005 and the term of the lease will run for a period of 5 years from the
commencement date of July 15, 2005.

The following breakdown is the total, of the minimum annual lease payments, for
both leases.

2005 $110,679
2006 $442,714
2007 $442,714
2008 $448,167
2009 $453,619
2010 $151,397

F29

NOTE 14 - COMPARATIVE FIGURES

Certain 2004 figures have been reclassified to conform to the financial
statements adopted in 2005.

NOTE 15 SUBSEQUENT EVENTS

WARRANT EXTENSION

Effective October 3, 2005, the Company extended the expiry date from October 3,
2005 to April 27, 2006, for 4,214,705 warrants previously issued in the first
traunch of the Company's Unit Private Placement in October 2002. Two warrants
are exercisable for one share of common stock. Warrants can only be exercised in
even lots for full shares of common stock at an exercise price of $0.30 per
share.

Additionally, effective October 3, 2005 the Company extended the expiry date
from October 10, 2005 to April 27, 2006, for 750,000 warrants issued in the
Company's October 2000 Private Placement. The warrants have an exercise price of
$0.17 per warrant share.

Effective November 3, 2005, the Company extended the expiry date from November
14, 2005 to April 27, 2006, for 914,705 warrants previously issued in the second
traunch of the Company's Unit Private Placement in October 2002. Two warrants
are exercisable for one share of common stock. Warrants can only be exercised in
even lots for full shares of common stock at an exercise price of $0.30 per
share.

On November 7, 2005, the Company elected to issue shares of common stock as
payment of interest earned on our 4% convertible debentures issued in September
2004. A total of 348,571 shares of common stock were issued to 10 debenture
holders per the debentures.

F30